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[Mark12547]

I believe that credit ratings attempt to quantify both the borrowers willingness and the borrowers resources allowing payment despite "life events".

Remember that the credit rating is based entirely on the credit report (in Prosper's case, the Experian credit report), which has no information on the borrower's income and, in many cases, no knowledge of the borrower's employer. Mortgage lenders typically want confirmation of the borrower's income (except for "no doc" mortgage products) as a first cut on the borrower's ability to repay.

So, while the credit grade does provide some information, it doesn't have a vital piece of the picture.

[sreeb]

I believe that credit ratings attempt to quantify both the borrowers willingness and the borrowers resources allowing payment despite "life events".

Remember that the credit rating is based entirely on the credit report (in Prosper's case, the Experian credit report), which has no information on the borrower's income and, in many cases, no knowledge of the borrower's employer. Mortgage lenders typically want confirmation of the borrower's income (except for "no doc" mortgage products) as a first cut on the borrower's ability to repay.

So, while the credit grade does provide some information, it doesn't have a vital piece of the picture.

The credit report at least hints at the borrowers access to additional credit to help paper over "life events".  Lots of inquires suggests that other lenders who may have access to borrower income, emloyment, and savings aren't lending.  High utilization means no reserve credit.

[mothandrust]

This scam risk would be 1-(.995)(.995)(.995)(.995)(.995)(.995) = 0.97% for 6 prepays in the 3-year period.

The more repayments you a reinvesting lender gets, the greater the risk he will get a scam loan.

The optimal number of repayments for such a lender is 0.

To carry this to its logical conclusion, the optimal strategy is never to lend in the first place.

If you're lending to AA's at 12%/year which compounds, and each borrower holds the loan for a 3-year term, after 18 years you have about a 1% chance of losing your investment (1-(.995)^6). 

(For the reinvesting lender who erroneously applauds prepayments every 6 months, it's 1-(.995)^36 = 16.5%)

But over that 18 years (at 12%/year to AA's) you will be doubling your money every 6 years, a total of 3 times.

[LoanChimp]

Pre-payments are just part of the game. As I posted on my blog today, nearly 25% of my loans have paid off already...

[xraider]

Trade you, LC.

[Mtnchick]

Some of my older higher interest loans are paying off. I wonder if they are just able to get a better rate elsewhere with all the recent interest rate drops. But as I said, a paid off loan is the best loan I can possibly think of