It has been some time since I have opened my Prosper account. Finally, I logged on a few minutes ago to transfer out money again because I want keep my account free of cash since the SEC cease and desist order against Propser and the quiet period have increased the possibility that Prosper could fold. I have been worried about the default rate since that order. The SEC actions combined with all the talk on the internet of how many loans on Prosper go into default probably trigger some people to feel stupid for actually paying on their Prosper loans despite the obligation and the impact to the credit score.

So how are my Prosper Marketplace P2P loans fairing? My loans’ average loan credit grade is an A minus so I have not been chasing 30%+ low-credit-score loans. Currently, I have three late loans out of 16 loans, so 18% of my Prosper loans are late.

Update: See the bottom of this post for an update. From the time I drafted this post until a few days later, another loan is now late.

According to Read the rest of this entry »

Sorry for being nearly as quiet as Lending Club lately. A quick update on my Lending Club portfolio is in order. Most importantly, I had my first late loan. It is only 16-30 days late, but as most P2P lenders know, once a P2P loan is delinquent there only a small probability of recovery.

Before the quiet period started, I had participated in 51 loans for a total of $1,250.17. Two loans are fully paid, 48 issued and current, and one late (details below). The weighted average interest rate Read the rest of this entry »

So far all my Prosper.com and Lending Club loans are current. I would be annoyed with loan defaults, but currently the number of borrowers who pay the loan in a month or less is starting to bother me. Why does a borrower bother to take out a loan for one month?

Here are a few instances from Lending Club of early paybacks that wasted my time and tied up my money while trying to find and fund loans:
Read the rest of this entry »

I often read that borrowers in one state or another are more likely to default on Prosper loans. I decided to investigate if there is any truth to the likelihood that some states are worse credit risks than others. The example that often comes to mind is Georgia which has a high default rate. Currently Georgia has nearly 8% defaults and about 10% late which is a higher than average rate of late loans, but nine states have more loans that are two or more months late than Georgia.

My interest in state by state loan default rates prompted my article Pennsylvania Loans: What were early Prosper lenders thinking? At the same time, I noticed how state interest rate caps vary widely from state to state — Pennsylvania 6% and Georgia 36%. I decided to see if the interest rate caps could partially explain the difference in Prosper loan default rates by state. My theory is Read the rest of this entry »

Browsing some Prosper lending statistics at LendingStats.com, I noticed that Pennsylvania loans are exceptionally late. 23% of the loans by dollar volume have already defaulted — despite the low rate cap of 6%. The low rate cap presumably should keep higher risk borrowers from receiving a loan. See Pennsylvania Loans Sorted By Origination Date. Other lower end rate cap states like Read the rest of this entry »

While browsing for articles for an academic project, I decided to browse academic journals for articles on Prosper Marketplace and related interest rates. I thought someone must have published in a peer reviewed journal something on Prosper, but I did not find any existing articles outside of newspaper fluff pieces on P2P lending.

I broadened the search for other industries and the impact that the internet has made on rates. I found an article with empirical proof that the internet lowered Read the rest of this entry »

My funds arrived to Prosper Marketplace a few days ago. I planned to jump into Prosper and start carefully selecting loans for funding. I browsed a few loans, but I have cold feet.

So I opened my blog to reflect…. Why am I nervous about bidding? I had no problem lending on Lending Club for a total of about $1,000 to date. So why is Prosper Marketplace different?

My trouble in starting to bid seems to come down to the openness of the market. That same openness is great for transparency. As I have read on other blogs, browsing P2P lending is voyeurism. I think it is a bit of Voyeurism and Exhibitionism.

Peer-to-Peer lending feels voyeuristic for several reasons:

• Many loans provide interesting, entertaining, or just odd stories.
• After browsing loans, you cannot help but to feel more secure in your own financial future because you had to read so many poor quality loans.
• It can be fun to pass judgment on others occasionally and with Prosper or Lending Club, you can decide who receives funding and who does not.
• Peer-to-Peer lending allows you to feel superior to others who are not as financially savvy. That is why most of them need the money.

Peer-to-Peer lending is great fun to view the financial lives of others. I like that part of the openness.

So what about the exhibitionism? Read the rest of this entry »

I checked my initial Lending Club portfolio and all the first payments have arrived on time. It is a minor milestone considering that each borrower must make 35 more payments to allow me to achieve my expected return on the portfolio. It still feels good to see the money arrive.

My first Lending Club portfolio consisted of 10 loans for a total of $375 at a wighted average interest rate of 9.27%. Despite the advantage that Lending Club allows small bids – $25 – I still extended half those loans at $50 each which was probably a mistake, but not a big one since they are all relatively low credit risks. The total payment is $11.93 per month.

It feels good to receive the first payment, but $11.93 is an insignificant portion of the entire expected payment stream.

Now the question becomes – what to do with the loan proceeds? Read the rest of this entry »

I decided to review the statistics at Lending Club and I scrolled down past the table towards the CSV file of data. There I noticed an amazing figure — Loans Not Approved for Listing. 5,137 loans for $44.9 million dollars have been denied for listing on Lending Club. The total number of loans approved is only 645 for $5.2 million. Only 11.2% of all loans submitted to the site were approved for listing, so Lending Club is attempting to keep out many of the lower quality lenders despite the fees that they could earn for originating possibly many of those loans. [Update: See the comments by Rob at Lending Club to know what loans are denied.]

I am glad to see how many loans they are filtering out, but one statistic on the page bothers me – the percentage of Lending Club’s late loans is currently premature to present in my mind. Currently, the percentage late is listed as 0.47% with a footnote that reads: Read the rest of this entry »

I returned to the Zopa lending site today for a second impression after my initial review of Zopa. I noticed something that knocked my socks off about Zopa’s business model of social lending — some borrowers are not paying interest after receiving “help” from lenders. In fact, some borrowers are “paying” negative interest at Zopa! In other words, they are receiving money for having borrowed money. This is an amazing development in P2P lending!

The proof in the Zopa homepage screen shot below. I cropped out part of the screen (red line) to make the graphic smaller and added three blue checks to show you the borrowers that I am highlighting below as examples. Click the thumbnail below to see it in more detail.

The three borrowers that I am highlighting (blue checks in graphic) are:

1. TinaM who is borrowing $5,000 to go back to school with a started interest rate of 9.99%. Currently TinaM is receiving help of $70.
2. wlaffin who is borrowing $5,000 to pay off credit cards at a stated interest rate of 12.99%. Currently, he is receiving help of $66.
3. Rugsaq who is borrowing $10,000 to grow his transportation business at 12.99% stated rate and is receiving help of $70.

Note that the links are to the profile pages which do not include the loans and the help amounts. The loans, interest rates, and help amounts are listed in the graphic above.

Calculating the actual interest rates…

Read the rest of this entry »