Sunday, October 07, 2007

Playing with Prosper

With my recent interest in finance I checked out a few finance blogs. One of them introduced me to a little website called Prosper. I was a little skeptical at first, but bottom line you are the bank. Folks put in for loans up to $25,000 and all loans are on a 3 year term. I am a lender, so I loan people money, but I don't have to come up with the whole principal, just at least $50. My $50, combined with many other Prosper lenders, make up the loan the borrower gets.

I get to chose who I lend money to. I can see their credit rating, debit to income ratio, and even post a question if I want. People with better credit can get away with a lower interest rate, but their a safe bet. Borrowers with bad credit will start at higher interest rates (pretty normal stuff). When I put in my $50 bid, I chose the lowest interest rate I'm willing to take. It's all very interesting and I highly recommend throwing in $50 to try it out. I got in on a reference, so after I made my first loan I got a bonus $25. Free $25 bucks is hard to beat.

Because my first loan has so far gone well, I've decided $50 a month isn't too hard to come up with. My first loan gives me back a whopping $1.68 a month. Right now the plan is to make the money I get back a month equal the $50 I put into it a month, thus making it a self sustaining investment. Depending on the loans I find, and assuming everything works well, I figure it will take about a year and a half before I reach that point. When that happens I'll be able to loan out $50's a month without having it come out of my income. Then from there I'll work towards bringing in enough to pay some real bills. It will probably be a while before I can live off Prosper income. Rough estimates tell me I need to invest well over $60,000 to even consider it.

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