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SocialLendingJournal.com

The investor’s resource for social and person-to-person finance.

Props to Eric over at Eric’s Credit Community for providing Prosper.com data to help us all build standing orders that work.  If you haven’t used Eric’s data to put together an investment strategy and understand your current portfolio, you aren’t taking full advantage of data-driven investing.

 I most recently took advantage of the Borrower by Segment report to ban my Propser standing order from bidding on certain high-risk professions.

The key to good social lending is to take advantage of both data-driven investment strategy and more holistic ideals that I mentioned in Are your borrowers doing the right things?

 Has anyone done any more advanced analysis or aggregation of the data at Eric’s CC?

It’s easy to get caught up in credit profiles, debt ratios and delinquency counting when making lending decisions.  Often, I think lenders ignore some of the broader, more holistic repayment factors.  Lenders may be doing themselves a disservice by focusing so much on the numbers and not asking themselves the simple question: 

Is this borrower moving toward financial health by taking a loan?

When I put together standing orders, I only bid on lenders that are consolidating debt, investing in a business, or their education.  I see home improvement loans and car loans as liabilities, not assets, and lenders shouldn’t be putting their own financial health in the hands of someone who is only acquiring liabilities that they can’t afford.The outcome of debt consolidation, business or debt consolidation loans are as follows:

Debt consolidation - Generally, a smart borrower can lower their interest rates on outstanding debt, decreasing their liabilities and supporting their financial health.

Business loans- While business loans are risky, we can only assume that business borrowers are maximizing their capacity to take a calculated risk in their business, providing the lender a second layer of risk mitigation.

Education loans- While, as many people know, a college degree doesn’t guarantee a higher salary, it is certainly a step toward greater financial health.

 So ask the question, are borrowers doing the right things or the wrong things? 

Celent research shows online loan origination has increased over 4 major loan categories:

Retail mortgage
Home equity
Credit card
Auto

Online Loan Origination and Rise Across All Loan Types

 

 

 

 

 

 

 

 

 

 

Additionally, the USA today reports:

The market for the loans is still relatively small but growing fast, according to Celent, a research firm. Celent projects that $5.8 billion in peer-to-peer loans will be made in the USA by 2010, an 800% leap from the amount this year.