Lazy Man and Money

Prosper and Loanio Updates

by 7 Comments

This news is a week old, but I’ve been a little too busy to get it out. It seems like the SEC ordered a cease and desist. I have to admit that reading the legalese is not my specialty. So I don’t really know what it amounts to. If anyone wants to read it and interpret it for me, I’d appreciate it.

That’s not the only bad news for Prosper. Monday Prosper agreed to pay 20 states $1 million dollars. It seems you can follow the progress of this class action lawsuit on this blog.

In other news, Loanio has voluntarily decided to stop accepting lenders and borrowers. Presumably they’ve seen what’s going on with Prosper and what Lending Club has been through. This is why Zopa didn’t operate a pure P2P.

Sometimes I wish the US regulators that are going so hard after these P2P companies would spend more time preventing and fixing the economy.

Zopa US is Dead

by 1 Comment

I hope you really like to hear about peer-to-peer lending news. Earlier today, I wrote about how Lending Club opened for business again and just before Prosper died (not in the traditional sense, just closed it’s doors for a potentially “several months” while it passes a few steps with the SEC).

However, I really wanted to write about Zopa US dying. I know I’ve been fast and loose with the “[insert peer-to-peer company] dying” phrase in the past, but this is truly the case this time. Zopa US has officially announced that it’s closing it’s doors.

I’ve said it before and I’ll say it again, Zopa wasn’t a pure peer-to-peer lending company. Sure you could buy a CD and offer to help out complete strangers. I don’t know why’d you’d do that when you could buy a CD from a local credit union and help someone in your community.

It looks like my experiment to get a negative interest rate at Zopa has come to a close.  It didn’t work anyway.  I’d like to give a big thanks to Prosper Lending Review for passing on the tip, since I hadn’t been following them very closely.

Thursday Blogger Shout-outs

by 2 Comments

I’m going to try something a little new and interesting this week. I thought I’d give a shout out to some bloggers and their articles that I find noteworthy. There are a lot of great personal finance articles, but this takes it a step beyond to the level of garnering a small amount of fame.

I’d like to give a shout out to Joseph Sangl for his appearance in Money Magazine. I’m just egotistical enough to claim that I’m probably the only person to review his book Joseph Sangl : I Was Broke, Now I’m Not and I did it 4 or 5 months ago.

While on the topic of that Money Magazine article, No Credit Needed was mentioned there. While he has been famous for his personal finance site for quite awhile, fewer people pay attention to his health site, No . Calories Needed. It’s part of the Fitness Health Network, which includes Lazy Man and Health.

Lastly, I would like to give a pat on the back to RateLadder for alerting Zopa of their security leak. Good quick action by Zopa plugged it up in less than 24 hours. It’s what I like to see from them since I borrowed money on Zopa.

Zopa Scam? I Borrowed Money On Zopa. Here’s Why…

by 17 Comments

A couple of weeks ago, I went to Finovate Start-up to learn whatever I could from various financial company start-ups and report back to you. I hoped to find three or four gems in the 40 companies that presented. One of the companies that I was least interested in was Zopa. In the UK, Zopa is a very successful peer-to-peer lending company. This lead to their widely anticipated US release. When the product was introduced, critics universally panned the service. For the investor, Zopa is basically a CD – you get a guaranteed fixed rate of return. For the borrower, you get a loan without ever having to deal directly with a bank. There simply didn’t see anything “Finovative” about the company.

At Finovate, they reinvented their reputation. By the end, they had one the coveted award of Best of Show. I was stunned. How did they do it? Borrowers can pay negative interest rates.

Let me repeat that, because it took me a bit to wrap my head around it… you can pay negative interest rates. How can that happen? When someone invests in a Zopa CD, they choose a borrower to help. This “help” reduces the rate that the borrower has to pay back. Zopa showed a couple of examples where borrowers are paying negative interest due to all the help they’ve received.

So if the borrower can make negative interest, the investor must be getting the short end of the stick right? Not exactly. A Zopa CD pays 3.75%, which compares well with the US Avg (2.90%) as well as the Top 10 US Bank CDs (3.65%) (source: Bankrate.com, 24-Mar-2008). The Zopa CD is insured up to $100,000, so it’s a steady investment if you like the returns on a CD.

I didn’t need a loan, so why did I get one? I have often written about peer-to-peer lending. I created the Carnival of P2P Lending. I felt that it would be interesting to be on the borrowing side. Most importantly though, I wanted to experiment to see if I could achieve a negative interest rate. If I can’t achieve a negative interest rate through connections like you, the odds are very long against the average Joe doing it. So the results of this experiment lie in the Lazy Man community… If you want to help me achieve a negative interest rate simply visit my Zopa profile and click on the Help Me Now button. I put up my favorite YouTube clip and a couple of pictures on that profile for your enjoyment.

Before my wife reads this and I get a nasty phone call… Honey, I only took a $1000 loan – the lowest amount possible. I got the lowest possible interest rate 8.49%. This means that if I keep the loan for a full year, I’ll pay around $85 to run this experiment. If I don’t receive significant help in 6 months, I’ll probably cancel the experiment and declare the negative interest rate hype and not something that one can expect. I’ll also keep the money that I borrowed in an interest bearing account, which means that it will cost less than $85 in total. With our net worth, income, and spending, this doesn’t really amount to much. One could even claim that it was worth it to realize that I was able to get the best interest rate that Zopa has to offer despite being self-employed.

Carnival of P2P Lending #9 – Cinco de Mayo Edition

by 6 Comments

Happy Cinco de Mayo! In a few hours from now I’ll be having tacos and maybe a cerveza. I draw the line at doing a hat dance. Grab yourself some nachos and chew on these articles about P2P lending…

Moolanomy spectulates why Lending Club has stopped taking new lenders. Interesting thought that “If they are successful, I believe they will emerge as the industry leader.” I think Prosper already has a head start on Lending Club, so I think they’ll just emerge as a stronger #2 than before.

Not to be outdone, Cash Money Life speculates on the future of Lending Club.

Prosper Lending Review tells you how you can buy your own P2P Lending company. I’m guessing that it’s not going to come cheap.  I wonder if my credit score is good enough to get a loan on Prosper to buy it – just kidding.
Wiseclerk covers the launch of Cashare in Switzerland. It’s similar to Prosper except that you have to submit paperwork for each loan.

The Prosper Blog notes the value in social capital in getting a loan funded. I’ve got more to say about this in the future – perhaps later this week.

RateLadder says that with the Fed dropping interest rates, buy a Zopa CD. It seems like you might even be able pay your loan back at negative percent if you can convince people to help you.