Prosper - 4 month setup review
Well back in February I decided to experiment with Prosper - an online loans/borrowing service to test the premise whether it could pay higher than a savings account. After having played with the site (as a lender) for a few months now, I have somewhat of a mixed opinion.
First - I've made approximately 60 loans since I started with Prosper and over time I've developed my own portfolio criteria for 'automated' bidding on loans. This leads me to the biggest drawback of Prosper -- not that people are crooks/don't pay back the loans, but that its -really- time intensive to bid on loans.
The site itself is not as speedy as one could wish, and as a result searching for loans manually is a slow and slightly cumbersome process.
Separately, I would estimate that 1 out of every 3 loans I bid on falls through for some reason after the bidding has closed. This is a pain because (including the time for the loan auction) it can take 5-6 days for a loan to close and be reviewed, only to have to start back at square 1. In the meantime, your funds are not accessible for bidding on other loans and they don't earn interest while 'idle'.
Second, the ability to craft a truly custom criteria for loan bids (eg. only bid only loans over 10k IF the borrower has answered at least 2 community questions) is nonexistent. Instead portfolios are crafted on objective criteria such as credit rating/delinquencies etc. Since its too arduous to actually manually bid on loans (unless you place the value of your time at 0), your automated portfolio invariably wind ups bidding on loans whose objective criteria look great, but loan description strike you subjectively as fishy.
For example, one of the first loans I automatically bid on via portfolio management was 27715 -- this was a person with AA credit, no delinquences etc who was willing to pay 11% interest. Except the person in question wanted the loan to go on a religious sabbatical in Israel. Not exactly the rationale that would lead me to believe I'd get my money back. Interestingly this loan was paid off after around 10 days, so even though it did turn out to be fishy - it wasn't exactly what I expected.
Of the 60 or so loans I've made, 3 have been paid off within 2 months, 1 was 3 days late in payment and all loans are current. Currently my 'interest rate' is averaged around 16% but unless I'm extremely lucky, this should fall as some loans turn bad.
I'll revisit how the portfolio is doing at the end of the year, but for now its kicking off enough funds to fund a new loan every 2 weeks. I figure I'll let it compound its way to double the value or total loss. If it does double in value then it will be a nice model for future retirement funds when more aggressive investments (stock market) are sold off.
First - I've made approximately 60 loans since I started with Prosper and over time I've developed my own portfolio criteria for 'automated' bidding on loans. This leads me to the biggest drawback of Prosper -- not that people are crooks/don't pay back the loans, but that its -really- time intensive to bid on loans.
The site itself is not as speedy as one could wish, and as a result searching for loans manually is a slow and slightly cumbersome process.
Separately, I would estimate that 1 out of every 3 loans I bid on falls through for some reason after the bidding has closed. This is a pain because (including the time for the loan auction) it can take 5-6 days for a loan to close and be reviewed, only to have to start back at square 1. In the meantime, your funds are not accessible for bidding on other loans and they don't earn interest while 'idle'.
Second, the ability to craft a truly custom criteria for loan bids (eg. only bid only loans over 10k IF the borrower has answered at least 2 community questions) is nonexistent. Instead portfolios are crafted on objective criteria such as credit rating/delinquencies etc. Since its too arduous to actually manually bid on loans (unless you place the value of your time at 0), your automated portfolio invariably wind ups bidding on loans whose objective criteria look great, but loan description strike you subjectively as fishy.
For example, one of the first loans I automatically bid on via portfolio management was 27715 -- this was a person with AA credit, no delinquences etc who was willing to pay 11% interest. Except the person in question wanted the loan to go on a religious sabbatical in Israel. Not exactly the rationale that would lead me to believe I'd get my money back. Interestingly this loan was paid off after around 10 days, so even though it did turn out to be fishy - it wasn't exactly what I expected.
Of the 60 or so loans I've made, 3 have been paid off within 2 months, 1 was 3 days late in payment and all loans are current. Currently my 'interest rate' is averaged around 16% but unless I'm extremely lucky, this should fall as some loans turn bad.
I'll revisit how the portfolio is doing at the end of the year, but for now its kicking off enough funds to fund a new loan every 2 weeks. I figure I'll let it compound its way to double the value or total loss. If it does double in value then it will be a nice model for future retirement funds when more aggressive investments (stock market) are sold off.
posted by Wetkarma | 6:51 PM
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