SWB: Alan B. Rowley II - Success Coach - ECoaching - Email Coaching

More on being a Prosper group leader

Group leaders get a little kickback from their work.  I think it's something like 1% on the loan.  Some of the lenders on Prosper say it's not enough to justify the work involved.  I need to email a group leader and find out exactly what kind of work is involved.  From what I know, they check some documentation and make a few phone calls. 

I need to find out just how much time is spent in the vetting process. 

Group leaders also help attract attention to the listing by working the forums a bit.  Help get the word out. 

I was thinking about starting a group that concentrated on getting people out of high interest credit card debt and worked toward being debt free.  I think it would be a great service but I need to find out if I would have the time to do it.

About Prosper Groups

Prosper groups can add an extra level of risk management to the equation.  Active group leaders go the extra mile in verifying information for members of their group.  Borrowers join groups to gain the credibility of the group increasing the odds that they will get their loans funded. 

Group leaders gather information on the borrowers such as pay stubs, tax information, and anything else (except a credit report) that they feel necessary.  The credit information is already pulled by Prosper.  Many group leaders talk to borrowers on the phone to get a better feel for the person.  If the borrower passes all the tests, the group leader accepts the borrower in the group and puts his stamp of approval on the loan listing.

Some group leaders are more picky than others.  Some aren't picky at all.  Group leaders get a cut of any loans that are funded so some group leaders take anyone that wants in the group and do little, if anything, to vet them. 

Some group leaders have excellent track records and you know that funding a loan for one of their members has a high likelihood of being repaid.  Many group leaders fund their members because they have worked to verify that the person is probably going to pay the loan back.

I've considered creating a group myself for people who are trying to get out of debt but I don't know if I have the time to go through the verification process with borrowers.  I'm still trying to decide if it would be worth it.

More on this tomorrow.

I'm going to be funding another Prosper loan today

So I have been looking over the listings.  Some of them look more like they are asking for charity than for a loan.  I read one today where a woman sounded like she was in desperate times and I couldn't see how she would ever pay the loan back.  It didn't even sound like she had any intentions of paying the loan back.  She probably won't get funded.

I think I'm going to go lower risk this time.  I've looked at a couple loans that would fit what I'm looking for today.  I'll pick one this afternoon and make my bid.  I'll probably fund another one later this week.

I have money earmarked to be used for Prosper.  $100 a month.  That's $50 put toward two loans.  My goal is to get to where I have money coming back to me just about every day of the month.  That will be pretty cool. 

I'm also going to put the money that I get back, right back into loans so that it acts like compound interest.  It should add up after a while.  I plan on doing this for 36 months and then seeing if I want to continue from there.  I may move on to putting my $100 a month somewhere else or I may continue to fund Prosper loans.

If it works out for me, then I'll probably keep going because it's a way to help people who can't get help (or as good of an interest rate) at traditional places. 

I have been thinking about starting my own Prosper group.  I'll explain that tomorrow.

My plan for Prosper

My plan for Prosper is simple.  I'm going to put $100 a month into it plus reinvest anything that I get out of it and just keep doing that for at least 36 months.

My reason for this is to make money but not in the sense necessarily of making serious money but for a different reason.  I am working on things that give me a sense of money coming into my life even if in small amounts.  It's part of the overall plan.  We are putting most of our money into paying off debts and not into making more money but I think it's important to start that brain shift as early as possible even in small amounts.

If I fund 36 loans, they are going to come due on different days.  Not all of them will be on different days but enough will be that I should be getting payments every day or two and if it skips a day, I'll be getting a couple of payments to make up for it.  Each payment will only be for a couple of bucks but that's not the important part.  The important part is that people will be paying me the principle they owe me plus interest every day. 

I think it's going to be strong reinforcement to the concept that I'm building.  And right now, an extra 70 bucks a month is still money coming in.  Of course, I'm going to reinvest it for now but eventually, it will be money coming in for the purpose of spending somewhere else.

We'll see how it goes.

I received my first Prosper payment yesterday

The borrower paid on time and I received my cut.

$.86 in principle was paid back and I received $1.23 in interest. 

That's pretty dang good.  Not in the amount of course but in the ratio. 

The most important thing about Prosper is learning what it's like to be on the receiving end of interest.  The amount isn't that important.

Most of our money is going into paying debts off which doesn't leave a lot of money left over for investing.  That's the way it needs to be for now.  I won't say that it's impossible to get ahead while paying interest to someone else but it sure slows down the process. 

There are people out there that will borrow money at a low interest rate and invest it in something that is supposed to earn them a higher interest rate.  I understand the principle but for me, the answer is to owe no one.  There is going to be a great feeling of freedom in knowing that I don't owe anyone money. 

It won't just be a feeling either.  It will be actual financial freedom.  I'll go into that a bit more tomorrow.

Everyone knows that sex sells but did you know that sex borrows too?

I didn't know that until I joined Prosper.  I should have guessed it or known it based on the fact that it's just the way things work.  Still, it didn't dawn on me until it was pointed out to me.

At Prosper, borrowers can upload a picture of themselves to put a face with the loan.  I never really looked at the pictures.  I saw them but I didn't really *look* at them.  It's a picture uploaded on the net from . . . well, just about anywhere.  It doesn't mean much.  At least not to me but others obviously look at them.

One guy was trying to get a loan funded.  I don't remember any of the details of the loan but it didn't get funded.  There was something that just didn't mesh with hsi story or the numbers or something.

So he tried again.  Only this time, he uploaded a picture of a model dressed to show off what she had as his picture.  He didn't change any information in the text area which included his name and the obvious fact that he was a man.  Lenders (that pay attention) were discussing the tactic and trying to decide whether it was false advertising or a good strategy.  The borrower never said that it was a picture of him.  Didn't even imply it.  Several other people have pictures of things that aren't them as their picture like a cartoon character, their kids, or their pets.  There is no rule that says the picture has to be of the borrower.

The loan funded.

The final vote in the forum discussion that I was participating in was that it was a good ploy by the borrower and that lenders should be smarter than that.

One of the benefits of Prosper.com

For those people who go there to borrow money who aren't there because no one else will give them a loan, Prosper does have one nice feature.

I told you that borrowers put down the interest rate that they want.  This is the starting interest rate.  Lenders then start bidding on the loan at the amount of interest that the borrower has suggested.  If the amount of the loan is funded before the bidding time ends, lenders can continue to bid.  To get in on the loan, they have to bid a lower interest rate.

This is a great aspect of Prosper that you don't find at banks or credit card companies.  Since all the lenders can see what the bidding is, they can choose to continue to bid or not.  The result is that many borrowers get their loans funded at lower interest rates than they thought they would.

In one case, I saw bidding take an interest rate down 9%.  That's huge!  You wouldn't find that out in the banking world.

Even some of the less dramatic changes in interest rate of 1% -1.5% is great.  It's a matter of how much lenders think they are risking.  At some point, lenders quit bidding because the risk outweighs the gain for them or because they are looking for a higher return regardless of risk. 

If you have fair credit, a good debt to income ratio, a plan, and want to consolidate high interest credit cards, Prosper might be the vehicle to help you out.

Tomorrow, let's talk about sex.

Prosper: A loan offer that was hard to pass up and some education

One thing that I have noticed about Prosper is the high number of high risk borrowers.  These people can't get loans in traditional places so they come to Prosper with hope.  Some come with unreal expectations and some are put out when they don't get the loan.  Not everyone is there because they can't get a loan someplace else and I'll cover that tomorrow.

Here's a loan that was hard to pass up.  A guy came to Prosper to borrow some money.  Borrowers set the interest rate of their own loan.  You can look at your credit score and see what the average interest rate is for your risk category but you can set it at whatever amount that you want.  So this guy set the interest rate at 0% for his loan.  I can't remember what amount of money he was asking for.  It doesn't really matter since he didn't get a single taker.  I guess it doesn't hurt to try but why in the world would you lend money to a stranger at 0%?  And why would you lend money to someone who doesn't understand that?  In his loan description, he went on and on about being a Mason.  This supposedly made him low risk and exempt from interest.

Borrowers who don't get funding can ask lenders on the forum why they aren't being funded and lenders will jump in with answers.  Like all tools, there is good and bad to this.  The good part is that honest people can take the advice and improve their credit, their financial situation, and their listing.  The bad part is that not honest people can learn how to tweak their listing to attract lenders. 

I read one listing a couple of weeks ago and couldn't see why this person was borrowing money.  I told her that with her financial situation, she didn't look like she needed a loan.  She was trying to consolidate her credit cards but she had enough money to pay them all off in 6 - 8 months.  A couple other lenders gave her the same advice.  Why pay the origination fee and get into a 3 year loan when you could be done with it all in 6 months.  She insisted that she wanted the loan.  It made me wonder what she wasn't telling us.

Prosper has been a great learning experience.

So, can we finally start talking about Prosper?

I joined Prosper last month and I have lent out $100 to people.  $50 to two different people. 

Here's a quick refresher since it's been so long since I have talked about Prosper.  Prosper is a place where people fund loans for other people, taking banks and credit cards out of the equation.

One of the things about Prosper is the diversification of risk.  You don't normally fund a loan in it's entirety.  Most people buy $50-$100 of a loan so several people take on the risk in small amounts.  They lend to a large number of people (or 2 in my case) to spread out their personal risk.

Like I said, I'm not going to get rich by doing this in $100 increments.  There are lenders at Prosper who have tens of thousands of dollars invested so it is possible to make it work for you. 

There are two things that I am getting for my hundred dollars. 

1.  I am still making money as long as they pay their loan.  24% interest between the two loans.  One of the things that my wife and I wanted to focus on this year was getting interest paid to us, no matter how small.  We are trying to reverse the financial inertia of interest so that it's coming in instead of going out.

2.  I am also learning things.  There is a forum where people talking about borrowing and lending money.  You start to look at things from a banks point of view.  Some of the people trying to borrow money are laughable.  I'll go into that more tomorrow.

What's it feel like to decide whether or not someone should get a loan?

Well let me tell you.

I joined www.prosper.com and I can tell you that it's hard.  If you want a look at life from the bank's point of view, I recommend you give this a try.  I'll probably cover Prosper for the next couple of days as I explore it more.  Here's the quick overview.  People go to Prosper to borrow money.  The money comes from people who buy the loans, not a bank.  People 2 People, they call it.  Interesting, I call it.

Today, let me just tell you the thoughts that I went through trying to decide who to loan money to.

First, I am not risking very much money at this so that means that I have to be picky.  I can't just loan money out to everyone that applies.  I have to pick a couple of people and roll the dice.  So, I have limited resources to throw at this.

Next are two things combined together.  The return versus the probably of getting that return.  How much interest are people going to pay me?  Are they actually going to pay their loan?  The more likely they are to pay me back, the less money I make.  The less likely they are to pay me back, the more money I make if they actually pay the loan back.

So you have to decide how much risk you are willing to take and accept that interest rate or you can decide what interest rate you want and accept that amount of risk.  Or you can try to do a balance act between the two.

If you have ever felt frustrated as a borrower of money, join Prosper as a lender and see what it's like from the other side.