Prosper Loans Review: January 2013

I have made it no secret in previous posts that I enjoy investing on Prosper. Mainly because of the low cost (low barrier) and hence the ability to easily diversify your peer to peer loan portfolio.

So this is my first update for my peer to peer loan project and Prosper Loans Review. I am still not exactly sure how to present the information, so I figure I will just begin and change it as I go along.

Here is a screen capture of all the Prosper loans I purchased during the month of January.

I was hoping to purchase more, but was unable to find very many loans that meet my criteria. Sometimes there just are not enough hours in a day, so I am sure I missed out on a few quality opportunities, but oh well.

So between the 5 loans, the average interest rate is 16.57%. Make sure you look to the number at the far right. That is the interest rate after Prosper takes their cut.

Obviously the first loan I purchased pushes this number up considerably. Without it the interest rate would be 14%.

Right now, with such a low number of loans, any change at all, will have a big impact on the numbers. As the number of loans I acquire grows, changes such as default will have less of an impact. If I had a default right now, things would be looking pretty dismal.

Breakdown

So instead of focusing a little case study on all of the loans acquired during the month of January, I will just focus on one. In this case, I will focus on the first loan I purchased this year. Loan # 80575-54.

The figure above gives us a pretty good snapshot of the loan. It doesn’t have a lot of detail but there are some good things in there. First, I look at the amount, $4,000. I really like the smaller loan amounts. I feel more confident that a person would either not want to default on such a small loan if possible, or if this individual is doing some kind of debt snowball plan, my debt may be one of the earliest ones they focus on. I know that this can lead to receiving less interest from an early payoff, but I receive a decent amount I am still happy.

Directly to the right of the amount of the loan is the length of the loan. In this case it is 3 years. Prosper offers loans in 1, 3, and 5 year intervals. So this loan falls right in the middle. One’s are my favorite and five’s are my least favorite. I just like to get my money back sooner than later I guess.

The interest rate is located right next to the loan length and then the borrowers credit rating is right next to that. These two bits of information usually move together. What I mean is when you are searching through the loan listings, you will notice that borrowers with better credit ratings often are asking for lower interest rates and borrowers with lower credit ratings are asking for loans with higher interest rates. Nothing surprising here, basically the same thing that happens to everyone that needs a loan.

On the the profile. Although I look at all the information that is provided on the borrower’s credit profile, there are a few things I pay a little closer attention to. The now delinquent information, credit balance, home ownership, length of employment & income. Since I discuss these things in other posts I will only give a brief explanation of what I was thinking when I purchased this loan.

1. The borrower is now delinquent on some payment but the amount delinquent is relatively small.

2.The amount asking to be borrowed is less than the revolving credit balance. I get a little suspicious of borrowers that want to borrow more than what they owe. Especially with debt consolidation loans.

3. Home owner, yes. This really isn’t a make or break thing for me, I mean these are unsecured loans so if one default I am not going to hold my breath.

4. Employed 24 years and 3 months. I need to look into this a little bit deeper to understands Prosper’s method of checking out this info.

5. Income is between $25-50k, not bad, but like employment I am curious about this info. I may take out my own loan with prosper to test their verification.

This part is actually what I look at the most. I have a search filter set to only search for loans from borrowers who have previously taken out loans. Borrowers who have previously taken out loans and have fully paid them off get the most attention from me.

In this case the borrower has fully paid off one loan and has less than $1,000 in principal left to pay on their second loan from Prosper. This is actually what sold me on the loan. To me, it looks like the borrower is attempting to pay down their debt, and honestly paying the money they owe back.

The payment history looks pretty good as well. Out of 64 payments, roughly 5 years and 4 months, the borrower has only been late twice. This is good for my nerves and keeps my hair a brownish/blonde color instead of an early white. Early I said roughly because we have no idea how many times the borrower may have made multiple payments within a month.

The credit score info is another good reminder of the credit of the borrower but we already had a good idea from the original credit rating.

I also like this bit of info. I think if a borrower wants a loan, the least they could do would be to give a little bit of a description of why, and their expenses. I am not looking for an in-depth biographical account of their financial history, just a little insight about yourself and maybe some info on why you need the money. The borrowers justification here was to improve their credit score. They already met my other obligations so they were good to go.

Hopefully this loan pays off for me in the future, the credit rating is a bit lower than my typical loans, but when a listing meets my criteria I go with it. Sometime in the Summer I will do a recap on my thoughts as to how this is working. I have been using this system since last spring and it has worked out pretty well but I have documented it as I am here with this experiment.

As you can see in the first picture I had already received $1.60 from this loan, of which $0.94 was interest. I wouldn’t mind seeing this over and over!

If you would like to sign up with Prosper.com you can use this link I provided. This link is an affiliate link. If you use this link to sign up with Prosper I will receive compensation at no extra cost to you. As always, if you have any questions please contact me. I will also use all income generated from my affiliation with Prosper to reinvest back into my Prosper account. Thank You!