I had almost forgotten about this series. Let’s jump straight to the bullet points.
- I continue to not fill up full gas tanks as energy prices drop. I’m expecting that the next time I go to the gas station gas will be a few cents cheaper. This is a very small savings (about 28 cents when I did it last week), but it makes me feel good that I’ll be getting a “deal”, which is more important to me.
- My Prosper account has now paid $200 in interest. While my first loan was in mid-March, my second loan was mid-May. So for what is largely 7 months, this is pretty good. It’s hard to fully estimate the gains as I’ve been irregularly pouring money into the account. I have just over $3300 lended out.
- This past weekend, I spent a fair amount of money on a weekend trip to Boston.
- Like last week, I continue to procrastinate with writing the check for my Roth IRA. I think it’s just that I have to use the office computer for a printer (yes I’m an engineer that can’t set up printer sharing). Of course going to that computer and logging into a website to print it out AND snail mail it out is far too much work for me (now you see where I get my name). Perhaps there’s some time this weekend.
That’s all I have for this week.Â If I don’t post again today, have a good weekend.
Is that Prosper really worth it return wise? When I first saw it, I thought it was a great idea. But then I did some math (I do not know if it was right), but the only way to really get good returns is to take risks on the C, D, and E credit people. I saw one guy who wanted to borrow at 28% (for 3 years), which would have been over 9% return. That is great, but he had an E credit, so you take a big risk on whether he can pay it off.
Is you worth the risk to lend to these people? What are the rates you are getting?
Lazy Man says
That’s 28% each year for 3 years. It’s kind of like when you get a mortgage, you don’t just pay 6% and be done. Is it worth getting 28% a year? It really depends on the default rate. Even then you have to do a lot of math. I think I found that as long as 4 of 5 (80%) pay me back I’m breaking even. I’m averaging something like 95% as of now, so I feel I’m on track.
If you want to do the less risky loans, you can lend to people at higher grades and since it’s per year, you can still beat the ING Direct high interest bank accounts. Of course with high grades there’s a still risk. No ventured, nothing gained, I guess.
My Financial Journey says
I would also think that while you have experience favorable default rates, most of your loans are pretty young. I have no idea what the official rates are, but my guess is that most people don’t default right away…granted the later they default the better you are, but it will be interesting to see how the defaults on those high risk loans pan out over the next year or so. Anyway best of luck to you, if anything Prosper sure looks like a lot of fun.
Lazy Man says
Yes a number of them are young. It’s going to be difficult to track a real rate of return because I’m always adding new money in. I’m doing a lot of calculations of risk based on the rates they have on the site from Experian. Experian’s numbers are based on people with debt-to-income under 20% and I haven’t been following that guideline. My risk is probably a little more which is a little concerning. Prosper also posts the averages for all late payments and defaults, so knowing what the overall marketplace is will really help me.
Yes Prosper is fun!
Just curious: why are you sending a paper check to fund your Roth IRA? Can’t you link your bank account to your brokerage account? For some inexplicable reason, I used to drag my feet to fund my Roth when I had to mail a check. But now that I do it with a few clicks of a mouse, it’s effortless.
Lazy Man says
My only excuse is my name — Lazy. I would set that up, but I’m trying to move things to Zecco where I can buy and sell commission-free. I also haven’t moved to online banking like I should. I do it for some bills but not all. I know it’s weird, but I don’t want to come across a day where I think I have everything right and fail to put in a check mark in the wrong place.