Prosper recently had to freeze all new activity on the site due to some Federal regulations. Read more about that here (http://www.prosper.com/help/topics/lender-quiet_period.aspx).
Even more recently, yesterday I received a number of e-mails notifying me that some loans had been charged off. I have been waiting for this to happen, and I’m glad I can finally write those bad loans off and focu s on my current loans, and work on finding better loans. In all reality, looking at all my loans, the ones that turned out to be terrible loans were those which I bidded for without a whole lot analysis.
So the notices of the charge offs were nice, but it left a tingling feeling in my gut, I wanted to look at the loans and see if I could tell where they failed. I took 3 of the loans and read them a few times.
So here’s one.
Purpose of loan: The purpose of the loan is to pay off most of my debt. Looking to invest in a shop and would like to have my credit score increase just in case I need a loan.
My financial situation: I am a great candidate because I always pay off my debt on time. I’m a serious business man and take my responsibility very seriously.
(explain why you are a good candidate for paying back this loan)
Monthly net income: $ My monthly income is from 115k to 130k
Monthly expenses: $
Insurance: $ 150.00
Car expenses: $
Utilities: $ 150.00
Phone, cable, internet: $ 50.00
Food, entertainment: $ 200.00
Clothing, household expenses $ 0
Credit cards and other loans: $
Other expenses: $ 0
Questions & Answers
Q: TWO QUESTIONS: With a high income and small expenses why would you need a loan? Seems you could save the money needed for investment quickly. Have you listed all your expenses?
A: My Debt to Income ratio should be a higher than 45% Not sure if my credit shows that I have two houses. I’m also paying another truck payment that is my Fiance. Is that not showing on my credit report ? Both mortgages are about 2800.00.
Q: What is your average monthly income? -Selffortress
A: 10,500 – 11,000
Q: Can you please itemize what debt you have and what portion of this loan will go to pay them off, and how much will go to the deli investment? Second question: do you have any smallbusiness-retail experience?
A: Mortgages 2800.00 Credit cards 1500.00 Car payments 650.00 The money I receive from Prosper is not going towards my smallbusiness. It’s all going to pay off debt to put me in a better situation. I would like my credit score to be over 700 in case I inquire for a government loan for the investment in a deli. It’s been something I have been thinking about for a while now. I have a couple of business partners that are interested.
Q: What is your weighted average interest rate on your revolving credit cards?
A: 35% on my united 20% Beneficial 30% Discover 12% OCTFCU 25% Citi Financia
So what was the problem with this loan? There are some subtle indicators that this guy doesn’t know what he’s doing. And there are a few other things that should have raised enough flags to keep me away. He claims a high income, and lists only a few expenses. With such numbers, he should be able to put aside 25K in a few months. He should have done that instead of asking for a loan.
Take time to evaluate your loans better and don’t get greedy. Also, sometimes the automatic lending system works much better than
your own my own decisions.