Another one of my Prosper loans has now defaulted and been sold to a collection agency. The loan was for $100 at 23.75% interest. A total of five payments were made. I received $12.55 in principal, $10.87 in interest, $0.39 in late fees, and $2.56 from the proceeds of the sale to the collection agency. In addition to the standard Prosper service fees, I was charged and additional $0.33 service fee on the default and a $0.21 collection fee. My net loss is $74.17. Again, this borrower was classified as High Risk and I knew there was a good chance of this one defaulting when I made the loan.
I wrote off the amount of my first defaulted loan on my 2006 income tax return. Looks like I'll have one more to write off on this year's return.
I now have two Prosper loans left, both of which are still performing. One is rated A, the other is rated D. (The ratings are A, B, C, D, E, HR, and NC. HR is High Risk and NC is No Credit score.) The A rated one is at 8.85% and the D rated one is at 15%.
At this point, I am really just waiting for all my loans to be over one way or the other so I can leave Prosper for good. I've already written about why I am leaving Prosper and now that I am down to two loans, I am getting anxious to leave. My total monthly income from these two loans is under $7. You can't transfer money out of Prosper's system until you have at least $25 in your account, so that means I have to wait four months until I can get each little chunk of money back. The loans are scheduled to be paid off in March, 2009. *sigh*
Tuesday, June 12, 2007
Another Prosper Loan Defaulted
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5 comments:
Hehe, Shaun, while I rarely laugh at others misfortune, this has been an entertaining story of your experience with Prosper... I can honestly say that I'm glad you tried it rather than me!!
It seems like a neat service in theory, except that you've now lost of 2 of the loans... Hopefully the 2 you have left continue to pay until maturity!!
Yeah, Defaults on prosper are all too common. Here is my loan's statuses:
52: Current
3: Late (<15d)
1: Late
5: 1 month late
2: 2 months late
2: 4+ months late
2: Defaulted and sold
Average loan age = 179 days
That means 18% of my loans are late or worse so far. Most loans that get to 'Late' status ride all the way down to default and sale.
Luckily for me, >50% of my loan balance is in 2 loans to people whom I personally know and who are current.
After checking out the site, it does seem like an interesting idea... It's just tough to go out on a limb and extend yourself to people you don't really know from a hole in the wall (of course there are exceptions, ie bogunflux knowing the 2 people he loaned to)...
If the term wasn't so long (3 years seems to be average), it'd be worth taking a flier on a few of those loans... It's just tough to get behind some of the people looking for money to pay for their wedding, etc... Who knows if they won't just take the cash and split...
Here's the thing.
There is a TON of information out there (if you look) about what types of loans to issue money on, and which to avoid. Granted Shaun, you made your loans very early, before extended credit info was available.
I haven't bet the farm or anything, but I have 30 loans and only 1 late - and this late was on a loan I wouldn't make now. Live and learn. I am up $120 or so, averaging 18% interest. Choose with caution, and don't 'settle' on a loan just cause you have money you want to invest right NOW.
Yes, Prosper now provides much more information about borrowers than they did back when I initiated made my loans. Still, I just can't get excited about the small amounts involved. I won't lend a lot of money unsecured, even spread out over many people. I've rather save and get some more rental property, which usually provides better returns and definitely provides more tax advantages. Granted, it's a little more work...
Right now, my two remaining loans are current and I have about $125 total outstanding. My combined return on those two loans is 12%.
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