Tuesday, August 22, 2006

Adapting the "I Buy Ugly Houses" Strategy to Prosper.com Lending

Have you ever seen the sign "I Buy Ugly Houses?" The signs actually look a little funny. Anyways, there's a way to adapt this strategy to prosper lending.

Find those loan requests that match your desired lending profile (credit risk, lender rate, etc), but have very little or no loan request description.

What you then have is something similar to a house w/ good bones but a less than desirable loan request description that will get past over by others.

Once you find one of these, you've found a loan request that will probably give you a 0.5-3% (or higher) interest rate than comparable "nice looking" loan requests. What you then have to do is send one or two emails to get answers to the items you would have otherwise been looking for in the "nice looking" loan requests.

Chances are, a good portion will come back w/ decent answers... and voila, now you have a loan to bid on that has a good risk vs. reward for you, the lender.

1 comment:

alexbey said...

To add to the idea a little, according to Prosper historical data (not even a year old, so take this with a grain of salt) the #1 variable that correlates the highest with non-late and non-default loans is the number of current delinquencies.

If you were to bid only on listings with 0 current or past delinquencies, with a credit risk/reward profile that matched your desired target, and went for those listings with little in the way of descriptions...who knows? "I buy ugly listings"