Lower Your Interest Rate: Credit Card Consolidation with Prosper
Thursday, January 17, 2008

Credit card consolidation loans are among the most common types of lending taking place today. Often times I read about people that have multiple cards at 20% - 30% interest rates. Even for cards at lower rates, depending on your credit, getting a consolidation loan is a great idea, and Prosper can help.

If you have a significant amount of credit card debt things can begin to spiral out of control with bills piling up. The money going to finance charges on credit cards eats up income needed for other important things and as you pay small amounts every month, it can look like you will never get out of credit card debt. This is why a credit card consolidation loan thru Prosper can help.

Prosper is an online marketplace like Ebay, except for loans. You post a loan request and people bid on your loan until its funded. If your loan gets funded early, the interest rate can go down as lenders start to bid lower and lower on your rate.

For a variety of reasons, its hard to pay off your balances every month. While credit cards can be convenient and credit card providers are very willing to give you cards, the interest rates they charge are often much higher than average.

If you have excellent credit, you can get a Prosper loan from as little as 7% or 8%. If you are paying 20% interest now, you can save a lot of money and pay the balance off much faster.

For example, if you owe $10,000 and are paying 20%, you are paying $2,000 a year in interest. Just to service this debt, you must pay almost $170 a month in interest! You have to pay more just to lower the balance.

But let’s say you got a Prosper loan at 9% to consolidate the debt, that would mean you would only need to pay $75 in interest, a savings of almost $100 a month in interest. This can have a huge impact on how quickly you get out of debt.

Prosper loans are amortized over 3 years. You can make payments any time you want, and you can pay the loan off early without any extra fees. Prosper is also a very safe place to borrow money.

Posted by ProsperBlogger 5:25 AM 2 comments  

Labels: Borrowing, Credit Grades

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For Prosper Lenders, Why Credit Grade and Income Matter
Wednesday, January 2, 2008

Digging into the performance metrics on the Prosper.com website, I wanted to determine exactly how the borrower’s income and credit rating affected the potential for default. The result was more revealing than I had expected.

Simply put, a Prosper loan with a credit grade of AA and an income of over $100,000 has never defaulted. Beyond that, there have only ever been 2 instances of a loan ever being 1+ month late. Pretty secure, I’d say. These stats coupled with the fact that the average AA/$100k+ income loan averages an 2+% better ROI than a loan with AA/$0-99k and you have a significant difference and a decent search criteria.

Now, we are dealing with a relatively small segment of loans here, there have only ever been 225 such loans funded, but statistically, 225 is certainly enough to derive a conclusion from. And better than that, as of this article being posted, there are 15 loan requests currently actively available to bid on.

Think of it this way, how many other sets of criteria can you think of within Prosper’s advanced search that will mitigate your risks to this low a level? When you consider the average interest rate of AA/$100k+ income loan is 10.75% you have a stable loan category from which you are almost certain to get a solid return on investment.

Posted by ProsperBlogger 6:43 AM 0 comments  

Labels: Credit Grades, Lending

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