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1. I don’t lend to people that use the money to buy houses or are in trouble with their mortgage. Usually I just stay away from the real estate related listings like “help me save my house!”. The reason is very clear. If they’re in trouble with their mortgage, it’s very very hard for them to catch up, and if they’re borrowing on Prosper for their mortgage they’re just delaying the inevitable foreclosure. Not lending to distressed homeowners was just an instinct I had, but apparently other Prosper lenders have the statistics to back up that homeowners are
2. I don’t lend to people with credit ratings less than D because the default rate is just way too high when people have worse credit ratings. I prefer B and C because I am personally in that credit score range and it’s not because I don’t pay my bills.
3. I don’t like very high revolving debt percentages and delinquencies in the credit report. This is also very obvious. If they’re maxed out and has a history of not paying bills then they’re not very good candidates for paying my money back either.
4. I don’t lend to people who are “reinvesting on Prosper”. The reason is that I did an analysis early on on whether or not I could actually make money by borrowing money on Prosper and then reinvesting, and I found that I have got to be extremely lucky to do so. Apparently other people also did the same analysis as me and found that Also, now there are many stories of “blenders” who are defaulting on their own loans while they’re collecting funds from the loans that they funded. That’s extremely retarded in my book.
5. I don’t really like listings that say they will pay me back faster than the three year period because they are admitting they’re a prepayment risk. I like people who pay on time for the right amount.
6. I do like verified bank accounts and I like people who link up Prosper to their bank even more.
7. I do like some listings where people are trying to consolidate their credit cards or higher interest loans. The reason is that these borrowers are using Prosper the right way. If Prosper is giving them a lower rate than they’re currently paying then they’re saving money, and I am all for helping people save money.
I think even after six months, I am still not ready to pour in large amounts of money into Prosper because humans are unpredictable investments. Also, Prosper still has a lot of things it could improve to make it a better place for lenders. When you loan small amounts of money like me, Prosper is really good just for entertainment purposes. There is a certain level of voyeurism similar to reading personal finance blogs when you read other people’s . I think the financial transparency is what makes Prosper fun to personal finance addicts. Currently there is a pretty good bonus of $25 for being a new lender and funding a loan of at least $50. So if you want to try your hand at being a Bank of One or just check out other people’s debt, you can and I will get $25, too. Otherwise, if you’re a borrower, you really have the upper hand on Prosper and you can wipe out your credit card debt faster with a lower interest rate. Currently I am still adding bits of money to Prosper. Basically every month I add a few dollars to Prosper from my checking account so my account balance ends in zero. I know it’s silly, but I think Prosper.com has potential to be much more than what it is now.
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