Those who recall my last Prosper post know that I’ve had an up and down relationship with the site and its borrowers. I’m happy to say that in the past year, I’ve participated in the funding of 12 loans, and none of them have defaulted. In fact, I can’t recall any of them being late even once on a payment. Two folks even paid off their loan in full early. This is truly a breath of fresh air compared to my loans prior to that point where basically 10 out of 24 (over 40%) defaulted.
I know, I know the cynics among you are saying sure Slug but these are all newer loans less than a year old. They’re going to default just like the others. Au contrair I say. My lending style as previously discussed has changed. My current style focuses on much more credit-worthy borrowers which brings me to the reason for today’s post and a new feature on my blog. From here forward, each time I have $50 available in my Prosper account as a result of loan payoffs and interest, I will come here and discuss several loans I considered/am considering and which one I decided to fund. Today I have 4 prospects to share with you:
1) Helping Son With Business And Education – This is probably a fine loan to be in. It easily passes muster on my screening criteria and it’s 100% funded with a rate that’s been bid down from 17% to 12% at the time of this writing. My issue with this loan is that I don’t like people who take loans for others, even when it’s a family member. It just gripes me. Also, the family member who wants the loan has their MBA from the University of Phoenix. Not to be an elitist bastard, but that’s not a real school. I know it’s a bit petty, but it’s my money. So I’ll pass on this one.
2) Paying Off High Rate Credit Card – Again this one easily skates through my search criteria. This person has a very high income and unfortunately the credit card debt to match. They have an A credit grade, and the loan is fully funded down to 16% from 25%. Normally, these things would result in a bid from me, but something gripes me. They claim $25k in income per month. That’s not a typo. $25k per month. Are you kidding me? The frugal bastard in me just tells me that someone who makes that much money should not be capable of carrying credit card debt. And, if you are, there’s simply something wrong with you. Not only should you not have the debt, you should have a large emergency fund to tap if something does go awry. No bid.
3) Business Start-Up & Working Capital – OK, this is probably a solid loan. AA credit. High income. Keeping his current job while he opens a restaurant. Bid down from 14% to 13.5% at the time of this writing. I’m passing on this one only because I don’t feel good about restaurant loans due to the high percentage that fail in the first year and because I think I found a better place to put my $50.
4) Help me make my 1954 Spartan a home! – My winner! I chose this loan to fund for a variety of reasons. Like the others, it basically skates through my search criteria. She has an A credit rating. She has a steady job. She has very low credit utilization. The money is for her use. She has a clear plan for its use. And, here’s the kicker that puts her over the top, she already has a Prosper loan that she’s paid on time everytime for almost a year. The only worry would be if she broke up with her boyfriend who’s supposed to help with the work. Hopefully they stay happy! I bid at a 10% to insure I wouldn’t get outbid in the final hours. If it falls below 10% I can always talk to the chicken restaurant guy (#3). Note that this loan offers the lowest interest rate of the 4 described, but it still won me over.
I hope this article helps in understanding my thinking about my loan positions. It’s based on quantitative principles then flushed out with qualitative impressions. Like any good decision it’s a little art and a little science.