Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.
Last month, on June 7, 2008, I shared with all of you readers an update on my Prosper.com account. (Full disclosure, if you do choose to sign-up and become a lender on Prosper.com through these links, you will be eligible for a $25 incentive with your first loan, and I shall also receive a similar $25 award.)
I always like to update you with a sample of some of the news stories I have found on Prosper.com.
First of all I came across an article from ScienceDaily suggesting that consumers might fare better with a website like Prosper.com than seeking traditional loans through banks and other financial institutions.
"The study -- “The Democratization of Personal Consumer Loans?” -- analyzed a database of 5,370 peer-to-peer loan auctions from the Web site Prosper.com. Prosper.com, and other companies like it, allows people to lend and borrow money at more attractive interest rates than they find at a bank. The study also found that decisions made by lenders about whom to give loans to are much less likely to be influenced by race or gender."
However, on a balancing note, I also found an interesting story about "Racism in Peer-To-Peer Lending"
"Looking at data from Prosper, Devin Pope of Wharton and Justin Sydnor of Case Western Reserve University found that a listing with a picture of a black person was 25 to 35 percent less likely to get funded than a listing with a white person with similar a profile. And when a black person did get funding, the interest rate charged was about 0.6 to 0.8 percent higher.
(More likely to find funding were women and those with photos that showed a link to the military. The funding success for latinos and asians wasn't statistically different from the average. Another recent study of Prosper by Enrichetta Ravina of NYU found that attractive people are more successful in landing loans and lower rates than their homelier peers.)"
Personally, virtually ALL of my loans are done on 'auto-pilot' with portfolio plans. I am relatively risk-averse and have chosen to bias my lending towards higher-rated borrowers in a more 'conservative' fashion.
"With the increasing scarcity of bank loans because of the economy's credit crunch, entrepreneurs are thirsty for new sources of capital. One such alternative is peer-to-peer lending, in which people lend other people money directly, without the involvement of a financial institution. Transactions take place online, incorporating elements of social-networking sites. Websites such as Prosper.com and Kiva.com connect borrowers and lenders, and the prize on the table is investments.
Peer-to-peer lending sites tap into the popularity of social networking on the Web, hoping to imitate the success of MySpace and Facebook. But there is concern that these sites could fizzle out in popularity, as many Web start-ups do."
But I do see how pictures can bias a lender who is looking through the listings. That is if he/she isn't very careful about paying attention to more important details!
O.K. let's get back to my own Prosper.com portfolio. I continue with my twice-monthly $50 automatic transfers. I have also been aggressively been adding funds in order to keep one bid going at all times. I hope that with my larger loan portfolio, I can drop back to the $50 transfers.
As of July 13, 2008, I now have 96 loans. 86 are current, 3 are less than 15 days late, 3 are between 15 and 30 days late, 1 is one month late (and in collections), 2 are 3 months late (and in collections) and 1 is 4+ months late (and in collections and I suspect soon to be sold!)
I have now made a total of $5,964.23 in loans, received payments totaling $772.73, with an average interest rate of 14.24%. My daily interest accrual is now up to $2.12. Net income totals (interest + fees + rewards) $235.02. I havehad -0- defaults (although the 4 month late loan must surely be heading that direction!). The loan heading for default totals $(46.76).
I mention "rewards" again and indeed I have received a total of $75.00 (unchanged from last month) in rewards for referrals to the Prosper.com website.
Again to get a 'third-party' analysis of my Prosper.com portfolio with my lending activity and loans listed, you can visit LendingStats and view their analysis. Actually, they currently are estimating a ROI of (1.8)% on this account! I hope they are overly pessimistic. However, as you can see, I do have a number of non-performing or late loans. This does represent the challenge of investing in a peer-to-peer lending fashion!
So if you are interested in exploring Prosper.com, please feel free to use the links on this page which may entitle you to a $25 head-start. Please be very careful, spread out your loans, try to avoid excessively risky loans, and be aware of the potential for loss in a process like this.
I shall continue to try to provide you with updates on my own account and my success or lack thereof. This is all a new process and hopefully, by sharing with you my own successes and failures we can all learn together. And even find out if Prosper.com is a useful place for an amateur like me!
If you have any comments or questions, please feel free to leave them on the website or email me at firstname.lastname@example.org.
Yours in investing,