Prosper Passive Income Update

by Scott on August 13, 2008

It’s been a few months since I have written about my Prosper loan income, and I wanted to give an overview of the good and the not-so-good of my passive income. The good news is I have 21 loans that are on time and current with payments, the not-so-good, I have 1 loan that is 15 days late and another that is in default. I’m surprised by my default as he had a Prosper credit rating of B and income of over $100,000. One of the red flags on his profile was the 95% bankcard utilization, but this is not unique to this individual. Many Prosper borrowers have high bankcard utilization numbers. This is why they are turning to Prosper, so they can refinance high rates. It wasn’t a total loss, I did receive $3.24 in payments, but overall lost $46.76 on this loan. I do have a chance that the Amsher collection agency can collect some of that money, but I’m not holding my breath.

Now for the good news. I have 21 loans all current and earning 19.30% interest, or a daily accrual rate of .53 cents. If these loans stay current it should take 88.22 days to break even on the bad loan of $46.76.

Will I invest more funds in Prosper? Yes, I am learning more about the lending process, and about the need for diversification. It is tempting to bid more than $50 on some loans, as they appear to be wonderful opportunities, but I have to stop myself and remember they are investments. I really enjoy the opportunity to help others refinance credit cards and escape the grips of the payday loan and cash loan companies. Many of these payday loan companies can charge in excess of 200% and keep borrowers in the grips of high fees forever. Prosper offers the opportunity to bid on loans of all types, from AA all the way to HR loans. Even bidding on the safe AA loans offer great opportunities to earn in excess of 6% interest on your money.

What is my goal for Prosper?
To fund enough loans to create $100 a month in passive income. At that point, I could transfer the funds or reinvest in Prosper and fund more loans.

If you are interested in joining Proser as a lender, they are still offering a referral sign-up bonus of $25. You can send me an email to thepassivedad at gmail.com and I will send you the referral email. Remember that you should treat money invested in Prosper the same as that invested in the stock market, they are not fdic insured and can lose value.

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{ 6 comments… read them below or add one }

1 Ruthie August 13, 2008 at 4:49 pm

Hi Scott!

Thank you so much for stopping by and commenting on my blog! What an interesting way to make money, I’ll have to check into it.

2 passivefamilyincome August 14, 2008 at 3:50 am

Sounds like we have a similar strategy investing in Prosper. My goal right now is to earn $50 / month in interest in order to fund 1 new loan per month. I am transferring over $100 / month from my bank account right now to fund 2 new loans per month and rolling all other payments over into new loans. Do you use a saved search to bid on new loans?

When you say “default” – what is the status on the loan in Prosper? How many months is it late? I have one loan that is over 2 months late and the person has not made one payment yet.

3 Tom August 14, 2008 at 4:16 am

You are wise to diversify by limiting your loans to $50 each. Most don’t.

4 Lindsay August 14, 2008 at 1:24 pm

Nice post. I signed up with Prosper when it first came out, but kind of forgot about it after that initial buzz wore off. I should probably see if I can have my password sent to me and see if there’s any money in that account. ;)

19% sounds pretty good. With inflation the way it is today, a typical money market sure isn’t going to get you any where.

Thanks, and keep posting!

5 Scott August 14, 2008 at 1:52 pm

@PFI The one loan in “default” status has been late for 4+ months. After two months late they sent the loan to the Amsher collection agency. No luck yet on receiving any money from them.

@Tom Yes, I still want to stick to $50 a month, even when I add more money to Prosper. Some lenders have some serious money on the line as I’ve seen bids up to $2,000. That is a lot to put on one loan.

@Lindsay Yes, you should look at your Prosper account and check the status. Let me know how your loans are doing. 19% is not a typical return for Prosper, some are higher, and some are lower.

6 Tom August 14, 2008 at 3:42 pm

Yes, $2000 is a lot to put on a loan. Too much.

The better way to look at it, however, is what percent is that loan compared to your overall Prosper portfolio.

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