A C credit (super clean) borrower from Virgina (rate capped at 11%) has been trying to get a loan unsuccessfully on Prosper.
Here is the description:
Purpose of loan:
Replace an air conditioning unit that went out during a 100 degree day in the Washington DC area. I have made due without air conditioning until now; however, the weather is cooling down and it may be the best time to buy a new system as the old system is dead and not worth fixing. An average summer electric bill for me is about $300 because of the air conditioning. A new unit will be much more efficient and will most likely pay for itself in about 5-6 years.
My financial situation:
The job I have now is with a company that I worked at for about 5 years. Then I left to try a business of my own for about 4 years and now I am back at my old company again, which is why you see only “6 months” at my present job.I run a web site - DeepMarket.com - that brings in an income of about $900 a month
Monthly net income: $ 6400 + 900 = $7300 after taxes
Monthly expenses: $ 5800
Housing: $ 2700
Insurance: $ 200
Car expenses: $ 50
Utilities: $ 400 (mostly because of an inefficient old air conditioner - this will go down next summer)
Phone, cable, internet: $ 100
Food, entertainment: $ 300 (yes, a lot of cans of beans)
Clothing, household expenses $ 100
Credit cards and other loans: $ 1500 (Yes, I know - ouch. Old business debts)
Other expenses: $ 300 (in case I forgot anything else)Income of $7300 minus expenses of $5800 leaves me with about $1500 in free cash flow that I generally apply to my credit card balances.
In order to entice lenders the blogger made a double interest offer (Double Interest - the first 11% up front at Prosper). Basically offering to pay 11% of the bid via paypal for any bid of $250 or more.
Virgina’s stance on the issue is completely baffling to me. Protecting your citizens by only allowing to get loans at 11% or less? How does this help? By keeping all but the highest quality of borrower from getting loans?
Any idea why these protectionist laws are still on the books?
Viva la free market.
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5 comments ↓
While it may not be kosher legally, it’s also a risk because you’re relying on the borrower to pay out on his unenforceable promise.
The debt limit laws are idiotic…
Mike you are right.
It is a risk and there is no way for the borrower to “enforce” it. But, that is part of risk vs. reward - the greater the risk the greater the reward. I was trying to make the reward far exceed the risk, but there is no doubt it is still a risk.
Eric thanks for you comment. The 11% rate cap is incredibly hard to overcome. I placed a bid based on our blogosphere interaction and not the additional PayPal incentive (this is p2p lending after all). However if you fund I would like my additional 11%!
It’s interesting to note that it’s not double interest. You’d make about 11% on the first year. But what about the other two years of a typical Prosper loan? I guess this blogger knows his marketing.
But yes, the 11% rate cap by the state is incredibly dumb when you have interstate lending. Either all states should have the same cap, or nobody should have a cap.
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