My Personal Finance Journey

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Prosper: Taking A Pause

Contributed by mm | September 25, 2006 9:42 PM PST

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.

This Post Has Received 5 Comments. Share Your Opinions Too.


John Wilks Commented on September 26, 2006

MM-

Thanks for the update. It's always fascinating to read about Prosper. I currently have about $400 invested with $200 in loans. I only plan on investing until I get $50 back every month. That way I can reinvest right back into Prosper without contributing more. I estimate the magic number to be about $1250 - $1500.

-Wilks


2million Commented on September 26, 2006

I am waiting for prosper to mature a bit before I start investing - I think its ripe for potential fraud, but that may be jsut because I haven't really been using it yet.


John Wilks Commented on September 26, 2006

I agree 2million. I waited for a while. But then I opened an account with the minimum $50 and I've been adding a few hundred every month. I dont regret it.


Wilbur Commented on October 21, 2006

hahaha you rock buddy :)


Jeff Commented on November 27, 2006

Things are improving daily. I can totally understand the pause as some of the early loans are affecting the entire community and we need to tread lightly whether a lender or group leader (such as myself). New tools and ideas will help make Prosper great, but it's going to take time, patience and several sacrifices to get this done right!

-Jeff


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