One of the things I am most proud of in my lender experience on Prosper was my initial fear.  I feared losing the money I was lending.  As a result, I thought I was being extremely cautious as to which loans I invested.  My Portfolio is very much AA-C (I have a few D and one E). The funny thing was, I wasn’t cautious.

I invested in several loans that I would not touch today.  I bid down listings that were already 100% funded thinking the crowd must be right.  Was I lucky.  While I have made some egregious mistakes (I count $150 of my lates as mistakes), my portfolio is performing better than quite a few lenders that I know.  Although not as well as others (see $150  comment above.)  I am not saying that I only made $150 in mistakes, just that $150 in mistakes are late.

(Edit: With the release of portfolio plans, the newbie has an option to invest in Prosper without worrying about credit details or manual bidding hassels.  Th following steps are still very relevant for exeryone.)

So looking back, what advice would I give to my newbie self? 

• Nothing but AA-C.  Don’t even think of messing with D-HR until you have 6 month of consistent lending experience. 
• Diversify, Diversify, Diversify.  Never put more than 2% of your expected portfolio size in a single loan.  If you plan on having a larger portfolio stick to $50 loans until you have 100 loans and 25 loans are 6 months old before increasing bid size.  Continue to invest in $50 increments until milestone is reached.
• Standing Orders.  Take the emotion out of it.  Define your extended credit requirements and let the standing orders find the listings.  All $150 of the mistakes above were manual bids.
• Automatic transfers. Use automatic transfers combined with standing orders to prosper automatically.  Investing in Prosper is fun, but it can also be time consuming.  Unemotional decisions don’t have to defend intuition.  Until such time as interest is paid on account balances, keeping your cash coming into Prosper balanced with the listings your standing orders are finding.  Always try to have $50-$150 extra for those inevitable spikes in listings.
• Overlap standing orders to create ladders.  Ladder on Rate, DTI, loan amount, and homeowner status.
• Higher interest rates are better than lower interest rates.  Don’t follow the heard. Don’t bid down 100% funded listings.
• Start off in the black.  Use the following link to start your investment positive $25: Prosper Referral Link Worth $25 to New Lenders

Lending on Prosper is fun and can be easy. Follow the above suggestions and you can have a healthy and profitable portfolio.  If you would like to get started with a $25 start up bonus click the link.

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