zcommodore

I was recently looking over my loans on Prosper recently and made a few observations.  I've made a total of 33 loans so I broke them up in groups and noted the following:

• 4 of my first 5 loans are current
• 4 of my next 16 are current (one paid, the rest late or defaulted)
• 11 of my most recent 12 are current

As you can see, there were some very bad lending decisions made there in the middle.  Looking back, when I first found out about Prosper, I saw loan rates in the teens and couldn't get in fast enough.  Once I got funds in my account, I started looking and saw loans in the 20's and couldn't get my bids in fast enough.  Unfortunately, that became my undoing.

I got very lucky on my first 5 loans (all made during my first month on Prosper) such that 4 of those 5 are still current.  That led to my thinking I could pick the winners from the wasteland of high-risk borrowers so I didn't even look at loans unless they were at least 20%.  I thought that by lending to borrowers paying 300% on payday loans, they would save money and I would make money.

The only good thing about the whole situation is that I didn't have a lot of money available to lend so I didn't get in too deep.  Also, over the summer, I stopped transferring in money and came to somewhat of an epiphany where I realized that lending to borrowers offering 29%+ wasn't going to make me anything at all if they stopped paying.  29% of 0 is just 0.  On the other hand, if I could find a set of borrowers paying 10% and actually paying it, I would be much better off.

Ultimately, I can't say for certain that my new strategy is going to work a whole lot better but the early returns are promising.  I set up a standing order based on a set of criteria that in the past has had very good results.  I set the minimum loan rates so that I would only pick off the loans that paid the highest in those categories and then let them run.  Most of the listings my standing order bid on got outbid but I can watch the performance on eric's what-if page.  Not all the loans on that page were picked by my standing order but some of them were and I can see how they turn out.  I also can check the performance from the link on my standing order page to see if my criteria are still holding up (thank-you Urbi-et-Orbi).

My main concern at this time is Prosper's long term survival.  I will say that I'm seeing positive signs in that direction though but those can wait for another post.

One final note.  I'm still cash-positive on Prosper (barely) even if I write off all my Late or worse loans.  However the only reason for this is that I've received some group leader fees and some referral fees.  If it weren't for those, I'd be way under.