Wednesday, March 21, 2007

More about

Normally I don't care what people do - as long as it doesn't affect me. But I have to admit, I've got a super bug up my butt about Made more interesting because Mr. Snarkolepsy was somewhat intrigued by the concept. Not investing in it - just the free market side of capitalism.

Also note - I think my irritation is so high due to a family member of mine buying into every get rich quick scheme on the planet. You just can't tell them the business models don't make sense.

My immediate impressions of were:

1. Thats a horrible idea.

2. There will be an incredible default rate.

3. Many of people were very wealthy and could not find an avenue of credit outside of Even people with up to 5 houses. I couldn't figure out why these people weren't under a HELOC at a much lower interest rate than they were asking for on - other than being non lend-able through a bank.

4. If you read the loan plea's, it is impossible to see how the loan can realistically be repayed.

5. will probably get sued because of so many defaults.

6. People's need was more based on sob stories than any real need. Unless you think taking a vacation is a need. Some people claimed they didn't even need the money - but said " I am a little suprised at the amount of money people are willing to throw at high risk borrowers or scenarios on prosper, but people do love to gamble."

7. Borrowing money to then turn around and lend money was the most ridiculous idea ever. But yet a bunch of people were doing it.

8. Most of the loans were being funded not by large benefactors, but tons of small cash infusions. Some of these are due to the marketing people at advising "portfolio diversification" by making lots of small loans. But some people are just ordinary people putting in small sums of money as you can see later on.

9. The whole thing just really wreaks of a get rich quick scheme.

This is the thing - I think most financial advisers will tell you paying anything with interest over 15% for more than a very short amount of time will result in a situation where you can never get out from under that debt.

So this morning I got a technorati hit on the blog, and up pops this persons blog entry.

I have to admit, I thought it would take longer than that to start seeing defaults. But now I am curious. So I started looking around and found other defaults.Here and here.

This persons blog entry states "Sometimes pressing problems require radical solutions. If you've been reading our blog, you'll have gathered that my wife and I are running a monthly deficit of $1,800. This is a LOT of money and if the situation continues, it will put us in dire financial straits. As part of the solution, we're doing the following:" Yet they claim to have invested 70,000. in

This whole thing is a trainwreck.

Update - For the guys who read the blog who are investors.

Thanks to this guy - you can see how the lenders are faring. This is a better link to track the lenders. Hey.. I didn't put this information out there.

But the whole thing is actually really fascinating. Most unexpected? You can not really predict who is going to default. This guy and this guy are making risky loans, but have a very low default rate. But this guy tends to lend to people with very good credit risk, and he has a very high default rate.

1 comment:

  1. I think that this is a bad idea too, especially with these high risks borrowers defaulting at astronomically high rates right now. Anyone who has the money to do enough due diligence checking out the borrow won't use the site because the balances are too small and anyone who is only lending $1,000 at a time won't have the financial background to do the proper due diligence before investing. Socially, there may be some positive benefits to the borrowers, but I think the lenders are going to be in a world of hurt when they realize that the rates they are getting don't pay for the risks that they are taking. As more and more default blog articles come out, it will be interesting to see if it effects prosper's growth.