Sunday, May 21, 2006

Our Updated Prosper Strategy & Four Loans We're Considering Bidding On

You can read my latest posting on prosper lending here... You can always come back to the below posting.

I have made several changes to our lending strategy (Prosper is a peer-2-peer lending site).

(1) We have now started to loan money to those with "E" credit ratings (10% historical default risk likelihood). Before doing so, we only bid on those with no current delinquencies and positive debt-to-income ratios. Doing this will hopefully decrease the likelihood of default to something closer to 5% or better.

(2) I'm now emailing some of the prospective borrowers. This is quite effective in that a lender can get a sense from the tone of the reply as to the sincerity of the lender. Sometimes, you'll also get bonus information that you didn't even ask for.

(3) Lenders don't necessarily need to develop a spreadsheet to track their loan portfolio performance, has an easy interface that does it for you.

(4) Generally, I like to fund those loans that have a funding date on or after the 1st or 15th of the month (see original strategy post for definition of funding date and reason why). I now waive this requirement if the person divulges that they get paid on a weekly basis and also pass my other forms of screening.

I've funded 3 loans so far and have an open bid on another. Our first two loan payments are due on 2nd and 3rd of Jun, others due shortly thereafter. Current effective yield on loans is 18.62% (credit ratings of B, E, and E). I've found that knowing the effective yield on your portfolio influences me in the loans that I subsequently bid on. I find that an ounce of greed is involved and influences me to bid only on those loans that improve the effective yield (increases it). I must keep this emotion in check and diversify our loan portfolio risk by adding a few more loans of B and C quality.

Here's a couple of the loans that I'm watching and considering bidding on. All loans close in greater than 4 days so those of you with Prosper accounts may have chance to transfer funds and bid on them.

Loan, Current Yield, Debt Rating, Bidding Ends (note: 4 loans originally listed, I deleted two of them as they expired or were pulled by lenders)

(a) 14587, 19.50%, "C," 29 May
(b) 14419, 22.00%, "E," 28 May

Disclaimer: I don't know anything more about the borrowers than what is already available on the Prosper website. Bid at your own risk.

1 comment:

Finance Junkie said...

For those of you being referred by the investor geeks article, please look at my site at:

About 80% of my posts are related. My actual strategy has evolved a bit from this strategy posting.