SubscribeProsper: Is Greed Really Good?
Recently I’ve hit the 55 loan mark, earning an average interest rate of 21.3%. Additionally, I have just over $400 sitting in cash waiting to be lent out. Here’s my current situation…
·51: Current Loans
·1: Payoff in progress
·2: Late (<15d)
·1: Late
Obviously, I am not too happy about those who are a little late on making their payments. Fortunately, I've only lent out $50 to these clowns so not all hope in the system is lost.
My next step is to tone down my greed and start making intelligent bids with realistic expectations. Okay, I'll admit Gordon Gekko's "greed is good" speech in the movie Wall Street gave me too much of an ego boost in chasing these high rate loans.
At least I learned a lesson here...
I plan to cut out "C" rated borrowers from the picture altogether since they are the only ones struggling to pay their bills to moi .
Also, I’ve taken the liberty of lowering my asking rate on the AA, A, and B rates loans. Nothing drastic, but just enough to find high quality diamonds and begin rebalancing my lending portfolio away from the trouble areas.
Finally, I updated my standing order to include only those with verified bank accounts that have a debt/income ratio of 45% or less.
We’ll see how she goes from here. If you have any tips or suggestions- I’m all ears!
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Comment by Juan on 8 July 2007:
I now only lend to AA and A rated folks and feel much more comfortable about lending $. I started by thinking I could screen the poorer ranked folks and now have one default and a s*%$load of late people. I’ve been doing Prosper since about the time they launched. I wish you luck!
Comment by Stephen Oakes on 9 July 2007:
Hey Juan,
Thanks for your input. Please keep me posted on your progress! I’d love to hear how the shift in strategy works out for you.
Comment by Mike on 10 July 2007:
Greed is good here, but, to be blunt, don’t let greed make you stupid. You need to know you can win before you start playing (Gordon would be proud of this idea), and all those high interest loans had a big question mark hanging on the far side: the default rate.
I’m also surprised that you’re pulling out of the C loan space. All the stats I can find and have put together suggest that the C space is where the investors get the best ROI (after defaults), though it does require a good number of loans to spread out the risk.
Mike
Comment by Stephen Oakes on 10 July 2007:
Mike,
Haha so true! Every battle is won before it’s ever fought. I could very well be playing the role of Buddy Fox…a young man climbing his way to the top , trying to pick up every bit of knowledge along the way.
The “C” rated loans shook me a little and I’ve had no problem with AA-B. We’ll she what happens next, but I’m certainly going to miss seeing the higher rates.
It’s a wonderful game of chess…and I have just made my move.