Lazy Man and Money

  • Blog
  • Home
  • About
    • What I’m Doing Now
  • Consumer Protection
    • Is Le-vel Thrive a Scam?
    • Is Jusuru a Scam?
    • Is Beachbody’s Shakeology a Scam?
    • Is “It Works” a Scam?
    • Is Neora (Nerium) a Scam?
    • Youngevity Scam?
    • Are DoTERRA Essential Oils a Scam?
    • Is Plexus a Scam?
    • Is Jeunesse a Scam?
    • Is Kangen Water a Scam?
    • ViSalus Scam Exposed!
    • Is AdvoCare a Scam?
  • Contact
  • Archive

Prosper Mistakes I’ve Made

March 22, 2007 by Lazy Man 4 Comments

I hope you are all enjoying Prosper Week. Today we are going to look at my lending past. This is ideal timing because I currently have made 98 loans (and with 9 pending verification, it could be 100 by the time you read this). Also, my first loan is a year old.

That first loan is very interesting in that shows where I started. It is a C grade credit score with a 19% debt to income (DTI) ratio. I’m making a whopping 12% interest rate on the $100 investment. All the Prosper lenders reading this right now are probably cringing. I don’t know why I put $100 in my first bid. It gave me no diversity at all. More importantly, I needed to get a higher grade or a higher return. Nowadays, I have to think twice before bidding on a C loan at 20%.

I took two months before placing my next loan on Prosper. I didn’t have the spare income to devote. When I did put in another $200 in my account I made a $50 loan and then bumped it up to $100 again. At least this second $100 went to a C grade borrower with a 10% DTI at a 23% interest rate. Happily both of my $100 loans are current today. From there I made a pretty silly, but entirely reasonable assumption given the data available to me. I calculated that my actual interest rate was the rate of the loan minus the expected default percentage. So as long as that number was high, say over 15%, I put money there. It hurts for me to even look back on those days.

It only got worse from there. I had been introduced to Eric’s Credit Community. There they have rankings of diversified (25+ loans) lenders sorted by expected return (a monstrously long page, that you can get here, if it doesn’t crash your browser). I realized that if I bid on E grade loans with a 29% interest rate, my number at Eric’s CC would be higher. It didn’t matter if the DTIs were over 100%. I was climbing up the charts and it sure felt good. I’m still in the top 50 on that list.

Now if you’ve been reading the other posts this week, you’ll be aware of Jonathan’s analysis. It’s worth looking at the E rated loans which have -9% interest rate return. This is disastrous on every level.

I’ve turned a corner and tomorrow, I’ll show you how I did it.

Email (and share) This

  • Email
  • Facebook
  • Twitter
  • Pinterest

Related

Filed Under: Prosper

SIGN UP NOW FOR MONEY TIPS AND A CHANCE TO WIN $25 MONTHLY

Comments

  1. limeade says

    March 22, 2007 at 5:12 pm

    I’m looking forward to trying out Prosper.com; but I would like to clear up something about the rate of return people think they’re getting.

    If you lend someone money at 15%, you’re not actualy getting that rate on your money. You’re doing the same thing that a bank does when it gives someone a mortgage. With every payment you receive, part of it is interest and the other part principle. When you’re principle is returned, it’s no longer earning interest for you.

    This may not be new to some of you, but you can’t just make a loan for $500 and then wait for 3 years. At the end of the 3 years, you won’t have made the 15%. In order to get these outstanding returns, you’ve got to keep reinvesting the money as it comes back in.

    By the way, nice site.

    -limeade

    Reply
  2. Lazy Man says

    March 22, 2007 at 5:22 pm

    Excellent point Limeade. I make the assumption that as loans are paid off, lenders are using that money and putting it into new loans. I’ve got just under 100 active loans under my belt, so I have almost a continuous $25 dollars in transit into my account from payments of those loans. That stream gets loaned out with all the other money as soon as I get a chance. I suppose there’s some dead money “risk” in here as well.

    Reply

Trackbacks

  1. RateLadder.com says:
    March 22, 2007 at 6:35 am

    […] Lazy man gives a frank and honest assessment of his early days lending on Prosper: Prosper Mistakes I’ve Made. […]

    Reply
  2. Revealing the Keys to Prosper Success says:
    August 24, 2009 at 5:55 am

    […] 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 […]

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

As Seen In…

Join and Follow

RSS Feed
RSS Feed

Follow Me on Pinterest

Search The Site

Recent Comments

  • Joe on The Cost of Summer Camp (2023 Edition)
  • Lazy Man on Odds and Ends Update
  • Joe on Odds and Ends Update
  • Lazy Man on Odds and Ends Update
  • Josh on Odds and Ends Update

Please note that we may have a financial relationship with the companies mentioned on this site. We frequently review products or services that we have been given access to for free. However, we do not accept compensation in any form in exchange for positive reviews, and the reviews found on this site represent the opinions of the author.


© Copyright 2006-2023 · Perfect Plan Publishing, Inc. · All Rights Reserved · Privacy Policy · A Narrow Bridge Media Design