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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.

Last updated on August 1, 2011.

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

Prosper

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16 Responses to “Prosper Update”

  1. Sun says:

    Lazy: What’s the significance of a title-less post :) ?

  2. Lazy Man says:

    And title-less post now has a title. Thanks Sun.

  3. Traciatim says:

    I find it very interesting to note:

    “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 . . . ”

    Maybe this finding alone explains why banks refuse to loan money to high risk applicants, and also why fees are so high with high risk lenders.

  4. Tim says:

    I second what Traciatim stated. additionally, loaning money should be though of opposite to investing money: narrow your portfolio rather than diversifying it–that is, stick with the good grades.

  5. samerwriter says:

    Interest data — it makes payday loan companies (who generally loan to people with lower credit ratings) seem a little less usurious.

  6. Rich Slick says:

    MM over at pfblog.com posted an extensive review of his returns with prosper.com and concluded that all the work wasn’t worth the hassle. You seem to be moving in that direction as well so I wonder what kind of future prosper will have once everyone starts chasing the AA and B folk.

  7. Hello. I am interested to keep learning about how you or others fare because I previously had decided to hold off on trying Prosper (click name link for specific reasons).

  8. Hello. I replied to your comment on my blog.

    PS, I commented here earlier but the comment does not seem to be displaying anymore.

    Thank you.

  9. I currently have a C- average credit grade, have not had even a single late payment, and currently have an estimate ROI of over 17% (experian ROI of 13%).

    I have less than a grand loaned, though, and haven’t been putting much in the way of new money into the system. I’ve been too busy to hand pick the good loans.

  10. What explains the huge interest-rate range even for A-grade loans, with some at 20% but the average around 10% and others even lower?

    Thank you.

  11. pfodyssey says:

    Lazy,

    You know I love ya man and I want to see you succeed, but I still stand by my original thoughts I shared with you just over a month ago on this losing proposition called Prosper:

    http://pfodyssey.wordpress.com/2007/04/10/my-comments-about-prosper-on-lazy-man-and-money/

    At the very least, maybe take a “pause” for awhile? In the meantime, best wishes for continued success.

  12. Lazy Man says:

    The issue is clear with the D and E loans I made when I thought that 25-29% at any risk was worth it. It was before I had discovered the new tools – ProProsper & Lending Stats. Those old loans are coming up bad now as I suspected they would months ago when I wrote this. I’ve eliminated that strategy and my most recent loans seems to be preforming well. The problem is that Prosper is a lagging indicator and those bad loans are just starting to affect my portfolio. As time goes on they’ll get out and my new strategy (the one that has earned me 18 % on grades B or better) will comprise more of my portfolio.

  13. Lazy, I can return your favor about the comma in my blog comments by pointing out that, hopefully, your B loans will “comprise” your portfolio, not “compromise” your portfolio.

  14. Tommy says:

    I did a six month arbitrage experiment with Propser. I used my AA credit to loan 3K at 7.8% and reloaned that amount for about 19.8% overall. My goal was to have the cash sitting in my bank account earning 5% as a guarantee for payback (I never loan money if I can’t pay it back) and try lending on Propser for 6 months. Whatever money I made I put back into the system for the 6 months. If I made enough in those 6 months, I would continue re-loaning whatever I took in and just let the whole thing snowball over 5 years or so. The problem is that at the end of the 6 months, 6 of the 60 or so loans were in default and I stopped re-loaning money. I paid off my 3K loan in full. Now, about 5 months more (11 months total in prosper), 6 loans have defaulted with 3 more due to be re-bought for pennies on the dollar any day now.

    While I understand and believe in the idea of prosper, I just don’t trust the bulk of the people who take out loans there. Heck, I don’t loan money to some personal friends if their credit is bad! I tried to just do the numbers thing with prosper and I’m sorry to say that it’s a bad bet.

    While I still stand to make a little cash after everything is said and done (if everything stays alright for the next two years), I figure the hassle is just not worth the paltry earnings over There were quite a few first payment defaults which says to me that a small but significant percentage of people on Prosper are just straight up liars. They say they need money for such and such and will pay a good interest rate, but they’ll just walk away from the loan since their credit is already trashed. I had several of these sorts of individuals.

    At the on set, I thought that the payday loan system was exploitation of those who are in need. But now I see that the system is built that way for a reason. The people who loan money from payday loan companies are simply very risky bets and the loan company needs to cover their costs and make their money.

    The only way I’d reinvest in a prosper sort of system is that if it charged roughly the same rates and payday loan companies (several hundred percent). The reasoning is that the people who need this sort of money simply do not pay their bills on time (if at all), and therefore should be handled in such a way that makes it profitable for the lender to serve their needs.

    The other system I suggest to propser is to charge an upfront insurance fee to borrowers that automatically gets deducted from their loan before it is funded. The fee would be based on the percentage of total dollars for that credit rating that is late at the moment the loan is funded. For example…if your credit rating is C and 5% of all funded C loans are late, you would be charged 5% upfront. When 95% of the loan is paid off, your 5% will be credited back to your account and your debt service will be completed. If your loan defaults, the lender is paid in full for the remaining principal from your and other C borrower’s fees.

  15. Andy Swan says:

    Great post and excellent resources. As a prosper lender, I’m thrilled to find them.

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