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.

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.

"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.