In my last update of my micro-lending experiment endeavor about two months ago, I mentioned I would slow down my underwriting practice with a target of $12,500 invested by end of September. Partially encouraged by the positive performance data of the overall Prosper marketplace, I'm now looking at finishing September with about $13,800 loaned at an average rate of 17.90%.
However, as my portflio starts to age, some bad loans start to surface. Out of the 157 outstanding micro-loans in my stable, 8 of them are currently late, including one that has been late for over a month, and another 3 that are late for more than two weeks. While many of the loans should be finally brought to current over time from my previous experience, I am getting mentally prepared for some write-offs.
In addition, the marketplace is becoming increasingly competitive for the lenders. To maintain the same underwriting standard (with a target return of 11% per year), I was only able to initiate 20 loans in September so far (compared with 29 in the month of August and 46 in the month of July). While I am getting more comfortable to participate in larger amounts, I have to say the ROI of daily new loan screening is still low.
Therefore, starting from October, I will temporarily pause my active bidding practice at Prosper.com. I might still, from time to time, fund a couple of loans when I have time to measure the pulse of the marketplace, but until I have more comfort on the market and/or more time, I will let my current portfolio age for a while and revisit.