P2P-Loans.com

Make Saving a Habit: Like Washing Your Hands After #2...

noreply@blogger.com (Blogging Man) — Fri, 15 Aug 2008 16:30:00 +0000

Why do people habitually do certain things? I stumbled upon a great article on consumer habits (or lack thereof when it comes to saving and financial planning) that I wanted to share with my readers. The simple reality is that we need to not only make saving (I also call it "paying yourself first") not only a habit, but a top priority. With pensions receding at a rapid clip and continued US government deficits (don't count on Social Security to take care of you younger folks), it is more important than ever to save and save now. It doesn't take much if you do it everyday and don't think about it (e.g. make it a habit). Dropping a couple of bucks in your savings kitty everyday is all it takes.

Buy This: Save More, Spend Less
By ROBERT POWELL
MarketWatch
August 14, 2008 4:31 p.m.

Many American companies are adept at getting people to start habits. Firms such as Procter & Gamble, Colgate-Palmolive and Unilever "have perfected the art of creating automatic behaviors," said Charles Duhigg of the New York Times. They get consumers to chew gum, spray perfumed water on their furniture, and whiten their teeth "almost without thinking, often in response to a carefully designed set of daily cues."

By contrast, companies in the financial-services sector -- specifically banks, insurers, mutual fund firms and the like -- have failed to create the cues to get Americans to develop the saving habit or break the spending habit. So the question arises: What lessons, if any, can financial firms learn from those firms so skilled at manufacturing habits? What are the cues needed to create the savings habit?

READ THE REST OF THIS EXCELLENT ARTICLE HERE...

Get Paid to Save (And Have Fun While You Are At It?)!!

noreply@blogger.com (Blogging Man) — Tue, 24 Jun 2008 16:34:00 +0000

I know it sounds too good to be true, but this is the real deal and I would encourage you all to take a look. The "Pay Yourself First Challenge" is a savings contest sponsored by FNBO Direct (yes, that's a bank) that gives you the opportunity to earn free cash, learn to be a habitual saver AND offers a great, HIGH interest rate on your savings. This contest was recently written up in the Wall Street Journal and is gaining in popularity (they are relying on folks like yours truly and other Bloggers to spread the word). Here's the rundown per the contest website:

Create a one-minute video about what you're saving for (visit PYF's YouTube Channel to see what your competition is doing). Maybe you're a savings superstar — or a little savings challenged. Compel us with your original and creative video. You may be selected to join us on a six-month savings journey as a challenger in the FNBO Direct Pay Yourself First Challenge!

What's up for grabs:

$10 Gift Card for each of the first 500 YouTube Submissions*
$500 Cash Prizes for each of the Top 20 YouTube Submissions*
$7,500 Luxury Spa Vacation Grand Prize*
$25,000 in Matched Savings for the Top 5 Contestants*
Upload your video by July 31. Start shooting today!
What is PYF?

Pay Yourself First (PYF) before you pay your mortgage, credit cards or any other monthly bills. It starts with a direct deposit into your Online Savings Account, transferring only what you need for monthly bills into your checking or BillPay account. This small change maximizes your earned interest and grows your savings faster.

*See Official Rules for complete details.

P2P-Loans.com is sketching out a possible submission and I will post a link to my video assuming I ever get my production act together. Good luck and spread the word on this great program!

$140 Oil, $4.00+ Gas - Here's How to Save Some Bucks!

noreply@blogger.com (Blogging Man) — Thu, 19 Jun 2008 17:15:00 +0000

Wow, oil prices continue to soar and there is not much we average consumers can do about it. I used to spend $30 every week to fill my car up and now it's running me more like $65 each time (that's over $140 more per month and about $1,700 per year!). I don't know about you, but this is taking a serious dent out of my pocketbook and I don't like it. Well, there are lots of ways you can help reduce the impact high gas prices on your wallet.

For example, I recently signed up for the Chase PerfectCard (APPLY NOW), which offers 6% cash back on ALL GAS PURCHASES for the first 3 months and then 3% cash back thereafter (that's nearly $0.24 per gallon). For me, that's nearly $200 in free gas every year (and it is free since there is no annual fee). As a bonus, you 1% cash back on ALL OTHER Purchases and a 0% APR for 6 months as well.

In addition to financial tools like the one above (it's first on the list since it's the easiest one to do, by far), here are some tips for reducing the impact of high gas prices on your wallet:

Observe the Speed Limit: In addition to avoiding a nasty speeding ticket and the risk of getting into an accident, driving the speed limite can also save you big bucks on gas. As a general rule, for every 5 MPH you drive over 60 MPH, it is costing you about $0.25 per gallon! If you have a lead foot like me (like I used to have - $4 gas has cured this problem), it could save you $0.60 or more per gallon.

Don't Drive Aggressively: While it might make you feel good to stomp on the gas pedal to fly by the one car ahead of you in town or on the Interstate, it won't really get you to your distination all that much faster, but it will cost you a pretty penny. Lots of accelerating, speeding, and braking will cost you BIG MONEY when it comes time to fill up. One estimate puts the increased cost at up to 33% (or more than $1.20 per gallon!). Since most of us are not THAT crazy on the road, the cost is more likely $0.30 per gallon, but that adds up, trust me.

Maintain Your Car: Keeping your tires properly inflated, changing your air filter regularly and using the right grade of motor oil can save you over $0.25 per gallon. These are things you should be doing anyway as they will extend the life of your tires and your car thereby saving you a ton of money anyway.

I know this stuff can be kind of boring, but by signing up for the Chase PerfectCard (Click here to APPLY NOW), observing the speed limit, driving more carefully, and maintaining your car, you can reduce your gas bill by over $1.00 per gallon or over $450 per year (much more for you power drivers out there).

Of course, you could always buy a Prius...

Consumers Pile on $15 Billion More Debt in March 2008!

noreply@blogger.com (Blogging Man) — Wed, 07 May 2008 19:40:00 +0000

Americans are piling on the debt at an alarming pace while one of our most valuable assets (our homes) is plummeting in value. A recent article from Bloomberg points out that consumer debt levels increased by a whopping $15.3 billion in March 2008, which was substantially more than economists had projected. According to the article:

"Consumers are turning to credit cards after banks tightened standards for home-equity loans and other borrowing. The March figures brought U.S. consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession."

This is scary for those of you (like P2P-Loans.com) that are invested in Prosper loans. As banks turn away more people, they are likely to pursue alternative financing on sites like Prosper, LendingClub, etc..

America's debt problem has only gotten worse over the years and the current credit crisis may end up being a healthy event in that it will constrict American's ability to keep borrowing (at least for a short time). But, with the weak economy and fewer sources of capital, Prosper lenders beware...

Here's an interesting site that provides a lot of interesting debt-related information. Enjoy! http://mwhodges.home.att.net/nat-debt/debt-nat-a.htm

Housing Crisis Over? Mixed Data Suggests....

noreply@blogger.com (Blogging Man) — Wed, 07 May 2008 13:45:00 +0000

P2P-Loans.com has recently noticed a number of smart folks writing about the end of the housing crisis. In two separate articles in the WSJ ("Opinion: The Housing Crisis is Over" and "Is Housing Slump at a Bottom?"). These articles make very valid points with regard to housing starts, low interest rates, etc. What these articles fail to debate in any material fashion is that housing prices relative to disposable income are still extremely high!

This chart from Ned Davis Research (the line graph at the bottom of this page is most relevant) demonstrates that we remain at very high price levels relative to historical data. Ultimately, the value of housing is a function of affordability. When it's all said and done, this is the single most important factor that drives demand for new housing and the price of such housing. For example, the data in the chart suggest that in 2001 (yes, interest rates were in the sub 7% range for 30-year fixed mortgages then as well) the Median New Home Price / Disposable Income ratio was near its 30-year average, which is where it had been for the better part of 15 years. In fact, the ratio had been even lower before that, however this is likely due to the artificially high interest rates of the 1970's and early 1980's.

This dynamic has served to dramatically reduce demand for housing in conjunction with tougher lending standards (fewer buyer approved for new mortgages) and skitish buyers (when will prices stop falling). As a result, housing inventories have spiked to record highs. Accross the US, housing inventories are more than double typical levels, and are as high as 4-5 years worth of inventory (versus a long-term average of 5-6 months) in formerly hot markets such as Florida and California.
According to a recent post at Seeking Alpha, housing inventories are beginning to come down, but remain well above historical averages. Seeking Alpha points out that, at the current sales pace, inventories of new homes will be "back to normal" by the end of 2009. Simply put, we will be in a supply/demand imbalance for the next two years (and this is assuming that the market doesn't overshoot to the downside, which it's been known to do in prior busts - think about when many tech stocks were trading at less than cash value in 2003). The data is similar on the inventories of resales as well. In my estimation, this means we still have a ways to go before calling the end of the housing crisis. I hope I am wrong.

On a side note, the government is trying to push through a MASSIVE bailout program. Generally, when the government makes a move like this, they are too late to the party. Thus, this single fact alone could lead one to believe we are at the end of the housing crisis.

Save More, People! Why is the US savings rate so low?

noreply@blogger.com (Blogging Man) — Fri, 02 May 2008 13:30:00 +0000

Just the other day, the government quietly reported (only because the media didn't really give it any play - maybe it has something to do with their retailer advertisers) that the savings rate in the United States hit a new ALL TIME LOW! American's are saving a whopping $2 for every $1,000 of disposable income that they earn. TWO DOLLARS! That's a savings rate of about 0.2%. In no uncertain terms, America has become a spend and consume nation that relies on credit to finance our lavish lifestyles (a special thanks goes out to our kids for agreeing to pay back the $9+ trillion national debt for us). Well, in the spirit of returning back to our roots as a country of savers and investors (just look at the above chart to see that we did used to be a nation of savers), I'm offering a few tips and suggestions on how you might increase your savings rate just a tad:

1) Use your rebate check (thanks again to our kids who are paying for this) to pay down your credit cards - AND DON'T RUN THEM BACK UP. If you pay down $600 or $900 of your credit card debt that is probably costing you 20% in interest, you'll save as much as $200 per year in interest costs! It may even improve your credit score, which could lower your interest rate on other loans you have or need in the future! That'll help cover the increased cost of gas, at least.

2) Let your money work for you by putting your newfound savings in a money market account or a CD. For example, Countrywide is offering a FDIC insured 12-month CD at 4.10%. Of course, only do this if you can't use the cash to pay down your high interest rate credit cards (after all, 20% is much bigger than 4.10%). There are some other high yield ideas at P2P-Loans.com's High Interest site.

3) Refinance your credit card debt. If you have decent credit, why not seek out a low APR (or no APR) credit card to lower your borrowing cost. If you are paying a high credit card rate, take a look at some great credit card options on our Best Credit Card site. Using the 20% interest example, you could open a new account with a 0% APR for 12 months, transfer your balances to this new card (for a fee that is usually 3% up front) and save a whopping 17%! Here's a great offer from American Express that gives you 15 months of 0% APR on purchases and a 4.99% APR on balance transfers. There are a lot of other good offer out there as well. But, don't use this low rate as an excuse to spend more (this is key!). Stay disciplined! If you want to explore other great offers, use P2P-Loans.com's Credit Card Search to find other great offers.

4) Make saving automatic. There are a lot of programs that make saving easy. For example, open a Bank of America checking and savings account and sign up for their "Keep the Change" promotion. You not only get free checking and savings, but you also get $75 of free cash to kick-start your savings plan! Then, whenever you use your Bank of America debit card, they round your purchase up to the next dollar and put the change in your savings account. The interest rate on the savings account is lousy (less than 1%), but you will be saving some money with minimal pain and effort. If you make 30 purchases per month and save an average of $0.50 per purchase from this program, that's $15 per month and $180 per year. BoA will match 5% of that AND you get the $75 sign-up bonus, so that brings you to nearly $265 in savings (plus interest). It's an easy way to get started and it's automatic.

In summary, Americans are not saving enough and it's our responsibility to take care of our own futures. At the current deficit level, our government will not be in a position to bail us out when we run out of money, so SAVE MORE, PEOPLE! Please Digg it up!

Fellow Blogger Seeks P2P Loan on Prosper

noreply@blogger.com (Blogging Man) — Fri, 25 Apr 2008 15:47:00 +0000

P2P-Loans.com recently came accross the following listing on Prosper from a fellow blogger (Deepmarket.com) who is seeking a Prosper personal loan to consolidate some debt and begin the process of improving his finances. You can review his loan request for yourself on Prosper, but here is my quick and dirty analysis of this request:

1) The borrower has shown a strong desire to reduce his debt load, which was accumulated durning an entrepreneurial jaunt, and has returned to the "rat race" at a $100k+ salary. His company is a very strong one that focuses on government contract work (we all know that economic slowdowns don't hurt the government, so this job should be pretty safe). The borrower also provides some personal information about himself on his blog, which is comforting to a lender.

2) The borrower sought out the help of a Prosper expert, RateLadder, who is his group leader. RateLadder has been around Prosper for many moons and brings a lot of expertise to the table. While RateLadder doesn't personally know this borrower, his bid and endorsement does improve this listing on the margin.

3) Coverage - this borrower has just enough income to cover his monthly expenses with his salaried position. He also earns some extra cash through his blog (anywhere from $60 per month to $900 per month according to his listing). This income should be available to support any unexpected expenses as well as provide capital to repay revolving debt more quickly. Based on my math, this borrower should be able to cover the new Prosper payment with his salary alone and the blog income will provide a small cushion.

4) $25,000 request - this is a large loan amount to repay fully in a short 3 years (the term of a Prosper personal loan). With an interest rate of 25.45%, that equates to a $1,000 per month payment, which is large. Any bump in the road means that this borrower may choose not to repay this loan (in my experience, borrowers do not make partial payments, but rather stop paying entirely). Lenders can take some comfort in the fact that this borrower has a "public" personality via his blog, thus the public shaming he'd take by being late could be a nice incentive for him to make this loan his #1 priority.

So, what's the sum total of my analysis? The borrower is clearly an intelligent person with a great job in a high-demand area (e.g. if he does lose his job, his skills are in high demand). While the leverage is high, the risk of default of mitigated by the high interest rate being offered (25%+ at the start, but this could get bid down through the course of the auction). As part of a diversified Prosper portfolio, P2P-Loans.com does believe this is a loan worth bidding on and I will support it with a small bid once funds clear my Prosper account. If you are new to Prosper, you can get $25 of free cash for joining Prosper and winning a $50 bid on this loan. That makes it a no-brainer in my opinion.

Taxpayer/Renter Backlash Builds re: Proposed Gov't Bailout

noreply@blogger.com (Blogging Man) — Wed, 23 Apr 2008 16:04:00 +0000

A number of websites have popped up that provide an avenue for angry homeowners, renters, taxpayers, etc. to speak out about a government housing bailout proposal that is making its way through Congress. P2P-Loans.com generally believes that the market needs to run its course so that we can return to more normal times. While there are certainly instances where borrowers were mislead or taken advantage of in the boom times, the overwhelming majority of buyers knew what they were getting into when they bought in the boom times (they simply hoped and believed that the value of the asset they purchased would keep going up - now clearly a flawed assumption). The sites speaking on this cause are below and there is even a petition to sign if you feel strongly about this issue. You decide if it's fair for taxpayers to cushion the blow that is currently being felt by lenders, homebuilders and borrowers alike. Hey, my stock portfolio is down this year, will the gov't please consider covering some of my losses, too? When do people start to take responsibility for their own decisions and not rely on the government to bail them out when they get into trouble? I welcome a likely dialogue on this topic.

Visit:
http://www.angryrenter.com/
or
http://www.nationalbubble.com/stopthebailout/

Tax Payer ALERT! The Gov't Wants To Bail Out Troubled Homeowners

noreply@blogger.com (Blogging Man) — Fri, 18 Apr 2008 15:58:00 +0000

Is there a tax-payer funded (err... "government sponsored") bailout coming for honeowners? Momentum appears to be building for a broad-based program to bail out folks that bought homes in the boom times and can no longer afford to make their payments (e.g. are approaching or are already in foreclosure proceedings). This has been a topic of much debate. For those that made smart, sound financial decisions (e.g. didn't borrow more than they could afford to pay back, and read the fine print on their mortgage documents, etc.), this seems like it might be unfair since the taxpayers will potentially be bailing out these folks. But, as the outline below reflects, the current debate in Congress revolves around structuring a compromise that enables any eventual program to pay for itself. P2P-Loans.com is encouraged by some of the provisions being discussed (especially the payment of insurance premiums to the FHA and a sharing in any equity gains to homeowners upon a sale). We would hope that the equity gain sharing is substantial and not a pittance given any gain will be made entirely on the backs of tax payers (errr...the "government-sponsored" program). Generally speaking, the government has a terrible track record on projects like this (they underestimate the total costs, botch the execution and mess up a market-based system that works pretty well in the long run).

Here is a summary (from an article at Money.com) of what's being debated (P2P-Loans.com will report back on this issue once a program is passed):

While critics worry that an FHA rescue plan could amount to a bailout, supporters say it's not since everyone involved - lenders, borrowers and mortgage investors - would make a sacrifice.

Lenders get 100% backing from the FHA if a loan goes south. In exchange, the lender takes a "haircut" - reducing the principal owed and converting adjustable-rate loans to fixed-rate mortgages.

Borrowers get to keep their homes, but they would pay a premium to the FHA for the mortgage insurance and they would have to give a small portion of their equity to the FHA when the house is sold. They would also have to show they can afford the newly refinanced loan.

Mortgage investors - while they would sacrifice some future income from loans that have been reduced - would have more confidence investing in the new loans since the refinanced loans will be affordable and the borrower therefore will be more likely to pay them back.

Rebate for the Rich? Stimulus Plan Has Something For the Wealthy, Too!

noreply@blogger.com (Blogging Man) — Mon, 14 Apr 2008 13:28:00 +0000

P2P-Loans.com came accross this Fortune magazine article and thought our readers might like to know more about the stimulus plan (even if you don't qualify for the rebate check, READ ON). In a previous blog post, we wrote about the tentative stimulus plan (at the time of our posting it was not a done deal) and what it might mean to taxpayers. But, we didn't know about the details (and impact) of the change in the conforming mortgage amounts (discussed in the article below). The bottom line is that if you are an owner of an expensive home, but do not qualify for the tax rebate, this could be a huge money saver for you!

---------------------------------

A gift from the Beltway

High-income folks like me don't qualify for rebate checks. But we're getting so much more.

By Allan Sloan, senior editor at large
(Fortune Magazine) -- I won't be getting an economic-stimulus tax rebate check, but I'm not complaining about it. Not only am I fortunate to make too much money to qualify for a rebate, but I'm getting something far more valuable than the maximum $1,200 my wife and I could have gotten. Thanks to a relatively little-noticed portion of the stimulus package, we'll be able to refinance our house more cheaply than we otherwise could, or presumably sell it for more.

This means that higher-income couples like us who don't qualify for rebates because we have adjusted gross income of more than $174,000 ($87,000 for singles) are arguably getting a better stimulus deal than the 130 million taxpayers to whom Uncle Sam is sending payments.

Let me take you through it. The stimulus package raises the maximum size of a "conforming" mortgage to $729,750 from the previous cap of $417,000. A conforming mortgage is a mortgage that can be sold to Fannie Mae (FNM) or Freddie Mac (FRE, Fortune 500), and it carries a lower interest rate than "jumbo" loans that exceed those limits. Similarly, the maximum mortgage that can be insured by the Federal Housing Administration has also risen to $729,750. For people in high-home-price areas, including mine, these maximum mortgages are now high enough to matter.

Doing the math
Being able to borrow $417,000 on the cheap doesn't help much when you're hoping to sell or refinance your house for, say, $750,000. But a $729,750 limit works out just fine. This higher limit translates into cheaper refinancing or a higher sales price, because the lower interest rate means buyers can presumably afford to pay a higher price.

If we assume a 5% down payment, we're talking about houses in the $450,000 to $765,000 range becoming eligible for these loans. The range rises if people make larger down payments or put second mortgages on top of these loans.

We're talking major money here, folks. In today's market, the interest difference between a conforming loan and a non-conforming loan for a 30-year fixed-rate mortgage is a whopping 1.27% a year, according to Keith Gumbinger, a vice president at HSH Associates, a mortgage research firm. So a $700,000 conforming loan at 6.01% would carry almost $9,000 less annual interest than a nonconforming loan (at 7.28%).

Gumbinger says that's an artificially high difference caused by the current freeze-up in credit markets. "The spread was about 20 basis points [20-hundredths of a percent] before things got ugly in June," he says. So even if normalcy returns - alas, that doesn't seem imminent - having a $700,000 conforming mortgage would cut a borrower's interest costs by $1,400 a year. Call it $1,000 a year after taxes if you itemize. That's worth much more than a one-time $1,200 nontaxable rebate payment.

READ THE REST OF THIS ARTICLE ON FORTUNE.COM...

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Free Checking Account & $75 Cash for Signing Up: Bank of America!

noreply@blogger.com (Blogging Man) — Thu, 10 Apr 2008 15:59:00 +0000

P2P-Loans.com is always looking to bring you, our loyal readers, the best deals available. Today, we wanted to offer you a free $75 cash gift (ok, so we aren't giving you any money, but information is power!). All you have to do is open up a free checking account from Bank of America and you will receive $75 cash. That's it! So, sign up for the account through the link below and enjoy your cash. At a minimum it will help you lower you rapidly rising gasoline bill (visit our blog post on how you can lower the cost of gas by over $1 per gallon). I signed up for this account and received the credit without any hastle at all. To receive your $75 in free cash, apply online or go to your nearest banking center. Use offer code AOU260408, and open a personal checking account before June 30, 2008.

Enjoy your free cash!

Foreign Bank CDs - Higher Yield, But Is It Too Risky?

noreply@blogger.com (Blogging Man) — Tue, 01 Apr 2008 14:37:00 +0000

I've been very interested in some of the high yield offers that some of the foreign banks (particularly Caribbean-based banks) have been offering. With rates in the US so much lower (Countrywide Bank is at 4.05%, E*Trade is at 3.01%, Capital One is at 3.2%, etc. - BankRate says the average 6-month CD is 2.76%). But, with some foreign banks such as a whopping 8.0% yield being offered by Millennium Bank, should you trust your hard-earned money in these instruments. Well, I found an interesting article below (Ask the Expert on Money.com) that talks a little bit about this idea. The P2P-Loans.com take on this is simple: don't forget that higher yields almost always (defined as 100% of the time) come with higher risk. Thus, if you are looking for a superior return, you will likely need to take incrementally more risk. If you are looking for safer options, P2P-Loans.com has done some of the homerwork for you on our Best High Interest Savings page. Enjoy the article.

--------------------

April 1, 2008
Are foreign bank CDs worth the risk?

With different banking regulations and no FDIC protection, foreign banks bring additional risk that might outweigh the relative safety of CDs.

Question: My wife and I are both unable to work and live on a fixed income. We supplement our income with interest from a 5.5% CD which matures this month. If we let the CD renew, the interest rate will be around 3.5%. I found a 6% CD at a bank in St. Vincent and the Grenadines, but I am somewhat leery of a foreign bank. What are your thoughts? –Alan Brady, Greensboro, North Carolina

Answer: My first thought is of the movie version of “A Man for All Seasons,” which depicts the life of St. Thomas More, the scholar and author of “Utopia” who was beheaded for treason in 1535 for refusing to recognize Henry VIII as the supreme head of the Church of England. I’m thinking specifically of a scene at More’s trial in which More, played by the late actor Paul Scofield, confronts Richard Rich, who has perjured himself and betrayed More to secure the position of Attorney General of Wales. “Why Richard,” says More, “It profiteth not a man to gain the whole world and lose his soul. But for Wales?”

What does this have to do with buying a CD from a bank in the Caribbean island nation of St. Vincent and the Grenadines?

Well, it seems to me that you and your wife could be jeopardizing your financial security by taking extra risk with money that you clearly depend on. And for what? A couple of percentage points of annual return?

I suppose it could all work out fine. But do you really want to subject this money to foreign banking rules and regulations? Do you even know what those regulations are? (I noticed that one bank in St. Vincent and the Grenadines that advertises U.S. dollar-denominated deposits won’t allow early withdrawals from some of its CDs.)

Visit Money.com to read the rest of this article... (here's the link).

Free Software & Other Stuff - No Need To Pay Anymore (PhotoShop, Google, Tax Prep, Coupons and More)!

noreply@blogger.com (Blogging Man) — Fri, 28 Mar 2008 13:53:00 +0000

There is nothing like free to get my blood flowing. There is a reason that this single word is one of the highest cost words on Google AdWords since I don't know of anyone in this world that doesn't like free stuff. So, I thought I would try to summarize some of the coolest free stuff I've found on the web (mostly software, but there is tons of free stuff that everyone should know about). Please feel free to add cool, free stuff you've found in the comments section.

Free PhotoShop Software
Adobe USA (the parent company of Photoshop) just announced a free version of its famous Photoshop software online, Photoshop Express! I've used Photoshop for years and can tell you it is a truly excellent program. In fact, they are also throwing in 2GB of free online storage so you can upload your pictures and use the free software.

Google Apps
It seems like Google is adding something new to its free online applications on a daily basis. Google offers some of the coolest applications on the web. From the more boring stuff like Google Docs and Spreadsheets to really cool stuff like Google Picasa, Google SketchUp (really cool 3D software), and, of course, the best of all, Google Earth (WARNING, if you download Google Earth, I can promise you endless hours of lost productivity).

Free Tax Prep Software
I wrote about this in an earlier blog post, but wanted to touch on it again since we are rapidly approaching the dreaded April 15th. Why pay for this service when you can get it for free (if you meet certain income levels). If you can't get it for free because of your income, check out the tons of low cost online options (that's what I use). P2P-Loans.com has also created a quick and dirty webpage to give you a few good options on the Tax Prep software side of things.

Coupons (online and offline)
You have to be careful when searching the billions of free coupon sites on the web because it's very easy to get lost. But, never buy anything online without a coupon. It's as simple as searching Google for "Name of Store/website Here" + "coupon code". For example, I recently bought something at Dick's Sports at their local store. I found a great printable $10 off any $25 purchase coupon. I've used this coupon 10 times already saving me $100 in total! I bought my wife a present from Nordstrom's the other day (online) and saved 25%! This is free money, people, so don't miss out. It only takes 2 minutes to find a legit coupon.

Other: Endless Hours of Searching for Free Stuff
There is no shortage of websites that offer free stuff, so I would encourage you to search for this stuff online (Click Here to get started). I've actually found some pretty neat things online, so I would encourage you to check it out. Good luck, happy hunting and thanks for checking us out.

Help, My Credit Score Just Fell Off A Cliff (and I didn't even do anything)!

noreply@blogger.com (Blogging Man) — Tue, 25 Mar 2008 15:16:00 +0000

As you may not know, Fair Isaac (what's so fair about them, I don't know) recently updated its FICO score formula and it is being rolled out by the three primary credit agencies. While there are many views on whether these changes are good or bad, the one certainty about all of this is that your credit score is probably going to change. Here's our quick and dirty on how this might affect you:

If your credit is currently being bolstered because you are an authorized user on your parents credit card account, you are probably going to get HAMMERED! One of the largest (and most negative) changes to the formula is the removal of the benefit you get from being on someone elses account as an authorized user. Some credit analysts belive as many of 25% of all Americans with credit could be negatively affected by this one change (that's about 40 million people whose credit score could fall). The good news is that it may take a number of months before all the credit card companies, banks, etc. begin to use this new score (so, get some new credit while you can - P2P-Loans.com has some great credit card offers if you are interested). Getting credit now (while you can still piggyback with daddy's good credit) will allow you to start building your own on-time credit file.

However, there are some positive changes to the scoring methodology as well. For example, the system treats a single large slip up (even as much as 90 days) as an “isolated delinquency” to individuals with a 10-year credit history. Routine late payments of less than 90 days will still damage your report but at least now a legitimate mistake won’t haunt you so severely.

Also under the new system, multiple credit inquiries in a short period of time won’t be so damaging to your credit score, as now they will be weighted less heavily in calculating the overall number.

Finally, the new system rewards borrowers who demonstrate the ability to stay on top of both revolving debt (credit cards, home equity lines of credit) and installment loans (Prosper Loans, student, auto or boat loans, mortgages). Even if you show a wide range of loans but a solid history of paying them on time, expect your score to jump up as well. Go figure, if you pay on time, you have a good score!

Just as a helpful refresher, here is what we do know about the FICO system (even though the exact numbers are closely guarded by Fair Isaac) and what the rough weighting is for certain types of credit data used:

- 35% — punctuality of payment in the past (only includes payments later than 30 days past due)
- 30% — the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
- 15% — length of credit history
- 10% — types of credit used (installment, revolving, consumer finance)
- 10% — recent search for credit and/or amount of credit obtained recently

GOOD NEWS - Your Home's Value is Falling! (huh?)

noreply@blogger.com (Blogging Man) — Mon, 24 Mar 2008 18:42:00 +0000

The rapid decline in housing values has been a bit shocking for many folks and has resulted in a lot of lost wealth (did we ever really have that money to begin with)? According to Standard and Poor's Case-Shiller index, home prices have dropped an average of 14% since March 2007 and more than 30-40% from the peak in some areas (viva Las Vegas condo living). But, there is a silver lining in all of this morass - your property taxes should be falling, too! In Florida, for example, property taxes have soared along with home prices. A $500,000 home in Tampa, Orlando or Miami, which is a 3-4 bedroom home in a reasonably nice area (hardly a mansion) will set you back some $10,000 in taxes per year (yes, you are renting your home from the government despite being told you are a "homeowner" - but that's another posting)! That same house would have cost you $200,000 and $4,000 per year in taxes a recently as 2002 and is now worth $400,000 or less (if you can find a buyer).

But, there is a catch! It's not the "true value" of your home that matters when it comes to taxes, it's the assessed value. This is where it gets tricky - places like California have wierd laws such as Proposition 13 and Proposition 8, which serve to confuse the heck out of homeowners. I have a friend that had to take his local property appraiser to court TWICE! in order to get his property taxes reduced. He won on both occasions, but it was not without a fight. In this time of strapped municipal budgets and a slowing economy, I would encourage you to do your homework and be sure that your property is assessed at the proper value since your government is more likely to leave your values too high. With prices expected to continue to fall over the next 1-2 years (especially in once hot markets like Florida, Las Vegas, California, etc.), now is a good time to make sure you aren't paying your local government too much of your hard-earned money.

If you'd like to learn more about your state's property tax system, go grab a six-pack and get hammered because you must be crazy...just kidding. You can visit http://www.assessor.com, which offers quite a bit of information on this topic as well as links to many local property appraiser offices. If your office is not on this page, head to www.P2P-Loans.com and use the Google search box at the bottom of the page. Enter "'your county name' property appraiser website" and you will most likely see your local site pop up.

I Need Money (Don't We All) - Read On To Learn How to Get Some...

noreply@blogger.com (Blogging Man) — Thu, 20 Mar 2008 18:49:00 +0000

As you probably know by now, I tend to blog about things that I find curious, interesting or about P2P lending, Prosper, etc. Well, I recently came upon what I felt was a pretty useful collection of some of the best financial sites and tools on the web. So, naturally, I wanted to share it with my loyal fan base (thanks for reading, Mom!). Seriously, I've found that the best way to accumulate savings (and ultimately wealth) is to focus on living within your means and cutting a mean bargain when you make large purchases or other financial decisions (cars, homes, jobs, etc.). That's what I found so cool about these sites/tools.

The source of these links was CNN Money, but I added my own color commentary for your enjoyment.

Your financial life: Track it. Improve it.
New ways to keep tabs on your inflows and outflows can make a big difference to your bottom line. Did you know that saving $0.99 per day beginning when you are 25 years old will get you over $187,000 in cash when you retire (10% annual return assumed)!

Buying a new ride will never be the same
The new resources put you on more equal footing with car dealers. If you buy a car every 5 years (about average) and save $1,000 each time by using these tools, you will save over $100,000 between the ages of 25 and retirement (same 10% assumption)!

Where you can go for advice you can trust (really)
Before betting the farm on some hot new investment, head to these Web communities. Make sure you don't lose the nearly $300,000 I saved you above...=)

Create your own "network effect"
When searching for a new job, it's easier than ever to get on the inside track. Few things will be as important to your financial future as your job. Make sure you are paid what you are worth!

Get the lowest price on anything
Before you plunk down hard-earned cash, you can quickly see which stores are offering the best deals. Remember how much $0.99 per day is worth...?

Know your home's future
Is a neighborhood you're interested caught up in the housing bust? How do the schools rate? This information is a few clicks away.

Click your way to the right school
Get the latest stats and even take a virtual tour to find the college of your dreams. Don't waste your money on an average school. Do your homework (before and during school).

So, What the Heck Does This Fed Rate Cut Mean to Me?

noreply@blogger.com (Blogging Man) — Wed, 19 Mar 2008 21:21:00 +0000

I was in the process of writing a blog posting on this very topic when I stumbled accross this well-written article from Bankrate. So, I thought I would share it with you. Enjoy!

Who wins, who loses in Fed's rate-cutting spree?
By Chris Kissell • Bankrate.com

When the Federal Reserve meets and changes rates, we all have questions: What does it mean to me? Will my mortgage rate go up or down? Is this a good time to refinance? Bankrate is here to help. We've looked at five categories -- mortgages, home equity loans, auto loans, credit cards and certificates of deposit -- to determine if the Fed's moves made you a winner or a loser. Here's a look at mortgages:

Winner: People locked into a good loan rate
When the Federal Reserve cut the federal funds rate dramatically in January, many soothsayers speculated that mortgage rates would plunge in response. Instead, mortgage rates actually rose significantly, reminding everyone that changes in the federal funds rate do not directly control the direction of mortgage rates.

Now that the Fed has cut rates by 75 basis points (that's 0.75% for you newbies), it's anyone's guess where mortgage rates will go. But Richard DeKaser, chief economist for National City Corp., is betting the cost of carrying a mortgage won't be going down substantially any time soon.

"We've seen the lowest for mortgage rates," he says. "We're going to be in the range of 6 percent for the balance of the year."

Time may prove DeKaser right. If so, consider yourself a winner if you locked into a mortgage before January's rate cut, when mortgage rates were near historic lows.

Winner: Homeowners whose loans are about to reset
The Fed's rate cut won't directly affect people with fixed-rate mortgages. But it will lower the payments of most homeowners with adjustable-rate mortgages.
This will be a boon for countless Americans with subprime mortgages who fear their next reset could leave them facing foreclosure.

"The Fed's actions in their own right are going to reduce the burden of mortgage resets," DeKaser says. "So that will help directly."

Loser: Fixed-rate mortgage shoppers
Way back in January, times were good for people shopping for a mortgage. Mortgage rates were near historic lows, making it cheaper to borrow.
Of course, not everything was rosy. The U.S. credit crunch and falling home values made it difficult for some borrowers to take advantage of sinking rates. Nonetheless, many homeowners and homebuyers had a window of opportunity to lock into historically low borrowing costs for many years to come.

For now, it appears that window has slammed shut, leaving those who failed to act earlier feeling like losers.

Take action
The Federal Reserve slashed the federal funds rate dramatically in late January. How did mortgage rates respond? They rose, fast and furiously. The moral of the story is simple: Don't make mortgage decisions based on Fed actions, such as this week's rate cut. Instead, take the appropriate action given your individual circumstances.

"Trying to time the market is historically a fruitless exercise," says Bob Walters, chief economist at Quicken Loans. "If it saves you money to convert your ARM or to lower your fixed rate, then by all means do so."

How "Rich Kids" Are Investing Their Money

noreply@blogger.com (Blogging Man) — Fri, 14 Mar 2008 22:14:00 +0000

A recent study released by Northern Trust shows that young millionaires ("rich kids" in their 30s aka Gen X - we are launching a GenX Financial website in the future, so stay tuned) have more diverse investment portfolios than their older, Baby Boomer counterparts - huh? I thought that young investors were supposed to take more risk?

According to the study, the Rich Kids that have some how accumulated portfolios of $1 million or more (must have made their money in Real Estate...errr...foreign currency trading) allocated 23% of their portfolios to investments such as hedge funds, private equity, real-estate investments and commodities (oh, that kind of risk). Maybe we should add Prosper Lending as an alternative asset category. That compares to 14% for the old folks/Baby Boomers and 10% for the REALLY old folks (over the age of 62). What's really interesting is that the rich kids like CASH. The report shows that they had 17% of their portfolios in cash, compared to 13% for the ancient ones (can you guess how old I am right now). I have to be honest - hedge funds and private equity sound sexy, but the fees are a killer and I suspect the funds that lowly millionaires (as opposed to multi-millionaires) have access to are not the creme de la creme.

So, what can we learn from this? I think the obvious conclusion is that the young rich kids like to keep a lot of cash around to buy cool stuff and old folks still remember the Depression as well as the great bull market of the 1990's. I'm kind of kidding, but I would conjecture that most young, wealthy investors remember when their margined brokerage accounts were being liquidated as the dot com bubble burst (and are paying close attention as the financial markets are in a bit of trouble now). That may be an exageration, after all, I'm talking about current young millionaires, not the ones that went broke back then, but I think it serves to highlight a valuable lesson (don't invest in bubbles). Spread your investments around so that no one category makes up more than 20%-25% of your assets (US stocks, your company stock (should be more like 5% for this one), bonds, international stocks, cash, small vs. large cap, etc.). Remaining diversified will help you weather the storms that we call bear markets (yeah, we're in one now) and will help you become a rich kid (or old fossil if it's already too late for you).

P2P Lending Grows in Popularity as Banks Slow Lending (Are Individual Lenders Suckers or Savvy?)

noreply@blogger.com (Blogging Man) — Thu, 13 Mar 2008 17:57:00 +0000

By now, you've certainly read about the credit crunch that has engulfed the world. Banks are running low on cash to lend and in some cases (such as Citigroup) our largest banks are dancing dangerously close to the fire having to rely on sovereign investment funds (can you say Saudi Arabia) to bail them out. But, with consumer and small business loans scarce, credit card companies reducing or canceling credit lines and banks refusing to write new home equity loans, what's a small business to do?

A recent Wall Street Journal article (see below) talks about how small business owners are turning to P2P Lending sites (such as Prosper, LendingClub, Virgin Money and Zopa to name a few) for capital. But, for lenders on Prosper, are we the suckers or the savvy investors by making these loans? The banks are likely turning away some pretty good credits and borrowers on P2P sites tend to pay a higher interest rate relative to a more traditional small business bank loan that might be backed by assets in the business or a personal guarantee by the business owner. At the same time, delinquency rates are very high at Prosper (upwards of 20%+ of funded loans in some months - visit LendingStats or Eric's Credit Community for details).

I published a blog posting on January 22, 2008, which summarizes my personal experience as a Prosper lender. My firm hope is that Prosper and the other P2P Lending sites will continue to be a good place to invest; however, the jury is still out on this one. P2P-Loans' future is counting on it!

-----------------------------------

Where Either a Borrower Or a Lender Can Be Small-Business Owners Turn To Online Networks for Funds As Banks Tighten Credit
By JANE J. KIM

When Jeff Walsh wanted to refinance the small-business loan on his coin laundry, he didn't want to take a chance that his bank would reject his application. "I just bought a house in 2007 and was a little nervous about what the bank would say about my debt-to-income ratio."

Instead, the 31-year-old from Schaumburg, Ill., recently borrowed $22,500 on Prosper.com, an online lending network that matches individual borrowers and lenders. The interest rate on Mr. Walsh's loan: 10.25% -- several percentage points below what he says he would have had to pay at a bank.

HIGH FINANCE FOR THE MASSES

Read a Q&A with the founder of Prosper.com. As the credit crisis spurs traditional lenders to tighten credit standards and raise fees, more small-business owners and entrepreneurs are turning to so-called person-to-person lending networks -- with names like Prosper, LendingClub.com and Zopa.com -- to help keep their businesses going. The unsecured loans are tiny, usually no more than $25,000. But borrowers say they are able to get loans more quickly and with less paperwork than at a bank. And people with good credit are able to lock in lower rates -- often 8% to 12% -- than they would otherwise have to pay on credit cards or unsecured bank loans.

INDEPENDENT STREET BLOG

Have you used peer-to-peer lending? Read the latest post, and share your thoughts. Person-to-person lending is a small but fast-growing corner of the Web economy. New sites are jumping in, including Virgin Money USA, majority-owned by Sir Richard Branson's Virgin Group PLC. Roughly $100 million in new P-to-P loans was issued in the U.S. last year, a number that is expected to jump tenfold by 2010, according to Online Banking Report. Recently, some larger financial institutions have begun to take notice of P-to-P lending...

(article continued at WSJ.com)

Forget Mailing Your Keys to The Bank: Live in Your Home Free (at least for a while)

noreply@blogger.com (Blogging Man) — Thu, 06 Mar 2008 16:34:00 +0000

I don't normally re-post blogs, but I found this posting from the WSJ and found it particularly interesting. In fact, I have some experience with this area as I know someone in my local market that has executed the home squatter strategy to near perfection over the last few years.

This person owns a second home (it's actually a condo on the beach) and has had foreclosure proceedings started on him on 3 different occasions. Each time, he's taken the bank for a "rent-free" ride for 9-12 months. During each of these processes, he negotiated a "new deal / payment plan" with the bank, which ended in dismissal of the foreclosure proceedings. The net result of his actions has been effectively free rent for nearly 3 years (e.g. no cash payments) on his second home since the back payments, interest and penalties/fees were simply added to his mortgage balance (which he may or may not make payments on going forward). I suspect he'll try this again in a few months, and maybe the bank will wise up (doubtful). Or, maybe he will just continue to live in the condo as long as he can continue to play this game (in reality, he cannot afford this second home without playing this game with his bank).

With so many folks upside down on their homes (their home is worth less than their mortgage balance), one might expect to hear about more of these cases going forward. Let's hope that the banks will show a little compassion since many folks in foreclosure today are not gaming the system (per the story above), but genuinely need their help to keep their families in their homes.

Here's the blog posting and a link to the blog (there are some interesting comments on the actual posting, so I encourage you to visit).

Why Walk Away? Mortgage ‘Squatters’ Stay in Their Homes
by Lauren Baier Kim

We’ve written about homeowners who are walking away from their homes instead of paying back their mortgages as home values fall. But why give up your house when you can continue living in it without paying a cent? That’s essentially what some people are doing, according to a recent post on the Big Picture blog.

The blog shares the observation of one South Florida developer, MW, who says that in “the very best neighborhoods of Florida,” owners of houses valued in excess of $2 million have ceased making mortgage payments and are essentially squatting in their luxury homes. And thanks to a backlog of foreclosure cases in the local courts, they may be able to live in their home for months, maybe even years, before the banks can take action (many have also quit paying property taxes and insurance, the post notes).

The post reminds us of a December Journal article written by Amir Efrati about a family in Cleveland who fought off foreclosure in the courts and continued to live in their home for 11 years without forking over a single mortgage payment. Ultimately, the bank foreclosed on the house, the family was evicted and the house was sold to another family, Mr. Efrati says.

There’s a similar tale on Bloomberg.com of a Boca Raton, Fla., resident who hasn’t paid his $1.5 million mortgage since 2002, but still has ownership of his home because the bank can’t prove that it owns the mortgage note. The article says that homeowners across the U.S. have seen foreclosure cases against them dismissed because of lenders’ inability to prove ownership of mortgages that have been pooled into securities and have changed hands multiple times, sometimes with poor documentation.

Of course, many people stay in their homes for a year or two while awaiting eviction. But with so many folks holding negative equity in their homes, should we expect to see more of this? — Lauren Baier Kim

$100 OIL! How to Cope With $3+ Per Gallon Gas Prices

noreply@blogger.com (Blogging Man) — Tue, 26 Feb 2008 22:20:00 +0000

Wow, oil prices continue to soar and there is not much we average consumers can do about it. I used to spend $30 every week to fill my car up and now it's running me more like $50 each time (that's over $80 more per month and about $1,300 per year!). I don't know about you, but this is taking a serious dent out of my pocketbook and I don't like it. Well, there are lots of ways you can help reduce the impact high gas prices on your wallet.

For example, I recently signed up for the Chase PerfectCard (APPLY NOW), which offers 6% cash back on ALL GAS PURCHASES for the first 3 months and then 3% cash back thereafter (that's nearly $0.20 per gallon). For me, that's nearly $60 in free gas every year (and it is free since there is no annual fee). As a bonus, you 1% cash back on ALL OTHER Purchases and a 0% APR for 6 months as well.

In addition to financial tools like the one above (it's first on the list since it's the easiest one to do, by far), here are some tips for reducing the impact of high gas prices on your wallet:

Observe the Speed Limit: In addition to avoiding a nasty speeding ticket and the risk of getting into an accident, driving the speed limite can also save you big bucks on gas. As a general rule, for every 5 MPH you drive over 60 MPH, it is costing you about $0.20 per gallon! If you have a lead foot like me, it could save you $0.50 or more per gallon.

Don't Drive Aggressively: While it might make you feel good to stomp on the gas pedal to fly by the one car ahead of you in town or on the Interstate, it won't really get you to your distination all that much faster, but it will cost you a pretty penny. Lots of accelerating, speeding, and braking will cost you BIG MONEY when it comes time to fill up. One estimate puts the increased cost at up to 33% (or more than $1.00 per gallon!). Since most of us are not THAT crazy on the road, the cost is more likely $0.25 per gallon, but that adds up, trust me.

Maintain Your Car: Keeping your tires properly inflated, changing your air filter regularly and using the right grade of motor oil can save you over $0.20 per gallon. These are things you should be doing anyway as they will extend the life of your tires and your car thereby saving you a ton of money anyway.

I know this stuff can be kind of boring, but by signing up for the Chase PerfectCard (Click here to APPLY NOW), observing the speed limit, driving more carefully, and maintaining your car, you can reduce your gas bill by over $0.85 per gallon or over $350 per year (much more for you power drivers out there).

Of course, you could always buy a Prius...

Credit Card Delinquincies SOAR! Prosper Loans to Follow?

noreply@blogger.com (Blogging Man) — Mon, 25 Feb 2008 19:53:00 +0000

A recent report published by CardTrack.com shows that consumer credit card delinquencies have soared in the last few months. According to the report, delinquincies have reached 5.4%, up from 4.5% just 1 year ago. Not surprisingly, total credit card debt has increased a qhopping 315% since 1989 with the Federal Reserve estimating total consumer revolving debt of over $2.5 trillion (that's with a "T").

So, what does this mean to your Prosper loans? Well, naturally, I would fully expect to see DQs accelerate in the coming months. Of course, for those lenders that have been paying attention, this is on top of the already very high DQ rates on Prosper. For example, about 5.2% of 12-month old AA loans (the best Prime loans you can make on Prosper) are late on Prosper (this is nearly equal to all credit card DQs!). If you ventured into the A-rated loan category, nearly 10% of these loans are late (again, only loans that are 12 months old as of this post). B, C and D-rated loans get even worse at 13.4%, 20.7% and 23.3%, respectively.

One can only hope that Prosper will start performing more like the credit cards, which post a meager 5.4% DQ rate as of February 2008. Be well and visit us often.

Free Tax Software and Filing: File Your Taxes For Free at IRS FreeFile!

noreply@blogger.com (Blogging Man) — Fri, 01 Feb 2008 21:25:00 +0000

Did you know that you can get free tax software on the Internet? Through the IRS’ FreeFile program, if your adjusted gross income (AGI) is less than $54,000, you are eligible to utilize software from a long list of partner companies for free.

Online tax software, which is provided free through the FreeFile program, provides a long list of benefits to tax filers including access to your refund money faster (through direct deposit), save gas and a trip to the post office, file any time any day at any hour (up until the deadline, of course) and save paper! You will also get all of the benefits of tax software including accuracy checks, notices of potential errors on your forms as well as confirmation that the IRS received your return (not available if you mail your paper return via the USPS).

If you make more than $54,000 in AGI, you should still consider utilizing low cast tax software. We’ve provided some information on several popular services on our Tax Software page. (link to tax page).

Learn more about the IRS FreeFile program by visiting the IRS website.

What Does the New $150 Billion Fiscal Stimulus Package Mean to You?

noreply@blogger.com (Blogging Man) — Thu, 24 Jan 2008 20:46:00 +0000

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Today, Congress and President Bush announced a tentative agreement on a fiscal stimulus package to help avoid what many believe is an impending recession. So, what does this package mean to you? Well, there is something in this package for most everyone except for folks that make more than $75,000 (singles) or $187,000 (married couples, although the rebates are phased out beginning at $150,000 of income). Here's the quick and dirty:

Approximately 117 million American families will get some tax rebate including low income workers that currently pay no income tax (although they do pay payroll taxes).

Individuals would get rebate checks of $300 to $1,200 depending on a number of factors including income level and number of children in a household. Low-income workers who earned as little as $3,000 and paid no income tax would also get rebates. Workers who paid income taxes would receive up to $600 in rebates, or $1,200 for a couple. Taxpayers with children would get an extra $300 per child.

Businesses also get in on the action; they would get a 50% write-off on capital investments made in 2008. This is likely to help create some number of new jobs this year, so say the politicians.

Finally, the package provides for the definition of a "Jumbo" mortgage to change such that mortgages that are the larger of $417,000 or 125% of the median home price in the area. This is significant because it will reduce the costs of homeowners who need to take out a jumbo mortgage to pay for a loan (thus helping the flagging real estate market).

All in all, this looks like a reasonable plan. I am sure some will argue that folks that don't pay income taxes should not get a rebate (fair point). The other side will argue that these folks need the help the most. Whether you like this package or not, it should help give the economy a short-term boost.

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My Prosper Portfolio Performance (CY 2007) - Ugh!

noreply@blogger.com (Blogging Man) — Tue, 22 Jan 2008 21:34:00 +0000

Well, my first year of Prosper lending has come to a close (actually, I began lending in on March 27, 2007, but year end is a good time to reflect). After many countless hours spent building up P2P-Loans.com and investing over $16,000 in Prosper, here are my net results for 2007:

Interest income received: $699.25
Late fee payments received: $0.39
Service fees paid: ($38.67)
Referral rewards collected: $100.00
Group Leader rewards rec’d: $307.57

Gross Income (2007): $1,107.21

Less: Loans >1 month late: ($686.88)

Net Income (2007): $420.33

Assuming an average portfolio of $13,000 (this is approximate, but close), this is a paltry 3.2% return over slightly more than 9 months. Adjusting for a 12-month period, this amounts to slightly more than a 4.0% return on investment. If I exclude the $407.57 in referral and Group Leader rewards I just about break even on the year (i.e. if I only look at the performance of the loans I invested in).

But, my experience was actually reasonably positive if you spread the numbers and look a little deeper into my loan portfolio. The primary driver of the losses I expect to take are in two loans (with a small loss from a 3rd $50 loan). It is noteworthy that I only expect to take the losses noted above as the loans mentioned are 3 months past due, hence I expect them to default. To put this into perspective, I made over 120 loans in 2007 and all of my expected losses are coming from just 3 loans (I invested $600 in two of the loans that I expect to default). Thus, if I had made a $50 investment in each and every loan I closed, I would be out a mere $150, which would put my total return up in the high single digits (which is actually pretty attractive, in my opinion, and in line with what Prosper is marketing to new lenders). I do expect that there are some loans in my portfolio that will turn bad down the road, thus I reserve the right to edit this commentary in the future.

So, given all of this data and commentary, what have I learned this year as a Prosper lender and group leader? 1) Remain disciplined and invest a consistent amount in each loan that is attractive to you (don’t double, triple or quadruple down if you really like a particular listing), 2) Don’t waste endless hours trying to be a group leader unless Prosper agrees to reinstate compensation (I earned about $1 per hour this year as a group leader) unless you are doing it out of the goodness of your heart and unless you are willing to accept that Prosper likes to change the rules without any notice from time to time; and 3) BE CAREFUL as we are facing some serious economic headwinds in 2008 – I expect defaults to rise on Prosper as they are rising in other areas of the financial services sector (link to article on rising credit card defaults).

If you simply don’t want to go through the hassle of reading listings and want to earn a certain (albeit lower) interest rate on your month, visit our Best High Interest Checking/Savings accounts page to see what is available (you can earn 5%+ in an FDIC insured account, for example).

Good luck and I wish you the best for a Prosperous New Year! And, thank you for supporting P2P-Loans.