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:

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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.

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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 


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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 

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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