Loan Payments So Far So Good

Earlier this month I was reading a post from a guy a few years ago who decided to stop investing at Prosper because his returns were better than a bank, but not what he expected.  He thought that for the risk he was taking, he should be getting better than 8%.  He related that he was disappointed at the number of people who had defaulted on their loans which caused his overall return to drop.  Keep in mind that even after all the defaults his return was around 8%.

There are a lot of people who would be happy with a return of 7% or more.  Still, I am striving for more and looking for ways to invest in people and still get a good or even great return.

While I am definitely new to loaning dinero at Prosper, I have not yet had anyone stop paying on a loan.  If this trend continues I will be receiving much more than 8% on my money.

You have the option to look at each loan individually and decide to take a risk on a real person instead of simply going by the numbers.  I do not mean to say that the numbers mean nothing, but they are only one factor.  This is the method I choose as I am of the opinion that this will increase my skill of making profitable loans over time.

As of this morning I have received payments of 1.12, .18, .91, 2.29, 1.05, .91, 1.08, 1.01, 1.10, .22, 1.10, .98 and one complete repayment of 26.06.  There are also 5 more payments in process, which I assume means that these payments have left the financial institution of the borrower and are somewhere in between there and my account at Prosper.  I encourage you to invest in people by loaning to them.

In my back office at Prosper the line that reads Gain/Loss to date equals 5.53.

All numbers above are in dollars and cents.


If I can do this, so can you.  Keep in mind that you could lose money.  I hope you don't. 

I am currently in the black.


 Click here or on the title of this post to visit Prosper.com and find out more about how to make a profit loaning money to real people.

What Were You Doing Two Years Ago?

While this blog is new, I have been blogging at theBigManWalking.blogspot.com for nearly two years.  I encourage you and everyone to get more exercise.  Start with walking if that's where you're at.  Here's an edited entry from early January, 2008:

---

I feel better already. I decided to get moving in 2008 and from January 1-5 I've done over 12 miles total. I've been wearing a pedometer since last summer. If you've never worn a pedometer, you can get used to it. It's second nature to me now. I remember to put it on my belt 90% of the time or more.

I recommend recording your progress every day, which I started doing in 2008.  I find daily records help inspire me.

---

By looking back I am reminded that I need to go get a pedometer again.  I have gotten out of the habit and I am now reminded of how much it helps. 

We can also learn about our financial outlook by looking back a couple years.  What were you doing that was working two years ago?  What were you doing that didn't work out?  Did you learn from it?  Was it a systemic problem or just a small (or big) glitch?

As we look to the future, what criteria do we use for investments?  If I am loaning people money and expecting a good return,  do I have a method that allows me to pick better candidates with a larger reward for the risk involved?  Am I satisfied with less because I see myself as doing some good?  Will that be o.k. with me in the future?

Interesting questions...

Click on the title of this post to learn more about Prosper.com.

Click here to do some good.  Even if you don't donate, please register and be a cheerleader.

Four Minutes Return Email

OK.  Now I'm impressed.  Again. I just sent an email to Prosper and received a response in under five minutes.

That's great communication.

Start Up Solo Law Firm Needs Cash

Today's headline comes straight from one of the borrowers to whom I have loaned. 

There are numerous reasons for a borrower to use Prosper.com.  Some refinance existing debt.  Some would simply rather owe the money to real, live human beings instead of a faceless corporation.  Others need capital for a business, whether a start-up or an existing business.  I saw a church get a loan for about 11% to complete the purchase of a building.  Still others with excellent credit actually get low interest loans and re-loan the money to other Prosper borrowers.

No matter what the purpose of the loan I find it exciting that the payments are now coming in.  So far I have had 1 borrower completely pay off his auto loan in a few days.  I assume that he refinanced at a lower rate once he got the loan through Prosper.  In addition, I have received 5 payments on time and currently there are 8 more payments being processed.  I have also received one very early payment from a Kiva.org borrower and not one borrower is late.

This seems like a really good time to do some good and make a good return.


Click here or on the title of this post to explore loan possibilities (as a lender or a borrower) at Prosper.com.

Prosper Communicates Well

If you're like me, you want to have timely and accurate information regarding what's going on with your money.  I like that Prosper instantly sends you an email to let you know if your loan offer is outbid.  Below is one of the first notices I received.  Click here or on the title of this post to visit Prosper.com.

From:	Prosper (No reply)
Received:	Oct-22-2009 3:37 PM PDT
To:	Toastmaster007
Subject:	You were outbid! Listing #XXXXX

Dear Charles,

You have been outbid. This means that other lenders bid at a lower yield percentage. By bidding your minimum rate from the onset, you can help prevent having to rebid your offer should another lender outbid you later.

If you want you can bid again now:

Bid again now

Helpful links:

• Wondering why you were outbid? Learn how bidding works.
• Want to place bids automatically? Choose a portfolio plan.
• Want to place more bids? Search listings now.

Title: Paying off CitiBank Mastercard
Listing #: XXXXXX
Amount requested: $7,500.00
Current yield: 15.30%
Listing ends: Oct-22-2009 3:57 PM PDT
Time left: 0d 0h 19m

Your bid amount: $25.00
Your minimum bid yield: 15.32%

Regards,
Prosper 


---


You can see that my minimum bid on this particular loan was 15.32% and when all the bidders collectively pushed the rate below that my bid was null and void.  When Prosper sends this email it gives you a chance to bid again at a lower interest rate if there is still time left.  If you look closely you will see that when I received this email there were only 19 minutes left to bid.  If you are serious about a particular loan you need to stay on top of it.

How I Started With Prosper

The other day I asked my son to take a look at 550 Plus 50 and I was surprised to find that it wasn't entirely clear to him what I was going on about here.  So I've decided to start showing a timeline of how I have invested in people through Prosper.com.

Below you will see my first email I received from Prosper.  You may notice that I changed some things like my financial institution or the transfer number, but the essence of it is the same.  It shows that my first transfer to Prosper was initiated on October 14th.  It also shows the estimated completion date as October 20th.

I have included a second email that confirms the transfer of funds was complete on October 20th as expected.

From:	Prosper (No reply)
Received:	Oct-14-2009 11:24 AM PDT
To:	Toastmaster007
Subject:	Funds transfer initiated

Dear Charles,

Your funds transfer for $100.00 on Oct-14-2009 has been initiated.

From: My Financial Institution
To: Prosper Loans Marketplace Account
Amount: $100.00
Transfer started: Oct-14-2009
Estimated completion: Oct-20-2009 9:30 AM PDT
Transfer #: XXXXXX

If you or anyone with authorized access to your account did not initiate this transfer, please contact us immediately. For security reasons, you are required to receive messages about funds transfers to or from your Prosper account.

Regards,
Prosper 

---

From:	Prosper (No reply)
Received:	Oct-20-2009 10:08 AM PDT
To:	Toastmaster007
Subject:	Funds transfer complete

Dear Charles,

Your funds transfer for $100.00 on Oct-14-2009 has been completed successfully. Funds are now available for investing in your Prosper account.

If you or anyone with authorized access to your account did not initiate this transfer, please contact us immediately. For security reasons, you are required to receive messages about funds transfers to or from your Prosper account.

From: My Financial Institution
To: Prosper Loans Marketplace Account
Amount: $100.00
Transfer started: Oct-14-2009
Transfer completed: 10/20/2009
Transfer #: XXXXXX

Regards,
Prosper 

---


Look for more details in the near future.  I hope that my experience and the information contained here will convince you to take a chance on real people and hopefully you'll receive a return on your money similar to mine.


For your out and out charitable impulse I'm including a link to help you help others by donating so real people can have water clean enough to drink.


You can click below or on the title of today's post to learn more and help me reach my goal!



MyCharityWater.org/BigManWalking

Paul Barsch On Marketing Lessons Learned

My Toastmasters club has some impressive members.  Paul Barsch is one of them.  He's at MarketingProfs.com.  Here's some of what he had to say about Microfinance:

Besides Wall Street bankers, the poor of the world need access to financial liguidity too. But loaning money to individuals lacking credit history and formal employment can be a dicey proposition. Indeed, pitching financial services to people in the rural hinterlands takes effort, patience, and a tolerance for risk. It also takes marketing—but perhaps not in the way you might think.

Read more.

Sense of humor or Pink Floyd fan?

Click here or on the title of this post to see a video/photo montage in Las Vegas set to Pink Floyd's Money.

Payments Are Being Reinvested

 When I venture into my back office at Prosper.com I can take a closer look at my activity by clicking on "View Detail".  This is what it looks like:

Available to bid: $0.00

View Detail 

We can see that I have zero dollars available to bid as I have bid using my entire deposit of $550.00 and the 67 cents interest that I've already been paid.  When I click on View Detail I see this: 

Cash Summary

Total deposits:		$550.00
Total withdrawals:	-	$0.00
Cash used to purchase notes:	-	$507.16
Payments received:	+	$28.27
Cash balance:	=	$71.11
Prosper winning bids:		$71.11
Available to bid:		$0.00

 

The first section above shows that I have used $507.16 to purchase notes.  I have received $28.27 back from borrowers, which includes one borrower who paid off his note right away.  I believe I received $26.06 within a couple weeks of having my $26.00 bid accepted.  The other $2.25 includes both principal and interest.  Also, I have $71.11 bid on 2 remaining loans that are currently pending review.  My experience so far is that about 15% of the "pending review" loans result in an email like this:

Dear Charles,

You were a winning bidder on:

Listing number: XXXXXX
Listing created: Sample Date 8:14 AM

However, this listing was cancelled during a pre-funding review for one or more of the following reasons:

• The borrower's identity could not be verified.
• The borrower did not comply with Prosper Marketplace policies.

The funds in the amount of your bid have been returned to your Prosper account and made available for further bidding.

Regards,
Prosper

I am sure that some people will judge this result in a negative light as perhaps a waste of time or time that their money is not earning the interest rate they would like.  

However, I like the fact that Prosper is so careful all the way through the process.  Even after all the bidding is over, they are looking out for the interest of the lenders by making sure the borrower meets their standards. Frankly, I am surprised that borrowers try and do this without having all their ducks in a row.  

While Prosper doesn't prevent borrowers from using the money for a different purpose than the one they represent as the truth, it's clear that they have more than one level of safeguards to help the lenders.  I like their rating system, too, which includes their estimate of the possibility of loss for similar loans.  

Performance Summary

Payments received:		$28.27
Principal paid off:	-	$27.61
Payments in excess of principal:	=	$0.67
Principal charge-offs:	-	$0.00
Gain/loss to date:	=	$0.67

 

You can see in the section above that I have no charge-offs at this point.  I hope it never happens, but hopefully you can see that even with one or two charge-offs, a lender can achieve a favorable return on their money.  

Note Status Summary

Principal value of active notes:	$479.55
Total active notes:	19  View
Current:	19  View
Past due (1-30 days):	0  View
Past due (31+ days):	0  View
Payoff in progress:	0  View
Total charged-off notes:	0  View
Total notes paid in full:	1  View
Total notes sold:	0  View

In section 3 above it shows 19 active notes so I could have 21 active notes soon if both notes pending review receive final approval.  I think 21 borrowers is a great way to NOT have all your eggs in one basket.  

Note Acquisition Summary

Value of notes at acquisition:	$507.16
Acquisition cost:	$507.16
Premium at acquisition:	$0.00
Principal paid off:	$27.61
Average note yield at acquisition:	24.11%

In section 4 above you will see what I consider a truly excellent rate of return - 24.11%.  This will not be my total rate of return as I have two loans pending at 23.29% along with two loans at Kiva.org on which I receive 0% interest.Accounting for all the interest rates on the different loans, my calculations produce a total return of 22.46% IF no borrower defaults.  I recognize that this is a pretty BIG if. In my opinion, this is still pretty incredible and worth the risk.  Holding the rate of return constant at 22.46%, ten years of that return would produce this:

End of year one balance =  734.76

End of year two               =  899.79

EOY three                       = 1101.88

EOY four                         = 1349.36

EOY five                         = 1652.43  

EOY six                          = 2023.57

EOY seven                     = 2478.06

EOY eight                      = 3034.63 

EOY nine                       = 3716.21 

EOY ten                        = 4550.87 

I find this pretty impressive.  

Just a reminder though-  we are dealing with human beings.  How fortunate we would be if every single borrower paid back everything on time and in full.  That's not how it works in the real world, but we can see how my actual results stack up over the coming years.

Here's a quote from Kurt Vonnegut at BrainyQuote.com:

 Still and all, why bother? Here's my answer. Many people need desperately to receive this message: I feel and think much as you do, care about many of the things you care about, although most people do not care about them. You are not alone.
Kurt Vonnegut

"Here Comes The High Rate Of Return"

 I was pleasantly surprised today when the first payments started coming in.  Prosper works.  The proof below is from my back office at Prosper.com.  I made a few edits but didn't touch the amounts.  Click on the title of this post to find out how you can make a good rate of return by trusting in real, live human beings.

 

 

 

 

Note Detail

Note Summary

Title:	Loan #----- | Note #----- |
Original loan:	$2,000 @ 35.00% 36 month loan	Origination date:	Oct-28-2009
Note share:	$25.00	Principal balance:	$24.25
Payment status:	Current

Note Purchase History

Date	Buyer	Balance	Price @ Yield	Net rec'd
Oct-28-2009	ME	$25.00	$25.00 @ 34.00%	$1.12

Payment History

View: Borrower payments

Payment number	Post date	Type	Status	Total paid	Prosper fees	Late fees	Interest	Principal	Principal balance
-----	Nov-13-2009	Manual	Paid	$1.13	-	-	$0.38	$0.75	$24.25

"Borrow Money At Better Interest Rates"

While this blog is focused on encouraging people to loan money to real, live human beings in order to:

*be of help to your fellow humans &

*achieve a respectable return,

this post is to remind you that if you need to borrow money, you're probably better off appealing to real people instead of corporations.  This is especially true if your credit is in the range of pretty good to great, though my guess is that if you are willing how to learn the skill of choosing your words to appeal to your audience, you can get a good rate even if you don't have great credit.  By the way, when I say "choosing your words" I don't mean that you should say something untrue.  If you are willing to do the work it takes to learn how to speak to the people you want to reach, you will likely be rewarded with a lower interest rate.

Because Prosper.com uses a bidding process to both fund your loan to 100% within a certain time frame and then lower the rate as more people bid with lower acceptable minimums, if you get more lenders involved in the process it's very highly likely that your rate will go down.  Another factor in lowering your rate is the amount you are borrowing.  When the minimum bid allowed is $25, it's obviously easier to fund a loan for $2000 than it is to fund a loan for $13,000.  It stands to reason that if you know some people who might not loan you $1000 each, you can probably easily get them to join Prosper.com and be part of the group who loans you mostly $25 or $50 or $100 each.  Many people feel much more comfortable because there is a legal contract.

While I have only participated as a lender on Prosper.com and Kiva.org and have not been a borrower on these sites, I think you'll agree that the advice I've given sounds logical if your goal is to lower your interest rate.  As I gain experience with Prosper I will be able to give concrete examples of what I am talking about here.  For now, you can click on the title of this post to read more about borrowing money at Prosper.  You can also contact me if you would like to pay me to help you get better results when using Prosper as a borrower.

"We Let You Loan to Low Income Entrepreneurs"

 Please remember that I am just a person who has found a way to do some good AND make an interest rate on my money that I like.  I started with Kiva.org which you can visit by clicking on the title of this post.  I then added Prosper.com.  Click here to view my article titled, "Borrow Money Or Refinance Online From Real People For Better Interest Rates."  Below is some information I copied and pasted from Kiva's "About" page:

Kiva's mission is to connect people through lending for the sake of alleviating poverty.
Kiva is the world's first person-to-person micro-lending website, empowering individuals to lend to unique entrepreneurs around the globe.

The people you see on Kiva's site are real individuals. When you browse entrepreneurs' profiles on Kiva, choose someone to lend to, and then make a loan, you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates and track repayments. Then, when you get your loan money back, you can relend to someone else.

Kiva partners with existing microfinance institutions. In doing so, we gain access to entrepreneurs from communities world-wide. Our partners are experts in choosing qualified entrepreneurs. That said, they are usually short on funds. Through Kiva, our partners upload their entrepreneur profiles directly to the site so you can lend to them. When you do, not only do you get a unique experience connecting to a specific entrepreneur on the other side of the planet, but our microfinance partners can do more of what they do, more efficiently.

Kiva provides a data-rich, transparent lending platform. We are constantly working to make the system more transparent to show how money flows throughout the entire cycle, and what effect it has on the people and institutions lending it, borrowing it, and managing it along the way. To do this, we are using the power of the internet to facilitate one-to-one connections that were previously prohibitively expensive. Kiva creates an interpersonal connection at low costs due to the instant, inexpensive nature of internet delivery.

"Achieve A Good Return Even If One Borrower Defaults"

While watching some Grey's Anatomy with my wife I decided to make some preliminary calculations.  This includes 18 loans at Prosper.com and 2 at Kiva.org.  Let's remember that the two loans at Kiva have a zero percent return.  The 18 at Prosper are most of the $550 I currently have invested at Prosper and I am waiting on three more loans to close there.  So, my predictions are a little rough as they exclude the final three loans.  But, we can get a preliminary basic picture of what's going on and what to expect.

If I assume that on average 1 out of 20 or so loans will not be repaid, I have found that with my selections I will still receive a respectable interest rate.  In fact, many people who invest in the stock market would love to get this return every year.  I want to be clear that I have not yet received even one dollar back yet as I write this because it is so early in the process.  I am trusting the human beings who say they will pay back the loans and I am trusting the track records of both Kiva.org and Prosper.com.

Here are the interest rates I will receive from the 18 loans at Prosper:
34%, 15.16%, 18.5%, 17%, 26.7%, 19%, 29%, 26.47%, 33%, 23.95%, 33.27%, 19.1%, 26%, 27%, 16%, 19.95%, 28%, and 22%.  The loans are mostly at $25, but they range from $5.10 to $64.88.

The interest rate on the 2 loans at Kiva.org is 0%.  Both loans are for $25. 

My total invested in all 20 loans is $507.16 and I expect to receive $616.51 and now that I have found how easy it is to use Google as a calculator, I know that this return - which is MORE than I expect - would be 21.56%.  If one of the randomly chosen (among the higher risk) loans defaults without even one payment being made, then I will receive $31.62 less.  That would mean that I would get back $584.89 instead and that would mean a return of 15.3%.

To recap, so far I have loaned 2 women at Kiva $25 each at an interest rate of ZERO percent and 18 people at Prosper a total of $507.16 and even if one of the Prosper borrowers doesn't pay back any money at all, I can expect an interest rate around 15%.

Who says you can't make a profit doing some good?

"You Choose Who Gets Your Money"

There are lots of borrowers to choose from on Prosper.com.  You choose who gets your loan of $25 or more.  The borrowers are rated by Prosper and you can decide what level of risk is within your comfort zone. I choose to take on higher risk borrowers and we'll see what happens.  I'll share some facts about my first Prosper loan recipient in today's post.

My first borrower's loan originated on October 28, 2009. I purchased $25 of his loan on 10/27 - 1 day earlier. There were less than 40 lenders who had successful bids.  The borrower is paying 35% and all the lenders receive the same rate - 34%.  (As far as I understand the bidding process, all lenders receive the same rate on all Prosper loans).  The 1% difference goes to Prosper.  This loan is the borrower's second at Prosper.com and he has made 24 payments on the first one to reduce his amount owed from $2,000 to below $900.  All his payments have been on time.

This borrower is listed as military enlisted, a full-time employee with over 20 years at his employer.  The site allows for personal statements by the borrower and in his he says, "I always pay my bills no matter what."  I know that a lot of people appreciate blunt statements like this.

Prosper rates this loan in what many would consider a very, very risky category.  They estimate that loans like this will not be paid back 25% of the time.  Because of his personal statement and the fact the he is long-term military, I decided to take a chance.

Keep in mind that when you bid, you might say that you are willing to accept 17% interest, but if all the lenders together only bid the loan down so far, or not at all, then you will receive the interest rate that everyone else receives.  In this case, that is 34%.  Many would say that that rate is fair given the high risk rating he has received.  Until I am proven wrong, I will look at this as receiving a very generous interest rate from a military man who has given us his personal assurance that he always pays his bills "no matter what". His track record with Prosper backs that up.

"Make Money By Loaning Money To Real People"

Are you getting a low interest rate in your bank account?  Take a chance on real, live human beings and get a better rate of return.  Yes, you could lose money.  But, what if you could start for less than $1,000 and get a return of more than 8.5%?  Or 10.5%? Or 12.5%?  For me personally, it's worth the risk.  How about you?

I have come up with a way to loan "550 Plus 50" and still get what I consider a good, or even great interest rate.

I loan $50 at zero percent - yes, you read that right!- interest and the other $550 at varying rates of interest.  When you combine all $600 you can achieve a "blended" interest rate in the range mentioned in the first paragraph.  You may decide to be more conservative and your blended rate might be around 6.5%.  Or, if you're like me you could take a higher risk and achieve a blended rate of around 18% or 20% or more.  I realize that someone could default on the loan, but that has not happened to me yet.  (To be fair, I'm pretty new at this.)

Visit Kiva.org to learn more about helping people at zero percent interest.  If you are at all skeptical about being charitable, this is a good starting point because you are loaning money and expect to receive it back instead of simply giving money to someone.  (On the other hand, if you are the type of person who likes to donate money to good causes, please don't let me or anyone else stop you.  I think that's great.  I even do some of that myself.  But, this blog is about you achieving a better interest rate by loaning money to real people.  Or if you happen to be in need of a loan, that may be possible, too.)

Click here and you will see the track record of Kiva.org loans.

Here is the profile of the first woman I loaned to at Kiva.org. Her name is Doracy and she's in Boston.  The second woman I loaned to at Kiva.org is Malia and she lives in Samoa.

I wrote an article about my experience up to this point at EzineArticles.com.

In the article I included some of my experience with Kiva.org as well as Prosper.com.  To visit Prosper.com, click here or on the title of this post.  Both sites allow you to make individual loans of $25 or more.  When you loan $25 or so to 15 or 20 people, you spread out the risk.  If someone fails to payback the loan, you can still receive principal and interest from the others.

Remember, 550 Plus 50 helps you and other people, including 2 who might not have been able to borrow money any other way.

As always, you risk is your own.  There are no guarantees.  (The "V" could land and crush Malia's farm in Samoa). I guess it's possible that in a few months you could see my posts about how not one single person paid me back and I lost my $600.  But I sincerely doubt it.