Peer to Peer Lending Status – November (2008)

photo credit: swanksalot
Today’s tight credit market is making it difficult for individuals seeking capital to be funding through a banking institution. As a result, borrowers in need of cash are turning to peer to peer lending institutions to find required capital. There are several of these companies that bring individual lenders and borrowers together. One such company that I participate as a borrower and lender is Prosper.com. I have been a lender on Prosper since January 2008, funding over $2,000 in loans to borrowers.

Each month I post the status of my peer to peer lending account that I have through Prosper. This account brings in extra income and is one of my more established passive income streams. My current loan portfolio includes -

• Number of Loans - 51
• Average Interest Rate - 16.79%
• Daily Interest Accural - $1.01
• Number of Late Loans - 4
• Charge-Off Loans – 2
• Loans Paid Off – 5

Over the past month, I have decreased the number of active loans from 54 to 51. One loan was paid off in full, which was actually nice to see in this economic climate. Unfortunately, I had 2 loans fall into Chare-Off status. Basically, a charged-off loan is more than 4 months late and cannot become current again. Prosper collects on charge-off loans until they are sold to a debt buyer and any payment on the loan received after charge-off but before the sale will be credited to the lender as a recovery. The principal on the 2 charge-off loans totals $94.31.

The average lending rate for loans in my portfolio decreased from 16.97% to 16.79%. My daily interest accrual decreased from $1.10 to $1.01, as a result of the 1 loan paid in full, the 2 charge-off loans, and because no new loans have been funded. The current daily interest accrual will bring in around $30.03 per month in interest income. This form of interest is an excellent source of passive income. My long-term goal is to bring in $50.00 per month in interest income through Prosper, which will fund 1 new $50.00 bid. The magic number that I am shooting for is to bring my daily interest accrual up to $1.66. It seems now that it will take much longer to reach this goal because of the economy and because I can no longer fund any new loans for the short-term.

Late Loans
I currently have 4 late loans in my portfolio. These late loans make up 7.8% of my portfolio, with the 2 charge-off loans no longer considered in these stats. The breakdown of these late loans are as follows -

• Loans in Bankruptcy – 2 loans - While the status in Prosper does not show the loans this way, I am classifying them as Bankruptcy. I have $43.51 remaining principal to be paid on one of the BK loans and $45.40 on the other. I am expecting the worse in these two situations and am preparing to take a hit of $88.91 on my earnings. I have enough in interest earned over the course of my Prosper experience to cover this amount without a loss. However, if more and more bankruptcies are filed, then I may have a problem.
• 3 months late - 2 loans - I have two loans in the 3 months late payment status. I am starting to think that these 2 loans will probably be classified as charge-off loans next month.

Prosper.com Status
Prosper has closed down the funding of any new loans, which means that lenders will not be able to lend money in the short-term. According to Prosper, they have temporarily shut down any new accounts from being opened as well as the lending of any new loans.

According to the Prosper.com site -

“Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.”

Based on the current status of Prosper, they have temporarily stopped any automated funding of accounts. This means that I am not contributing $25 / month in new money, as I previously noted last month. This probably comes at a good time regardless as I have been taking steps to build my cash position because of the uncertain economic climate. I will continue to monitor my Prosper loans and provide a status until they come back up and allow new loans to be funded.

Tagged as: Prosper.com