Monday, November 06, 2006

A Prosper Lesson Learned: I'm Kicking Myself For Lending Money To One Person

Read my latest post on prosper here... You can always come back to this 2006 post later.

Bottom Line: I recommend against lending money to people who need to buy a car w/ a Prosper loan.

A car is a "hard asset" that can be repossessed if somebody goes delinquent on payment(s). No matter where you go, you can almost always find somebody willing to sell you a car and finance it too!

To frequently I see people w/o money buying or leasing cars they have no business with (vettes, escalades, lexus's, bmw's, etc). I know there's dealers out there that will finance a car, albeit at a high rate, for most anybody.

So, when somebody with bad credit or no credit wants to borrow money for a car, they've probably been turned down already by dealers. I suspect, their credit and/or income reliability may be much worse than what's represented (or not represented) in their Prosper loan request. Of course, there may be the case where the person may have found a good deal on a private sale, with limited financing opportunities. This is up to you... I've been burned once, and i'm staying away from them.

Ok, why am I saying this. Well, my only delinquency is a person borrowing money for a van. He's also the only "no credit" (NC) rated person that I lent to. He's retired Air Force. I guess I have a soft spot for prior military since i'm active military.

Here's my one delinquent: (Link was listed but removed on recommendation of others).

Summary of my loan portfolio:
a) 89 active loans w/ six more in review for funding
b) 20.32% return since starting in Apr 2006 (% per Prosper Performance Table)
c) One delinquent (six weeks delinquent)

Now, I'm getting to where I prefer "credit card consolidation" loans over all others. I prefer these when the tone of their application is remorseful for the situation they got themselves into, and THEY SPECIFICALLY STATE THEY'RE USING THE LOAN TO PAY OFF OLD DEBT. Of course, they could always lie to you and simply pay off the cards to continue shopping at Nordstroms.... It's one of the risks I choose to take.

Good luck!


Anonymous said...

I would receommend not posting information in a public forum about the delinquency of someone you have loaned money. The fair debt and collections act and other privacy laws might be major concerns for placing the information on line.

Billy in Texas said...

I would use caution placing personal delinquency information for individuals who you have loaned money. The Fair Debt Collections Act and privacy issues are items that I would be concerned about. The link you provided has the individuals name and that he is 6 weeks delinquent.

You would never have a bank or Credit Union post information about a bad debt on a public fourum.

Finance Junkie said...

Thanks for the words of caution. I'll investigate further. To the best of my knowledge I'm not attempting collection. There is also no name associated w/ the listing, only a screen name.

I could have sworn I've seen delinquent tax listings that even give you the address of the delinquent person.

Billy in Texas said...

I read in his profile that included his name and state where he lived. The Fair Debt Collections Act provides who you can communicate with concerning the debt. Primarily it involves not discussing debts with outside family members such as parents, siblings and I guess neighbors.

I am not an attorney. I would be more cautious with your blog. You do not want any unneccesary problems.

My guess is that the government can find ways around lisitng information such as delinquent tax information because it is public information.

Good luck with your blog.

Finance Junkie said...

Thanks Billy for the kind comments and looking out for everybody's best interests.

Finance Junkie