Thursday, January 10, 2008

portfolios on prosper

With the extra money I received in December, I did several things: I put a substantial amount onto my house loan, I put some into a college savings account for my grandson, I bought some camera equipment to replace what was stolen last June, I paid off all my credit cards, I set aside enough money in savings to pay off my car.

I also transferred a smallish amount to prosper (see link on right) so I could do more lending and earn decent interest. Prosper now offers "portfolio plans". A member can create up to four portfolio plans, choosing to make loans to persons with credit records that range from conservative to somewhat risky. I put different amounts of money into each risk portfolio and chose $50 as the loan amount for each.

The way it works is that whenever I have sufficient funds in my account bids are placed automatically, according to the maximums in each portfolio, until the portfolio is full. As loans are paid off and more money accumulates in my account the portfolios automatically refill themselves. At least that's the way I like to put it.

By doing this I am able to keep bidding on loans even when I am not anywhere near a computer. And my portfolio has a mix of risks in it. Obviously, the higher-risk loans bring higher interest, so I have put a fair amount of my money in the top two levels. I figure if one defaults, that is $50 at most that I am out - and probably less, because a collection agency steps in and part of the loan may have already been repaid. It isn't likely many will default - even though the default history of high-risk borrowers is higher than that of lower-risk borrowers it is still rather low as a percentage of loans.