Peer lending can provide an excellent opportunity for individuals looking to take out a loan. As the recession deepens and the banks continuing to tread lightly on lending out money – peer lending has become a viable alternative to traditional lending. There are several companies out there who specialize in bringing individual lenders and borrowers together to help both parties out. Investors looking for higher interest rates and an alternative place to put their money are turning to sites like Lending Club to invest their money. These investors then bid and fund loans at a higher rate than a traditional certificate of deposit or savings account. With the higher interest comes an increased risk as the loans are not FDIC Insured. Proper diversification across many loans can help to reduce this risk and make peer lending a great investment.

There are many reasons why individual borrowers look to take out peer loans. Some people are looking to consolidate their credit card debt. Using a site like Lending Club may allow you to bring down a credit card interest rate over 20% to around 10% depending on your credit. This is an incredible opportunity for people to consolidate their bills and get out of debt. There are also individuals looking to take out loans to pay off medical bills, raise money for home improvement projects, and even pay for college. I took out a $1,000 loan last year on Prosper as an experiment to see if I could leverage my good credit. The details of this experiment are below.

Monthly Prosper Loan Recap
Each month, I provide a status on my Prosper loan that I took out last year. When I last posted the status of my investments using this $1,000 Prosper loan, I had accumulated the following assets -

• Stock – I purchased 46 shares of HTE.
• Cash Generated – As a result of selling Covered Call Options against my HTE position, I have generated $58.68 in positive cash flow. It is important to note that selling a Covered Call Option contract requires 100 shares. I have combined my $1,000 Prosper loan with additional funds to meet the 100 share requirement.
• Remaining Cash – I had $14.55 remaining in leftover cash after making the purchase of HTE.
• Dividend Shares – I have received 7.653 shares of HTE stock through dividend DRIP payments. The total number of shares owned as of January (2009) was 53.653.

Current Status
I recently received the February monthly dividend payment, which was reinvested back into the stock using DRIP (Dividend Reinvestment Plan) -

• February Dividend Payment – I received approximately 3.066 shares of HTE as a result of the February (2009) DRIP payment. This brings the total number of shares owned up to 56.719.

As of the close of the market yesterday (March 18, 2009), I estimate that value of the assets listed above at -

• Shares – 56.719 @ $4.02 per share = ~$228.01
• Cash – $73.23
• GRAND TOTAL – ~$301.24

The value of my Harvest Trust Energy position in regards to this loan decreased by another (13%) compared with the previous month. The total payments required over the course of the 3-year loan are $1,095.07, so I am now ($793.83) in the hole. There are now 2 years (24 months) remaining on this loan, so I would need to make up an average of ~$33.08 per month over the course of the next 2 years to break even.

As I noted last month, the value of my HTE position continues to deteriorate each and every month. I have been reporting double digit losses consistently over the last several months on this investment. As expected, HTE also slashed their dividend recently which had caused the stock to drop significantly prior to this announcement. Hopefully the bad news is all out and we are seeing a bottom as it appears that things may have stabilized for a little while. Maybe I can start reporting an increase in my assets next month!

Originally posted 2009-03-19 07:29:10. Republished by Blog Post Promoter

Related posts:

1. Peer to Peer Loan Status – February (2009)
2. Peer to Peer Loan Status – January (2009)
3. Peer to Peer Loan Status – October (2008)

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I took out a Prosper Loan almost 6 months ago in an effort to increase my family’s monthly cash flow. The strategy in taking out this loan is to borrow money at a low interest rate in order to purchase higher yielding investments so they can be added to my portfolio of passive income streams. These passive income streams will allow my family to reach our long-term goal of financial freedom.

Today I would like to provide the monthly status on my Prosper loan that I took out earlier this year. For a history of activity, please check out the following post – P2P Loan Status. When I last posted the status of my investments using this $1,000 Prosper loan, I had accumulated the following assets -

• Stock – I purchased 46 shares of HTE (Harvest Energy Trust).
• Cash Generated – As a result of selling Covered Call Options against my HTE (Harvest Energy Trust) position, I have generated $40.20 in positive cash flow. It is important to note that selling a Covered Call Option contract requires 100 shares. I have combined my $1,000 Prosper loan with additional funds to meet the 100 share requirement.
• Remaining Cash – I had $14.55 remaining in leftover cash after making the purchase of HTE (Harvest Energy Trust).
• Dividend Shares – I have received 1.167 shares of HTE (Harvest Energy Trust) stock through dividend DRIP payments (June & July). The total number of shares owned as of July was 47.167.

Current Status
This morning, I received the monthly dividend payment for August which was reinvested back into the stock using DRIP -

• August Dividend Payment – I received approximately .625 shares of HTE (Harvest Energy Trust) as a result of the August (2008) DRIP payment. This brings the total number of shares owned up to 47.792.

As of the close of the market yesterday (September 16, 2008), I estimate that value of the assets listed above at -

• Shares – 47.792 @ $17.34 per shares = ~$828.71
• Cash – $54.75
• GRAND TOTAL – ~$883.46

With the drop in price of oil and natural gas, I saw a very large decrease in the asset value of my loan. The value of these assets dropped by (16.7%) compared with last month. The total payments required over the course of the 3 year loan are $1,095.07, so I am now ($211.61) behind. Obviously I have some catching up to do, but still have over 2.5 years on the life of the loan. Since I have 30 months left on the loan, I would need to make up about ~$7 per month over the next few years. Assuming that HTE does not cut their dividend, I should be able to accomplish this by using DRIP.

Originally posted 2008-09-17 10:38:18. Republished by Blog Post Promoter

Related posts:

1. P2P Loan Status – August (2008)
2. Tracking the status of my Prosper loan – June (2008) Part 2
3. Tracking my P2P borrower account – July (2008)

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Over the past few weeks, I have read several blog posts questioning the risk vs. reward in peer-to-peer lending. One article I read on Enginero.com asks for others opinions on their experience loaning out money using these “micro-loans”. I decided that I would write an article on my brief experience in the peer-to-peer lending world.

One of my goals for 2008 was to create two new income streams other than my day-to-day job. As a result, back in January I opened up an account on Prosper.com in an attempt to create a new income stream. I opened the account with an initial $250 investment with the intent of funding 5 different $50 loans. At that time, I was learning the process of bidding on loans and was not concerned about what type of loans to bid on. I then setup an automatic withdraw of $25 each week from my bank account with the goal of funding 2 new $50 loans per month. In February, I decided to invest an additional $1,000 into my Prosper account to quickly build up my portfolio.

As of today (May 21, 2008), I have funded 38 total loans with an average credit grade of ‘B’ at an average rate of 16.4%. I have had success so far in the first 5 months of bidding, with only having an issue on 1 funded loan. The 1 late loan that has been an issue is currently in collections. I have also had 2 of the 38 loans already paid off. Below is a chart of my 38 loans that have been funded in my Prosper account:

After settling in with Prosper, I realized that I needed to focus my bidding on specific types of loans that would fit into my risk tolerance. It is my opinion that the Credit Grade alone is not enough criteria to bid on loans. In fact, the one loan that has been an issue in my portfolio has an ‘A’ credit grade. I put together a saved query in my account that I use daily to search out and bid on loans.

• Credit Grades = AA, A, B, C, D – I filter on all credit grade loans other than ‘E’ and ‘HR’ loans. I am fine with bidding on ‘C’ and ‘D’ credit grade loans under certain circumstances.
• Loan Category = Debt consolidation – I now have decided that I will only bid on loans that are focused on debt consolidation. I want to help people who are trying to get out of debt. Most of these loans involve people who are trying to consolidate their multiple credit cards into one monthly payment with a combined lower interest rate.
• Debt income ratio = 0% – 50% – I won’t bid on any loans where the debt to income ratio is above 50%. Basically, I want to make sure the people are bringing in enough money to pay their bill.
• Loan Amount = $0 – $15,000 – I stay away from any loan that is over $15,000. Any figure above that scares me and I won’t touch it. My screen is setup to include loans up to $15,000 but I use discretion on loans above $10,000.
• %Funded = 50% – 100% – I will only bid on loans that have a high probability of being funded. Any loan under 50% funded either stands a good chance of not being funded or has several more days to stay open. I was frustrated when first starting out as I bid on some loans that never got funded or had been open for several days. These types of bids hold your money up for several days while most of them never get funded.
• Delinquencies in last 7y = 0 to 2 – I give people the benefit of past mistakes and allow up to 2 delinquencies in the past 7 years. Anything over 2 will not be included in my screening process.
• Public records (in last 10y) = 0 – Basically, this criteria says that I will never bid on anyone who has declared bankruptcy in the past.
• Rate = 15% or higher – This is actually not included in my search criteria as I want to see all available listings to bid on. However, my goal is to bid on loans above 15%, generally falling into the 15% – 20% category. I also get suspicious of loans above 20% and the ability for people to pay them off.

As you may note, some of the loans in my portfolio don’t match the criteria defined above. I have modified the types of loans that I now bid on after becoming familiar with the Prosper lending process. In addition, on some occasions, I may bid on ‘AA’ or ‘A’ credit grade loans that don’t meet the criteria defined above that are under $5,000. Typically these loans are for people who want to reinvest in Prosper by taking out a loan for a certain percentage and then use the proceeds to fund other loans at a higher rate. I am willing to bid lower for these types of loans as they are not as risky in nature.

Do you have a Prosper account? If so, what type of success/failures have you experienced? Please take the time to vote in the poll found below. If not, have you ever considered opening one up?

Originally posted 2008-05-21 07:51:58. Republished by Blog Post Promoter

Related posts:

1. P2P lending status – July (2008)
2. Tips on How to Borrow Money using Prosper
3. Tracking a bad Prosper loan – Update #1

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Last week I wrote a post about Tracking a bad Prosper loan through my Prosper lending account. For those of you who don’t know, I have written several posts on both my Prosper lending and borrowing experience. The details of this loan are below -

Now to the update –
I got home last evening and turned on my computer to check email and my Prosper accounts as I do every day. When I checked the status of the loan I mentioned above (over 2 months late), I almost fell off my chair when I saw that there was a payment in transit. Now the payment was for a whopping $1.73, but the simple fact that there was activity on the loan made me happy. I am also trying to calm myself a little as this loan has shown that money was in transit at least 4 other times and then disappears a few days later. I am cautiously optimistic at this point that I may see at least some of my money back out of this transaction. On a positive note, because the payment is so late, all of the funds will be counted as interest and late fees, so the resulting principal balance remains the same at $48.88.

On a sour note, I also had another loan in my portfolio show up as being Late (<15d), so I will now be tracking 2 bad loans instead of 1. The details of this latest loan are below.

On paper, this 2nd late loan looks to be much riskier than the 1st loan that I mentioned. I made a bit of a stretch on this loan as the total amount requested was $1,500 which to me was more reasonable than a loan over $5,000 for a borrower with a D credit grade.

I will provide an additional post in the coming days to detail my entire Prosper lending account status for the month of June (2008).

Originally posted 2008-06-12 07:00:24. Republished by Blog Post Promoter

Related posts:

1. Tracking a Bad Prosper Loan
2. Tracking the status of my Prosper loan – June (2008) Part 1
3. Tracking my P2P Lending Account

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In keeping with my long term personal finance goals of eventually becoming financially independent, I participate in lending money using Prosper. The overall goal is to create several additional income streams (other than my day to day job) that will eventually be able to pay our monthly bills. These additional income streams need to be as passive as possible in order to spend more time creating new income streams. When I first setup my Prosper lending account earlier this year, I was spending over 5 hours per week managing my account – not very passive. After implementing a few of the tips I have listed below, I am now spending about 1.5 hours per week managing my Prosper loans. While lending through Prosper or any other P2P lender can never be 100% passive, I hope to eventually reduce the amount of time I spend managing my Prosper loans to less than 30 minutes per week. As with anything in my life, I prefer to continuously improve processes one step at a time. In this case, I have reduced the amount of time I spend managing my Prosper account from 5 hours per week to 1.5 hours per week. I hope to keep improving this process so that I can reduce my hours spent on this income stream even more.

The following list are tips that I have put together that can help to make lending on Prosper as passive as possible -

• Create Saved Searches – One of the first things I did after opening up my Prosper lending account was setup several saved searches based on specific criteria for loans that I wanted to bid on. After learning the system and experimenting with several types of loans, I settled on the following criteria:
  • Credit Grade – AA, A, B, C, D
  • Loan category – Debt Consolidation
  • Debt to income ratio – <=50%
  • Loan amount – <=$15,000
  • % Funded – >=50%
  • Delinquencies in last 7y – 0-2 delinquencies
  • Public records – 0 in last 10y

  Setting up this saved searched has been the single biggest time saver so far when bidding on Prosper loans.

• Setup an Automated Transfer – If you plan on funding your Prosper account periodically with cash to bid on new loans, why not setup an automated transfer? Setting up the automated transfer is the same as you would do for any bank. My goal was to invest $100 per month into my Prosper account so that I could fund at least 2 new loans each month. I setup an automated transfer from my bank account to add $25 per week into my Prosper account. That way, every two weeks I can make a $50 bid on a new loan. The automated transfer is easy to setup and prevents me from manually adding cash to my account.
• Setup a Portfolio Plan – Another option to save time when using Prosper is to setup a Portfolio Plan. When I first opened my account, I setup a Portfolio Plan and almost immediately, I had placed five $50 bids on loans. The Portfolio Plan allows you to specify certain criteria for the type of loans you want to bid on. This is a huge time saver if you don’t mind letting Prosper do all the work for you. I actually prefer being in control of the loans I want to bid on, so I now use my Saved Searches instead to place my bids.
• Use 3rd Party sites – If you are curious about stats for your account or other Prosper lenders, then there are several 3rd Party sites and blogs that provide you with quick statistics, graphs, etc. Some of these sites can provide you with a dashboard of your data very quickly which helps you save time. Some of these sites also show how you stack up against other lenders. One of my favorites is – LendingStats.
• Use development tools – If you are interested in pulling certain data out of Prosper for your account, then they also offer several different development tools. They offer several different options of pulling data out of Prosper that can be used for analysis. While I haven’t used these tools to date, I am planning on investigating them to see if they can help me save even more time.

Check out these previous related posts on my Prosper lending experience -
Creating a new Income Stream using Prosper
Tracking a bad Prosper loan
Tracking a bad Prosper loan – Update #1
Tracking my P2P Lending Account

How much time do you spend per week on your P2P lending?

Originally posted 2008-07-10 08:13:50. Republished by Blog Post Promoter

Related posts:

1. Creating a new Income Stream using Prosper
2. Tracking a Bad Prosper Loan
3. Tracking a bad Prosper loan – Update #1

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