Monday, October 30, 2006

Prosper Lending: A Big Surge of Borrowers About to Hit the Market

I'm an avid lender on prosper.com and I was previously getting concerned that I was working a bit hard in finding suitable risk-reward lending situations. Per Eric's Credit Community, my ROI is 14.45%. Beating this ROI is starting to get difficult. But voila, I just came across a Christmas related listing.

It then dawned on me that the Christmas/New Year season will be a good period for lenders. Here's why:

(1) Who ever came up w/ "It's better to give than receive?" LOL, perhaps a retailer, i'm not sure. However, many people are going to spend more money than they have on hand. This will create more shortfalls when emergencies hit.

(2) Some of the other lenders you're competing against may get a little bit shorter on funds if they're not giving frugally, but making a splash w/ the purchase of big Christmas presents for others (perhaps a big flat screen for themselves).

(3) Other people may be making New Years resolutions that cost money.

(4) Others may be spending too much money on travel to see family this season.

(5) Others may be spending too much money on Christmas/New Years parties.

You should expect the beginning of a surge of Christmas related listings starting about 10 days prior to Thanksgiving. The one above may be one of the first ones.

I haven't yet decided if i'm bidding on the listing above. I've emailed her a couple of questions and am waiting on a response. The one challenging thing for her is that English must be her second language after I suspect Mung/Lao or Thai. I hope she doesn't think it's smart to "SAVE" at 25.48% interest. It's only saving if she would have otherwise spent the money on a 32% Bank of America or Chase credit card. If that's the case, on the one hand I applaud her for saving about 6.5% but on the other hand, she needs to work on money management.

2 comments:

Lazy Man and Money said...

That's an excellent observation which didn't occur to me. I will be less able to lend money as I finish up my 401k contributions for the year. I think I'm going to tighten up my belt and see if I can get some of those better rates as you suggest. I might even just save up for a 2-3 weeks and not transfer any money in to catch the Christmas rush.

fin_indie said...

Fantastic observation. It'll be interesting to see how the inventory of borrowers ramps up. As I've said, the supply far outstrips the demand right now and it's leading to those lower rates...