A comment on a recent post, How do I come up with $2600 ASAP, suggested getting a prosper loan. As readers of my blog probably know, I already have one! I think I got a pretty decent rate, considering I had a D rating, at 14.94%.
I used the first loan to consolidate credit card balances with up to 29.99% APRs. Words can only begin to describe what a help it has been. I have reduced my monthly finance charge by more than 66% and have since reduced my personal debt by over 23%. Now my highest interest rate is 19.99%.
So Prosper Lenders, how would you feel about refinancing a "high risk" loan to a borrower that has consistently paid early and often (i.e. three additional payments in the first 5 months). My income has since gone up and my DTI has gone way down but I'm pretty sure my credit score hasn't changed much yet. Plus there are a couple new inquiries mostly due to transferring balances at low rates. (See full explanation in my Score Watch post.)
I put "high risk" in quotations because there is no risk (short of me falling dead sometime between now and next year). Nothing in this world could stop me from getting out of debt. Not only do I have a job I love with recently increased job security, I also have a second job with flexible hours that I could increase at any time. And if all of that somehow failed me, my boyfriend is a hiring manager at a restaurant. I would go back to waiting tables before I'd risk damaging my credit.
I'm thinking it might not be a bad idea to send a quick note to my current lenders asking them to consider bidding on a lower rate loan. By lower I'm thinking like 12% would be great. I'd use the loan money to pay off the original loan plus the extra $2600 on my high interest card. With all of the stories I keep hearing about defaults it seems like they might be happy to have someone they know (from experience) would pay.
What do you think?
Would you consider refinancing a current borrower at a lower rate?
Not saying that its my best option, just a thought...
Thanks to brip blap for including this post in the Carnival of Peer-to-Peer Lending. Thanks also to Pro Latter for linking from the Prosper Blog.
Monday, December 31, 2007
Hey Prosper Lenders! Question from a Borrower...
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5 Comments:
I would be careful about doing a second loan that is substantially higher than the first as this is a popular method used by scammers e.g. get a small loan, pay it off nicely, then get a huge loan and default on it. However, if the second loan is about the same as the first, I would consider the previous prosper loan history an added value. Another question is how much of the original loan has been paid off. 100% or close to 100% is good. However, if the new loan substantially increases the debt, it would be seen as a negative. It is important to note that prosper lenders are as junior as they can be. Thus if a borrower goes out and gets additional loans later on, it puts them at a greater risk still. As far as using a loan to pay back another loan, I have seen people claiming their intentions to do that and then not doing it.
@ Jacob -- My original loan was for $5k back in July. The principal is down to about $3900 right now.The most I'd ask for would be $5555 (current balance + $2600 for high interest card + 1% fee). Close to 100% but still possible that it could sound like a scam. I never thought about it from that perspective.
I'd ask for just the $2600, but that will make my original loan my highest interest liability -- therefore the target for my debt snowball. If anyone is going to profit from me, I'd rather have it be the prosper lenders than the cc lenders. It would be nice to make prosper one of my lower rate debts so that it made financial sense to push it to the end of the list.
Just a thought, thanks for the input!
Amanda, I just found this post via the p2p lending carnival. Is your total debt less than when you originally took out the Prosper loan?
Also, this post is three weeks old by now - have you already made a decision?
I'd consider bidding on a new loan for you. Another option would be to refinance on Lending Club. I've noticed at least two Lending Club listings where someone has refinanced their Prosper loan on Lending Club.
Andrew from Prosper here... congrats on making so much progress with your debt. Regarding a second loan, you won't be eligible until your first Prosper loan is at least 6 mos. old, but once you reach that point, go through the process of creating a new listing, see if your credit grade has improved, and if it has, go for it.
I also can't recommend highly enough getting your friends/family/coworkers to give you a strong endorsement and, most importantly, a $50 bid. Even a few bids from friends can significantly increase your credibility on Prosper, and get you a lower rate. For example, I got a $10k loan at 5.54% because I had 11 endorsements and 4 bids from friends. (Disclaimer: I am an employee - your mileage may vary.)
Good luck!
Hey Amanda -
I came across your blog the other day, I must say, I admire your determination to pay off your debt! My girlfriend will be finishing up her master's degree soon, which means we both have started to prepare for the long haul :)
Anyway, I was just wondering if you were thinking anymore about opening a new loan with Prosper. I agree with jacob that it is possible your listing could be seen as a scam in some corners. But if you list your me-vs-debt blog in your loan listing, I am sure lenders would flock to your blog, read more about you and have no worries about risk.
I'd me more than willing to endorse you and put my money where my mouth is. You obviously have your act together and paying down your debt at high interest rates is completely UNACCEPTABLE!! :) :)
I look forward to your future entries.
Mike
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