Prosper Looking for a P2P Rate of Return Industry Standardization

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Last night I had the pleasure of attending a webinar where lots of technical jargon was used to discuss complex mathematical topics. The use of the word pleasure in that last sentence was not an accident. Allow me to explain...

When I say that I attended a webinar, I meant to say that I got to be part of the live studio audience. The audience consisted of SVB from The Digerati Life, Bobby from 2 Minute Finance, Peter from Social Lending, Fanny from Living Richly on a Budget and a few others. The location: Prosper's office in San Francisco. I hadn't been to the offices in more than 3 years since I used to write for Prosper's Blog. Truth be told, I lost some money by misjudging risk with the way Prosper worked when it first came on the scene in February of 2006. However, all that is changed now. The people allowed to get loans are better risks and the returns are better.

On the topic of those better returns... we were there to learn about the difficulties in calculating the rate of return on peer-to-peer loans. It isn't just a Prosper problem, but a Lending Club thing as well. That's where all the technical jargon and complex mathematics comes into play. Let me give some examples that were discussed:

  • Loan Vintage - This is analogous to wine. The credit market of 2008 was different than 2011... and it will be different than 2015. It is difficult to compare the three. It doesn't get any easier when companies like Prosper and Lending Club change their lending criteria and other
  • Loan Seasoning - Since a loan can't default for a few months, a recently made loan with even a small payment is going to deliver top results. Anyone who has lent any serious money in P2P knows that there will be some people who won't repay their loans and thus the actually rate of return on their portfolio will be negatively impacted. How should this be factored in?
  • Idle Cash - Should cash that is sitting idle in your account be factored in your return?
  • Secondary Market - You can sell off loans to other bidders. This creates its own set of complexity in measuring returns.
  • Charge-offs - If a loan is delinquent (late), but not charged off (considered a total loss) yet, how should that be factored in? If a borrower calls up the P2P institution and works out a payment plan for less than original loan, how should that be handled?

(I should note that all the above is my best interpretation of the issues. Three years ago, I had a better handle on the math involved in judging a P2P loan, but the cobwebs in that area of my brain are thick.)

All these factors significantly impact the rate of return on a P2P portfolio. There are different philosophies as to is the most accurate method. There's a tool by Nickel Steamroller, a tool by Lend Stats, as well as Prosper's and Lending Club's own assumptions. The interesting thing is that in general, a P2P investor doesn't need to understand all these details to successfully lend on the platform. The P2P industry needs to have an industry standard. This way Joe Average Investor won't just default to mutual fund rather than getting scared off by all the ugly math.

I have some of my own ideas and I'm constructing a rough straw-man in my head. However, that's an article for next week. In the meantime, let me turn the floor over to you. What are your thoughts on an industry standard for P2P rate of return?

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Posted on November 4, 2011.

Two Monday Thoughts About Prosper

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If you've spent any time in the archives or if you are a long time reader, you'll know that I used to write about Prosper.com quite often. I've since taken this blog in a more general finance direction. However, I find that I need to continue to cover the peer-to-peer lending space since it's quite possibly the most new and exciting thing to hit personal finance in some time.

First up, Prosper launched their own blog last week. I had the opportunity to talk with their Chief Marketing Officer more than six months and made this suggestion. I'd like to say that I'm the reason it got off the ground, but I imagine it might have more to do with Lending Club's Blog. The bigger news, at least for readers of this site, is that I'm writing for Prosper's blog. In fact you can read my first article about multiple income streams which came out today.

Now that I've firmly established the bias I have for Prosper and peer-to-peer lending in general, I'd like to highlight the other side of the story. Free Money Finance decides that investing in Prosper isn't for him. Here are the reasons he's highlighted:

  1. Stock index funds will average about 10% return over the long-term. That's roughly what Prosper loans earn too -- at best. It could be 1% lower. And we all know that over a couple decades, that 1% can make a really big difference in your total investment return.
  2. The Prosper loans take a lot of time to select and manage -- at least more than index funds do. The latter are easy, especially when you set up your investments automatically.
  3. Index funds seem less risky. It's not that stocks are without risk, but do I really want to lend money to someone who can't get a loan from a bank? Think about it -- people who do this professionally (bankers) have said this person is a bad risk. So why do I want to give them money.

I've read these reasons before and on the surface they make a very convincing argument. However, when dig under the surface some of these are not 100% true for all Prosper loans. I'll give counter points in order:

  1. It's very tempting to take the average Prosper loan as what your performance would be. When we talk of the stock market it's been documented that monkeys throwing darts at stocks don't beat the average performance. However, when you are evaluating Prosper loans, this isn't really the case. You don't have to settle for average if you read my keys to Prosper success.
  2. Prosper loans don't necessarily have to take any time to manage. I can go months or years without logging into my account, yet my money can be invested on a regular basis. You simply set up automatic withdrawals from your bank and then set up standing orders to bid on quality loans. Another alternative to this to take Prosper's portfolio plans which earn up to 11.56%. Who wouldn't mind that, especially with no work attached?
  3. I'm not sure how index funds seem less risky. The assumption with this one is that someone on Prosper can't get a loan from a bank. I never understood this assumption, but perhaps someone will explain it to me in the comments. I personally would rather not deal with a bank, if there's a choice of going online. It's similar to buying a stock through an online broker vs. the traditional way of calling up a stock broker. The old way takes longer, costs more, and is simply less convenient.

In the end, I don't see how peer-to-peer lending doesn't win. If you think about banks, they are happy to give you somewhere from 1 to 4.5% interest on your money so that they can lend it out to people at rates that are often more than 12% or 15% - even if you have very good credit. The banker collects that fee of 8-10% for his work. Peer-to-peer lending comes along and says, "We want 2% of that banker's cut and will give you the rest for doing his job of evaluating risk. Oh and if you want we'll help you evaluate risk by allowing you to invest in historically good loans." That sounds like a disruptive industry if you ask me.

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Last updated on July 29, 2011.

New Features make Lending on Prosper Better than Ever

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Prosper.com released a few new features recently. These features might be interesting to all lenders or potential lenders. Here's a run down on some of the new features and how they could affect Prosper's peer-to-peer lending market.

Portfolio Plans - Prosper now provides an automated method to bid on set portfolios. You can choose from 4 model portfolios that range from conservative (estimated return of 8.37%) to aggressive (estimated return of 11.06%). Prosper uses data from over a year of loans to determine the estimated return. I'm not sure if that sample size is large enough to depend on, but it might be interesting to try. This reminds me of some of the options I saw in many 529 college savings plans. I think this has two obvious advantages for lenders.

  • It could be an attractive option if they don't wish to spend hours reading and bidding individual profiles.
  • It also gives guidance to those that might want to just diversify their investments outside of mutual funds. If you don't care to learn the skill of finding quality loans, simply set up an automated bank transfer, choose a portfolio plan, and be lazy.

0% Fees on AA Loans - This is pretty big for those looking to place conservative loans. You already knew that low fees are good for other investments like mutual funds. The same concept applies here.

Interest Rate Cap is Increased to 36% - It was previously capped at 30%. I had difficulty making money with some lower grades even at 29%. In fact, I lost significant money on those types of loans. Perhaps at 36% it is possible for lenders to make money on loans from borrowers with lower credit grades.

Guidance on bidding - When you place a bid, Prosper attempts to calculate the estimated return. This is extremely helpful I found that some of my standing orders placed a couple of interesting recent bids. I thought that getting 18% from a B grade borrow with low DTI and low delinquencies would yield a pretty return. It seems like there were too many credit inquiries in the last 6 months reducing my estimated return on this potential loan to around 4%. Now if only there was a way of placing bids based on these estimated returns. Prosper, please allow me to set up a standing order for anything that has a 12+% estimated return. I know this is close to the aggressive Portfolio Plan, but this would give more diversity to the lending.

Now might be one of the best times to lend money on Prosper.com. For more on the changes, you might want to read this post on RateLadder.com.

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Prosper

Last updated on July 29, 2011.

Stopping My Prosper Contributions

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For a large part of this year, I have been regularly adding money to my Prosper account. I've enjoyed lending money to other people and I think I've done fairly well making money. I stress the "think" because it can be difficult to quantify exactly. On average, I seem to be making around 7% there. I would be doing much better if I didn't make some poor decisions early on taking on too much risk.

So why am I stopping my contributions? I looked at my 401k contributions for this year, and though I've stepped it up significantly over the last month, I'm still further behind than I'd like to be. I spent a large part of the year saving for the wedding, so I have a lot of catch-up. If I'm going to meet my goal of contributing the full amount for the year, I'm going to have to make some cuts.

Along with the 401k goal, I have is to finish paying off my HELOC. I set it up nearly two years ago to pay for the ring to ask my wife to marry me. I then did something a little unorthodox and used some of the funds to temporarily allow me to live while I maxed out my 401k plan back then. I wouldn't recommend that course of action, but I should explain why I did it. At the time, I could borrow money from the HELOC at around 6% after tax deductions. I calculate that my 401k will make 9% over the long term. That's around a 3% gain in my pocket. Lastly, I figured this would be tremendous motivation for me to live frugally. It was very much a forced savings plan.

Today that HELOC is a burden that I want to be free of. I'm no longer able to deduct the taxes which means that I pay more in interest than I used to. I've made some great strides in paying it off over the last couple of months, but it's time to double the efforts.

I'd like to invest more in Prosper. It's still new and exciting to me. However, sometimes you have to go with the boring mainstays such as investing in a retirement plan and playing down debt. I won't eliminate loaning on Prosper completely, I'll continue to reinvest the payments that borrowers make into new loans. Maybe by the start of next year, I can begin again without having to worry about saving money for a wedding or a wedding ring.

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Prosper

Last updated on July 29, 2011.

Prosper Beats the S&P 500?

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prosper beats S&P 500"Prosper beats the S&P 500" - That's the subject heading from an e-mail that appeared in my in box last night. If that surprises you it probably should. It surprised me and I support the company more than most people. However, there's a graph and everything so it must be true, right?

I looked a little more into where the graph numbers come from. For some reason they decided to compare the average return of the S&P 500 over the last two years (from 8/16/05 to 8/16/07). It's worth noting that the S&P was at a 3-month low on 8/16/2007. They compare that against the returns of Prosper for one year. Why one year of Prosper vs. two years of S&P? I don't know. They could have just done one year of each, but my guess is that didn't look so well for Prosper.

So where does the 9.20% they advertise come from? One might naturally assume that all loans do. However, Prosper chose only a small subset of loans they offer - specifically the loans that beat the S&P 500 are those "originated between 7/22/06 and 7/22/07 to borrowers with AA credit grades who have 0 delinquencies and 0 to 2 credit inquiries on the their credit record, as of 8/23/07." They provide a handy link to the Prosper performance data over the last year. Looking at it, it seems like AA, A, and B loans all perform as advertised, but C, D, and especially E are far below the S&P 500. Grade E loans lose 8% on average.

While it seems that Prosper is doing a bit of cherry-picking here, perhaps we shouldn't fault them for it. After all, each lender can cherry-pick the people they lend money to on Prosper. If the average AA, A, or B loan earns over 9%, then if you can pick better than average loans you can do better. This is why I recommend that you review my keys to Prosper to Success. With no time investment at all, you can be getting several points above that average.

So while I think Prosper's marketing tactics can be a little deceptive, I think it has a place in one's portfolio. With people getting scared out of the US markets, a Prosper portfolio seems like a good hedge.

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Prosper

Last updated on July 29, 2011.

I am a Monkey

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I didn't intend to write about this today. I had a great post in my head about retirement that I think many of you would have enjoyed. I also had one about the value of a dollar that I think will make you think. Perhaps I'll write these next week, but today I've got a confession to make. I am a monkey.

You might wonder how a monkey has run this website for the past year. Well, I can prove that I'm a monkey with these three reasons
1) I am very hairy
2) Monkeys and I have about 97% of the same genetic code
3) Miserly Bastard indirectly says that I'm a monkey: "Lesson #1: Prosper lenders are monkeys."
I'm going to ignore the first 2 points and focus on the third point of his.

In case you were too lazy to click the link (I know I would be), here's the brief summary of Miserly Bastard's take (in my words). A person on Prosper tried to take out a loan of 25K at 13% to invest in the stock market. It appears as if he has no serious investment experience. He got 85% of the way there with lenders willing to give him 20K. Thus if he had only asked for 20K he would have had the loan funded.

I hope that most of my readers right now are cringing at the idea. By many accounts, the market returns 8-12%, and in this case the person asked for a loan at 13% in HOPES of beating the averages in a game he doesn't seem to know a lot about. If you think this is a good idea in general, I'll have to shake my monkey tail at you.

Before we open and shut the case on me (and other Prosper lenders) being a monkey, let give some reasons why this might have happened.

1) It's important to note that his credit grade is AA - meaning he is the best possible candidate to give a loan to. He also has no delinquencies and no debt - a completely "clean" credit profile. In fact, Experian data suggests that people with this grade default only 0.2% of the time. That's 2 people in 1000. Prosper's historic rates are even lower, 0.13% of the time from this data. Perhaps the monkeys thought, "I have a 100% chance at earning 5% in a high-interest savings account... or I could have a 99.80-99.87% chance of earning 13%." I have to say that I'm with the monkeys on this logic.

2) Even if he lost money on his investments, his history shows he'll pay his debt from the surplus in his monthly budget which he states is $1500. Thus the monkeys don't 100% REQUIRE his plan be successful, they just need to be confident that he'll repay. Note this from the questions, "Even if the worst case scenario happens and my stocks go down in value, I will still have more than enough money to repay this loan."

3) Looking at the questions he anticipated the lenders being willing to bid the loan down. He did some homework, "the Vanguard S&P 500 fund, has returned 12.36% since inception." Thus his thought was never to take a 13% loan to try to beat the market. He went as far to withdraw the loan so that he can relist it and give him more margin for error. Let's say he relists it at 10%, perhaps the monkeys are no longer willing to lend it to him.

4) Even if you agree that this is hare-brained for the borrower and the lender monkeys (and I'm not entirely sure about that), it's worth noting that this is one loan. Miserly Bastard has taken this example as representative of the whole. One could just as easily take Enron, Worldcom, Webvan, or Pets.com and conclude that the stock market is an even worse place to put your money. With this loan many people could be out $50 or so (collectively a potential 20-25K), but with those previous companies people lost millions (collectively billions). So if you are going to throw out Prosper as a bad idea, you best getting out of the stock market.

5) Building on #4 above, one must remember that putting all your eggs in one basket that you can't control is very bad. Just like you wouldn't have put all your money in Worldcom, you wouldn't have put all your money into one Prosper.com loan. It is much better to look at it as part of a whole. If you invested in a S&P 500 from 1998-2000, there's a very good chance it had invested in Worldcom (I'm 99% they were included in this index). I don't think you are a monkey for putting money in a index fund. However, when some small percentage of people invest in something a little out of the norm, you become a monkey. It's worth noting that this loan hasn't failed like Worldcom yet - I would argue he may break even on his plan with the lenders getting the profits.

Here are some points to take away from this...

  • Lending on Prosper is like a creating a mutual fund of loans. You have control in what you pick. If you think this above is hare-brained, you don't invest and you move on. You don't have to take every loan, you cherry pick the best ones. In the long run, you are going to have some good loans and some bad loans. You can, to some degree, control the quality of your loans which will greatly impact your bottom line.
  • Borrowing on Prosper - I mentioned this recently, but there are some circumstances where you can't lose as a borrower. One great way is to lower credit card debt as Tricia from Blogging Away Debt found out.
  • It's very dangerous to take one example and generalize it for the whole group or sector. It's wise to at least have a majority of datapoints before making a conclusion.
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Last updated on August 1, 2011.

Lend Money & Borrow Money

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Having been a member of Prosper.com for about 16 months now, I decided to give a round-up of what I've learned. I'm going to break this up into three areas:

  • The Reason to Borrow Money - If you have credit card debt that you are trying to pay off, you might be able to borrow money at a lower interest rate at Prosper.com. This is what Tricia from Blogging Away Debt found. Instead of paying 13% to a faceless credit card company, she's now paying 9.9% to a bunch of average people. If you are looking to reduce your credit card rate, borrowing money from Prosper might be a smart idea.
  • The Reason to Lend Money - Remember that 9.9% that Tricia is paying above? That's nearly double what you can get in a high-interest savings account. Indeed there is risk, I'm the poster child for that. I didn't properly analyze risk when I started. However, in looking at my new strategy over the last six months, I've had only two late loans (out of around 50). This could go up over time, but it's still very positive. I have also made 40+ loans to people with credit grades AA, A, and B and none of them are late! I'm making 18-19% on average on those loans. Lending money to credit grade D and E have not been successful for me. If you avoid that (something that I'm starting to do now), I think Prosper can be a great investment. If this sounds interesting to you, join Prosper through this link - you'll get $25 to start and I'll get $25 for referring you. If it's helpful, I've written about some of my lending strategies in the past.
  • The Case for the Little Man - As I mentioned above, banks and credit card companies love to charge high interest rates. The executives at those companies live like kings. A bank's business is largely to give a small amount of interest to you while they lend it to other people at large interest rates. Credit card companies lend you money for free in hopes that you can't pay them back right away, leading to high interest rates. Prosper allows you to be the banker and get some of those high interest rates for yourself. Don't be fooled, Prosper takes their cut, but it's far less than the bank's cut. They can do this because they've automated the lending system. You do a lot of the bankers' work and reap their rewards, but they provide the platform. The other side of the coin is that you are lending to individuals and small companies. You are not putting your money to work for those big company executives to buy themselves $600 toilet seats. You are helping someone get out of a debt hole or start a new company.

I think the time is right to join Prosper. There are tools for lenders to create and refine great strategies. The market place can only help borrowers - as Tricia found. So give it a shot and join Prosper today.

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Prosper

Last updated on November 5, 2011.

Prosper Update

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It's been a long time since I've made a mention of Prosper.com. The reason is that it hasn't been performing as I had hoped. I'm putting money into Prosper though one could conclude that I should stop.

What's the cause for the change in my philosophy? Well, I found LendingStats.com which helps you track your portfolio. I was looking at my overall portfolio and I found some interesting things. You can see that my current performance is around 5%, not exactly something to write home about. If you look at the customize block, you can various attributes to find out how parts of your portfolio are performing. I like to view it by loan grades. If you look at my loans from AA-B, I'm making around 18-19% on 28 loans, a nice investment. If you at my grade though, it's only performing at 6%. My D's are worse at a portfolio busting -2%. My E's rebound a little bit to return 3%. My portfolio is biased towards D and E grades from the two months where I figured I could do well with anything making 25% interest. That was a terrible plan and since I've abandoned it, I've done better. As I continue to focus to AA, A, and B, loans I could see my portfolio performing as good or better than the 12% that I expected from the outset.

A couple of months ago, I revealed the keys to my Prosper success. Give the data above I was probably a little pre-mature about that "success." One of the biggest keys was to use a couple of queries from ProProsper.com. ProProsper has taken note and created a pair of RSS feeds for the Lazy Man auto-funding loans and the Lazy Man 24 hour fund. I've been looking the RSS feeds for a few days now, and if you lend money on Prosper, I urge you to check them out. I still prefer to cut and paste the queries into the query analyzer.

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Last updated on August 1, 2011.

Prosper Winners and Losers

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Personal Finance blogger left a comment during Prosper week. He suggested that:

  • The GIGANTIC WINNER is - Prosper
    • No risk
    • All reward
  • The RUNNER UP is - the Borrower
    • Pool of available lenders where more traditional methods have failed
    • Will always get a better deal than they could have gotten otherwise
    • No pre-payment penalty
    • Variable underwriting process (many loans completed with minimal information). For example, did you know the debt/income ratio is based upon income entered by the BORROWER? As I understand it, there are no screens to check this (unless you asked for a W-2) Someone correct me if I'm wrong on this.
  • The BOOBY prize goes to - the Lender
    • I believe there is a bias in the Prosper borrowers market and that historical default rates do not apply
    • Variable underwriting process (less documentation / verification can only benefit the borrower, not the lender)
    • Immature market and business - Prosper is continuing to improve transparency in its reporting and tools available, but the whole concept / model is in it's early phases
    • Very difficult to truly diversify - both because of the biased market I mentioned above and that people do not usually have the funds to do so.

I agree with giving an award to Prosper. They do incur a risk as any starting company does. Still it's very efficient business and it's hard to imagine them not being really successful.

I'm not sure I can agree with the Borrower being a universal winner. The point of "will always get a better deal than they could have gotten otherwise" doesn't seem right to me. Maybe as far as unsecured credit goes it's one of the best, but there are credit cards that offer 0% for a length of time. As a home owner, I'm using my HELOC for around an 8% interest - I can't beat that on Prosper.

Let's take the part that I'm most concerned with, The Lender.

  • I will agree that historical default rates do not apply in the Prosper market place, but Prosper lists the default rates within Prosper. You can't get better information than that.
  • Underwriting process. It is true that there's less documentation, but if you use the default market rates mentioned in the previous bullet, it shouldn't matter if there is less documentation. The default rate is the default rate.
  • Immature market and business - I think this is what is helping lenders right now. Because the market is immature it's possible to exploit.  Once the market matures and other lenders realize there's money to be made here, there's the distinct possibility that good loans will get bid down.
  • Diversification is easy - I think it's possible to diversify with as few as 20 loans.  With a $50 minimum, you can get started with as little as $1000.  If you don't have that kind of money available, stay out of the lending game.

In the end, I'm not seeing a reason why it's NOT possible for the lender to make money.  Of course, some will win and some will lose.  I plan on being the one of the winning lenders.  Stick with me, and we'll follow the journey together.

This post deals with: ... and focuses on:

Prosper

Last updated on September 2, 2009.

Revealing the Keys to Prosper Success

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Earlier this week, I defended the Prosper's business viability. I spent two posts rebutting the idea that it might not be a good investment. Just yesterday, I discussed the Prosper mistakes I've made. Today, I will share with you what I've learned. Hopefully 5 minutes from now you'll be on your way to 14% return after adjusting for risk...

Step #1: Know Where You Stand
It sounds so basic, but it can be extremely difficult. As I looked back on the mistakes I made yesterday, the biggest one was thinking that Eric's Credit Community's Expected Return was a good gauge. So now that we know that it doesn't work, what does work? I've found that RateLadder's IRR Excel Spreadsheet is the best way to gauge how things are going. (Note: If you download the worksheet be sure that you install the XIRR function from your Microsoft Office CDs. It's not in the standard install.) It's worth following his IRR game with other lenders. If nothing else, you'll be able to track my progress. My current average IRR is 12.76% which is remarkably better than the 9.91% it was just over a month ago on Feb 17th. I think this may be more luck than skill at this point. For too long, I was making E loans at 29% and maybe it hasn't caught up with me yet. Either way, it's a much, much better gauge than what I had before.

Step #2: Find Better Loans in No Time at All

Familiarize yourself with the Prosper's Standing Order. After doing some reading, I've realized that the best way to get in the better loans is to have a bid in before the loan is even created. I only put in standing orders for automatic funding loans. Otherwise, you could be tying up money in a loan that could get bid down - or even find yourself outbid. Here are a few good loans I've had.

Step #3: Use the Tools at ProProsper.com

I don't think the Prosper community is really aware of ProProsper.com. I had the great pleasure of being a sounding board throughout the initial development. It's an entirely free site full of great time saving tools. You'll have to sign up, but it's worth it. Here are some of the tools I use the most:

  • My Cashflow - This tool is essentially the same as the IRR game discussed above. I prefer to do it in an spreadsheet because it's currently faster than the web version.
  • Listings - The listings on the left navigation doesn't jump out at you, but click on it and then click on the "Views" drop down and you'll find some great options... One of them is "active loans where they offer a rate greater than the average." These views compare currently active loans to loans of similar grade, DTI, and loan amount requested over the past 120 days. The more standard deviations (STDEV) above the better.
  • Loan Rate Analyzer - This is related to the listings tool we just mentioned. Fill in the information in this form and you can find out the average interest rate of that loan over the last 120 days. I like to bid in loans that will give me a better rate than average.
  • Standing Order Analyzer - This is just like the Loan Rate Analyzer, except that it will give you information for multiple credit grades.
  • Query Analyzer - This is my favorite of all tools. You can query the database in free form. If you did a few of the "Listing" views above you'll note that ProProsper gives the query that's performing. Here are my two favorite queries to run...
    • Query #1 - This query will give you loans that are (a) active loans (b) close in 24 hours (c) are not HR grade (d) sorted by the difference of the current lender rate and rate of similar loans over the last 120 days:
      SELECT [listing].[listingid] AS 'listingid', ([listing].[startdate]+[listing].[duration]) AS 'scheduledenddate', [listing].[amountrequested] AS 'amountrequested', [listing].[creditgrade] AS 'creditgrade', [listing].[debttoincomeratio] AS 'debttoincomeratio', [listing].[lenderrate] AS 'lenderrate', [listing].[fundingoption] AS 'fundingoption', [listing].[listingnumber] AS 'listingnumber', rtrim(ltrim(SUBSTRING([listing].[title],1,80))) AS 'title', [listing].[percentfunded] AS 'percentfunded', [listing].[status] AS 'status', [listing].[borrowerrate] AS 'borrowerrate', [listing].[likewtavg] AS 'likewtavg', [listing].[likewtavg1stdev] AS 'likewtavg1stdev', lenderrate-likewtavg as goodValue FROM [listing] [listing] WHERE ([listing].[startdate]+[listing].[duration])>getdate() AND ([listing].[startdate]+[listing].[duration])<dateAdd(Hour,24,getdate()) AND [listing].[lenderrate]>[listing].[likewtavg] AND [listing].[likenumloans]>=10 AND [listing].[status]='Active' AND [listing].[creditgrade]<>'HR' ORDER BY 'goodValue' desc, 'scheduledenddate'
    • Query #2 - This query will give you loans that are (a) auto-funding (b) are not HR grade (c) sorted by the difference of the current lender rate and rate of similar loans over the last 120 days: SELECT [listing].[listingid] AS 'listingid', ([listing].[startdate]+[listing].[duration]) AS 'scheduledenddate', [listing].[amountrequested] AS 'amountrequested', [listing].[creditgrade] AS 'creditgrade', [listing].[debttoincomeratio] AS 'debttoincomeratio', [listing].[lenderrate] AS 'lenderrate', [listing].[fundingoption] AS 'fundingoption', [listing].[listingnumber] AS 'listingnumber', rtrim(ltrim(SUBSTRING([listing].[title],1,80))) AS 'title', [listing].[percentfunded] AS 'percentfunded', [listing].[status] AS 'status', [listing].[borrowerrate] AS 'borrowerrate', [listing].[likewtavg] AS 'likewtavg', [listing].[likewtavg1stdev] AS 'likewtavg1stdev', lenderrate-likewtavg as goodValue FROM [listing] [listing] WHERE [listing].[fundingoption]='Close When Funded' AND ([listing].[startdate]+[listing].[duration])>'2007-03-12 20:57:32.421' AND [listing].[lenderrate]>[listing].[likewtavg] AND [listing].[likenumloans]>=10 AND [listing].[status]='Active' AND [listing].[creditgrade]<>'HR' ORDER BY 'goodValue' desc, 'likewtavg1stdev', 'lenderrate'
  • With these two queries you can't simply take the top loans and bid on them. You'll want to look at the DTI and make sure it is reasonable. If you are the type who like to read what people read, you can do that as well. However, these queries should filter out most of the undesirable loans and reduce your time looking for Prosper loans to just a couple of minutes a day (if that).

In the end, by using these loan analysis tools, you can make sure that you always get in loans that are significantly above the average loan. Earlier this week, we determined that the average A-D loan returned nearly 10%. I believe that I'm now able to get in loans that are enough above average to earn up to 15%. If you want lend money on Prosper.com now.

This post deals with: ... and focuses on:

Prosper

Last updated on August 24, 2009.

 
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