"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.