– Applying For A Loan

Everyday GoddessI’d like to welcome Liz from Everyday Goddess as my first guest writer here. She has put together some excellent information about her experience of setting up and placing a loan request on auction (I also highly recommend her blog if you’re in need of getting away from personal finances for awhile). Enjoy:

As a personal blogger, I blog about my romantic life, my childhood traumas, my bad days and the band that’s playing downtown this Saturday. I’m sure a whole lot of it seems really, really intimate. But what’s truly the most intimate, what I find most difficult (read: terrifying) to blog about, is my finances.

See, I’m not in the best financial situation (read: debt-ridden). I struggle to make good choices and to learn from my mistakes. I have credit cards and loans and school debt. Sometimes, I screw up. Sometimes, I have a small financial success. And I blog about it because I’m betting that I’m not alone.

Sometimes, I blog about it because high-interest rate credit cards are evil. Oh, I’ve stood at the edge of the whirlpool. In fact, it’s still right over there.

The trick, of course, is lower interest rates. You know, those great rates all those financially solvent people get? They make it MUCH EASIER to actually pay off debt. Ever so slowly, I’ve been trying to roll all my debt into lower-interest rate loans. a good place to consolidate credit card debt?

So I was particularly interested in

The premise being, individuals funding individuals. Adding a level of personal connection. Bypassing the corporate behemoths.

I decided to check it out, and I decided to give it a try. As a borrower, of course.

The first thing I did was extensively check out the site. It all seemed simple enough. Most important, I learned that the loans are all three-year loans. So you have to borrow an amount that you can afford to pay off within three years. I also did the basic site registration (just setting up a user name/password). And I learned that payments are made through automatic monthly deductions to your bank account. Cool.

Next, I explored the “groups” on Prosper. This is one of their basic concepts. That people will form groups, and overtime, groups will gain a good payback reputation and therefore earn lower interest rates. Also, groups will provide a personal connection which creates social pressure for people to pay back their debts.

That all makes sense, but I couldn’t really find a group. First of all, it’s not like I know anyone in any of the groups. Still, maybe if there was one for my school, or a professional organization that I belong to. But it’s new, so there’s not, and I’m not interested in forming my own either. Further, I thought, a good group leader would probably call me, and I didn’t want to talk to anyone! A group that just accepted me without contact – probably destined to not be a good group. This is also why I didn’t want to start a new group. Because to do it right, I would want to really talk to anyone before accepting them, and I don’t want to deal with that.

So, I decided to stick my toe in the water on my own. Onto the real registration I went. Social security number. Driver’s license. Income.

And before long, I had a big, fat “C” rating, and I was looking at my 27% debt-to-income ratio. “Wow. I totally suck,” I thought.

To make matters worse, my highest financial priority is to roll a debt that is currently at 10%. There’s an account opened long ago! See, it has an ex-boyfriend on it, and it’s not his debt. But because my situation is much worse than it was back then, any opportunities I’ve had are at higher rates. They’ve closed the account for me, but they won’t remove his name (read: his liability). So, I chip away at it every month. And I’ve got three more years to go.

I took my “C” rating, and my hefty ratio, and I decided to lead with that. I like to aim high.

Creating the listing was quite easy. I even went back and forth between the various steps a few times to change things. At first, I listed at 10%, but with the Prosper fee, it became more like 10.6%, so I went back and changed it to 9%, so that it’s closer to 10% in actual. You’re given the opportunity to add pictures, but I wasn’t sure how I felt about putting a picture of myself up with it, so I used a dragonfly graphic. (I did wonder if pretty girls get better rates!) Best of all, you get to write out your request and talk about what you need and why, etc. I thought about linking to my blog – kinda like, hey, you’ll know where I live – but, for this go ’round, I didn’t. Honestly, it was a bit of wanting to stay more anonymous on the site. Of course, then I went and blogged about it on my not-private blog. That’s personal bloggers for you!

So my dream listing is up. As of writing this, I have a nibble! And twelve days to go on my listing.

The site is brand new, and I really like that. Getting involved and jumping on and participating helps get it rolling. Plus, if I can get a loan at this early stage and start paying on it, as the site matures, I assume that my good payment habits will look good for me. I can build a history. Maybe join a group. And just like on ebay, I got my user name locked in. Yeah, baby!

Finally, it is my hope that someday I will turn the tide, and I will have the ability to be a lender on Prosper. Because it’s brand new, and already it feels more like people than behemoth.

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12 Responses to – Applying For A Loan

  1. davis says:

    If you don’t get the loan fully funded this time, I would apply again using your real photo. As sexist as it sounds, I bet you get more funding with it than with the dragonfly.

  2. frank says:

    Hey Liz,
    I was poking around technorati beforehand and I came across your post about trying out prosper. Best of luck you, and I hope prosper makes you more prosperous 🙂

  3. lpkitten says:

    great post – i have been surfing around prosper and find it to be very intriguing. one way you might get more bids is by joining a group. being part of a group will increase your credibility and make your loan more desirable to lenders (so they say).

    also, if you feel comfortable, i agree you should probably post your picture, mostly because people feel more connected with a face than with an icon. you can also add a link to your blog. the more personally connected they feel to you, the more likely they will be to give you a loan.

    good luck!

  4. mapgirl says:

    I was really intrigued by your personal story so I went a looked. You might want to join the Personal Finance Bloggers group since you are affiliated with Jeffrey’s blog. He has a lot of dedicated readers, and on that association alone, I’m sure there are folks that would bid on you.

    I don’t know if I’d put a picture any different from the one already on your blog, though I have to admit when I saw the photo here at first, I thought it was a stock photo until I saw it on your personal blog.

    Good luck though! It sounds like a really interesting concept and I’d like to see this work. I could see myself as a lender or borrower.

  5. pfadvice says:

    You might want to join the Personal Finance Bloggers group since you are affiliated with Jeffrey’s blog. He has a lot of dedicated readers, and on that association alone, I’m sure there are folks that would bid on you.

    I just want to make it perfectly clear that although I am a personal finance blogger, I have no association with the group, am not a member of the group or involved in its creation in any way – I don’t even know who runs it.

  6. lizriz says:

    Thanks everyone for the comments. I agree that the picture and the blog link are likely good to post with a listing.

    I love that mapgirl thought it was a stock photo – I think that makes my friend’s cat a model! 🙂

  7. mapgirl says:

    Savvy Saver started a group too.

  8. RS says:

    This service would make me a little nervous being on either side of it. Loaning money to strangers is pretty scary. I am interested to see if it will take off here.

  9. jim says:

    Good luck to you Liz, I’m with RS, I’d be wary of lending to a stranger esp. with the lack of protections in place on Prosper’s end.

  10. Wilson says:

    Hey Liz, good post. It’s nice seeing one person’s first-hand experience of the service. Although there have been alot of blogs about Prosper, few people have ventured forth to try the service. I’d agree with RS ^^ on the fact that since the loans are unsecured, it can be a bit scary, especially from a lender’s side, and the fact that they won’t disclose a borrower’s information to their lender makes it even more risky for a lender. But then again, I suppose eBay and PayPal were scary concepts when they first came out. I think Prosper could fill a much needed niche as the ‘net-savvy’ group moves toward social and peer networking and viral marketing, preferring to deal with other people than big corporations. Could you do a follow-up post if you succeed in the loan? I’m sure many people are in a similar situation but have not taken the first step in trying out this service due to the ‘newness’ of Prosper.

    Furthermore, has anyone here had any experience as a Lender on Prosper? I’d like to hear more about the site coming from the other side of the coin as well.

  11. Rich says:

    I became a lender on Prosper soon after I read the NY Times article on the service. I am not sure the service will take off, but it has the potential of an eBay to really transform a market. I only invested a little, really on a lark. You can place a “standing order” to bid for you in small increments ($50 minimum) to spread risk among many borrowers. My strategy is to lend only to high-risk borrowers (credit grades C and worse). The high risks comes with the potential for high reward — right now my loans are at an average rate of 13% — try getting that at your local bank.

    Liz the interest rate you asked for is too low for a borrower of your credit grade.

  12. DocProsper says:

    Greets Liz,

    If you looking for a group 🙂 I’d love to have you in mine, for several reasons.

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