Analyzing My Late Loans

Here is a quick Prosper portfolio update…

Total Account Value: $8,715.32
Cash Invested: $7,692.69
Active Loans: 144
Avg Loan Age Active Loans: 172 Days
Avg Rate: 18.52%
Avg Credit Grade: B+
Estimated ROI according to EricCC: 10.34%
Estimated ROI according to LendingStats: 4.03%
Conservative Estimated IRR according to RateLadder: 2.75%

This paints a fairly rosy picture, however if you scratch the surface you will see that I have $700 in 12 loans 1 month or more late. Hopefully some of these will improve through collections; statistically that should be the case.

Looking through all of my late loans 1 thing jumped out. 10/12 and 11/13 (if you count my one already defaulted) have something in common. This was a startling discovery. All of my standing orders were adjusted immediately.

Do you know what the commonality was? I will give you a hint it was not autofunding and not DTI. It is in the extended credit.

The process of portfolio self reflection is important for all lenders. One should never assume that what you think will work will. Before plunging head first with your entire cash position, test the waters. Diversify, diversify, diversify! No more than 2% of your portfolio should be in a single loan.

September 26, 2007 | Filed Under Prosper.com, Strategy

Useful Info:

comments

8 Responses to “Analyzing My Late Loans”

Adi R on September 26th, 2007

So color me stupid, but I can’t guess what jumped at you? What was it that we the lenders should stay away from?
Stephen Wilson on September 26th, 2007

Yes, please throw us a bone here. What was the extended credit information that the lates had in common?
Kevin on September 26th, 2007

I don’t belive you are stupid. You read this blog afterall.

The point of the post was to be self reflective in your lending nature.

While I will reveal the criteria that has been the majority of my lates eventually, you should realize that I have 15 standing orders laddered on and covering many different profitable slices of Prosper loans. The fact 1 particular critera stuck out to me might be a product of some of my other criteria choices. For example, extremely high rates or a lack of DTI requirements or …

I encourage you to use the Prosper lending performance tool and understand the implications of when certain data was added to Prosper.
Adi R on September 26th, 2007

Okie.
Actually, I noticed the requirement some time ago on the prosper performance calculator and added it to my search criteria. I don’t believe in standing orders, since I seem the most unusual things and no matter how strict my criteria is (with Safest setting right now returing 3-5 listings on average), I still would not blindly invest in these listings without reviewing wording, photos and some other subtle signs which I hope will help weed out the “bad seed”. Only time will tell, of course.
Unfortunately, I did at least half of my original loans without looking at that part of the criteria, so it will be nice to reflect back and compare the two groups in a year or two.
Kevin on September 26th, 2007

I think my standing order based impartially on credit judgment is better than my own personal review. While my search criteria is equally tight, I find I am a sucker for a good sob story and often get in at a lower rate or for more money that I want to.

Plus manually looking at listing would take all day. I prefer to Prosper Automatically: http://www.rateladder.com/2007/04/25/automatic-prosper/
pjz on September 27th, 2007

What are you talking about “manually looking at listing would take all day”? Just do an advanced search with your tight criteria and then do a sanity check on the returned listings before you bid. Right now this procedure takes me no time at all since my tight search criteria currently finds zero matching listings.
Looking forward to the commonality you found.
pjz on September 27th, 2007

I do see a commonality among your late loans but probably not the one you are thinking about. Most of the late loans have a very high interest rate with respect to its credit grade.
pjz on September 27th, 2007

I think I got it. It is bad when your # of current credit lines are less than the # of open credit lines. However, I did not have have time to find one of those among your lates.