Hello Everybody,
A few weeks ago, we posted about the high rate of defaults we are experiencing with prosper.com, the website we use to lend money. Since we’re both busy with school and work, we haven’t been following the status of our accounts closely.
Well, todays twice weekly skype chat, we took a look at our account again. I am sorry to report that more of our loans are trouble. Of the 29 loans we have outstanding, at least 4 are three months late. At this point we think these four are likely not to be repaid. To make matters worse, this comes on the heels of continual problems we had in September and June of this year.
Back in September we decided to tighten our lending standards. We are now lending to only people who have very good credit. So, most of the troubled loans we made to people who have spotty or bad credit.
So, whats the take away from this continual mess? – We’ll as near as we can tell, there are three points we wanted to make.
1) We have made money with Prosper. As you can see from the graphic, we’ve made about $426.79 using the service so far. The higher interest rates on our riskier loans have partially balanced out the losses. So perhaps one lesson is if you’re not taking risks, you won’t make any gains.
2) Our strategy of tightened lending standard seems to be working. – So far none of our recently issued loans are late or have defaulted. Granted these are to people who have the best credit ratings.
3) The high rate of default is cause for concern. James has noted that prosper has recently begun reaching out to personal finance bloggers for referrals. This suggests that prosper’s management is not satisfied with their current rate of business growth. Possibly their on-line buzz may be wearing off in the face of increasing default rates.
Best,
James&Miel
P.s. we are including the latest from our prosper statement so you can see where our account stands(below).
P.s.s. We currently have an ongoing advertising relationship with Prosper.
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