Archive for August, 2008

If you are a first time loan seeker, whether for home, auto or any other personal need, what do you need to do or know? What do loan institutions look for when assessing potential borrowers? There are many sectors of your personal finances that you need to delve into before you start your loan search and here are a few good notes…

Know Your FICO

That’s your credit score and that’s where most loan inquiries start. No one can pull the report without your permission, so make sure all information is current/right and all errors corrected. Remember, the number of inquiries (if multiple) can actually make your score go down. So correct it and know it before approaching a loan institution. You can order for free credit report from AnnualCreditReport.com

Show Responsibility for Your Finances

Know your budget, the credit card debt, the monthly payments to other loans and every aspect of your personal finances. Be ready to present this in a one-to-one loan application face-off, as not to discount the human factor in showing preparation and good faith. If a loan officer thinks your application is credible, most likely you can get the loan.

Don’t Let Debts Accumulate

Pay your existing credit card bills and loan repayments ON TIME each month – this will help to show potential lenders that you are in control and more likely to make future payments. Better still, try to pay off any outstanding amounts on credit cards completely. Even in difficult credit card debt situations, there are solutions if you just keep communicating or negotiating with the card providers. Consumers with good credit can go to Propser.com and post a listing to consolidate their debt and often times receive a more favorable rate than most banks and credit card companies.

And lastly, as with presenting yourself for a job interview, make sure you put your best financial face forward before applying for a loan (and for goshsakes make sure there is no spinach stuck between your financial teeth).

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Steve McDonald is a freelance writer and Prosper member since October 2007.

The Olympics are upon us and I for one have been looking forward to this event for some time — the purest form of athletic competition and a political tool. Will the issues around censorship and human rights get the attention they deserve?

Get Fit Slowly (the fitness and health counterpart to the wildly popular Get Rich Slowly) discussed our Expanding Waistlines, Shrinking Wallets.

Lazy Man asks Is Eating Organic Food Worth the Money?

Brip blap has 5 Signs Your Job Sucks

GenX Finance offers The Benefits of Diversification: A Look Back at the Past 20 Years of Stock Market Performance

Rich Credit Debt Loan discusses Smart Credit Card Debt.

Cash Money Life asks Do We Need Another Stimulus Check?

At The Digerati Life you are asked How Would You Grade Your Money Management Skills?

Want to be a part of this round up in the future? It is easy… leave a relevant blog comment and/or link to a Prosper blog post in a relevant way from your own blog. Then, when I stop by your blog to see who you are, be sure to have fresh content as most of the posts that will be highlighted here will have been published in the last week.

Plus blogs that send trackbacks that are approved will be featured in the sidebar while their trackback remains one of the last 5 received.

While this will not guarantee that you will be included it will certainly get my attention… The blogs featured here already have my attention. Will you be next?

RateLadder is a Prosper lender and has been since July, 2006. He has a passion for p2p lending. He owns RateLadder — My Prosper.com Journey and other P2P Lending Adventures, P2P No Bank the P2P Blog Aggregate, and ProProsper — Professional Tools for Prosper Lenders featuring SQL access to Prosper data.

Starting a business is a daunting task – but for many it is a desire to follow a dream. To embrace risk…and the possibility of failure. It’s impressive how many people start businesses, follow their dreams and take those risks. And we see it everyday on Prosper – interesting stories about members’ business ideas.

As I glanced through the site I was humbled by the number of members driven by an idea - the possibility of becoming their own master and provide a service or product to others. You can search by Business Use and read about some of the business uses – funding a trade show booth; expanding a store, expanding a driving service, opening a pizza store and so on.

One of our borrowers, Lara Miller, started her business just a few years ago. Lara has had three loans with Prosper, one paid off and two current. She is a successful designer and her business continues to flourish. We love to read about our community members who have successfully launched a business, put themselves through college, gotten out of debt and many other stories.

We featured Lara in one of the Prosper commercials. You can also learn more about Lara by reading her story or watching the behind the scenes video.

Lara is now in the midst of generating more buzz by entering an interesting competition from www.ideablog.com  where you can submit your idea and let the community vote. Only eight contestants are selected to be in the monthly competition which lasts about 22 days. The top two winners then go on to enter into the monthly showdown. Every month one winner is selected and wins $10,000. The community decides the winner by voting for their favorite idea.
You can check out Lara’s idea here Lara Miller’s Wear It Your Way Sustainable Women’s Wear which focuses on green issues and reinforces the need to wear sustainable materials.

Acknowledging the impact that we have on our environment, my collection mixes hand-loomed “convertible” knits and tailored wovens made of sustainable materials for a contemporary customer. I have tripled my sales in one year. Please help me manufacture my orders as I continue to grow the business.

You can also check out Lara’s website at http://www.laramiller.net

Good success and planning to all our Prosper members with businesses of their own! If you are looking for a personal loan for your business, apply for one on Prosper.

Snowflaking is a way to save on interest. The general principle is to pay in a small extra amount towards a loan every month, a $5 snowflake here, a $10 snowflake there starts to build into a snowball which, if rolled downhill, compounds. These small amounts might not seem like much, but they definitely add up.

This process is traditionally used for reducing credit card payments but it’s also viable for a Prosper loan since any snowflake you put in will reduce the overall interest you’ve spent for the entire term of the loan. You will also end up paying it off early.

You will see below that that snowflaking is more valuable the higher your interest rate goes.

For example:
Let’s look at a very simple example of how this process can save you money. Let’s say you got the minimum amount possible for a Prosper loan, $1,000 and let’s say it was at 9%. Let’s snowflake at a 1% rate, meaning that you put in an extra $10 (which is 1% of the loan amount) a month towards the principal, and see what happens:

• Your 36 month loan term has been shortened to 27 months
• Your total interest paid has been reduced from $144 to $106, a savings of $38 which adds up to a savings of 27% on interest
• That’s 3.8% of the $1,000 principal

It may not seem like a huge amount, but if you pay a higher rate see below, it gets better.

Scaling it out
Now, a $1,000 loan is not a lot of money, and $10 is not a lot extra to pay in, but if you scale the 1% rule up you save a lot more money. If you borrowed $10,000 and snowflaked at a 1% rate ($100 extra a month) you’d save almost $400 in interest payments! Scale it up to the maximum loan amount for a Prosper loan of $25,000 and, at 9%, you’d save $1,000 in interest - nothing to sneeze at.

Scaling it up
I mentioned it gets better. We looked at how much you can save on a Prosper loan by looking across different loan amounts. What happens if we look vertically at different interest rates as they go up, how much more will you save?

Turns out a lot. Let’s start with that $1,000, and let’s say that interest rate is 25% instead of the 9% rate used above:

• Your 36 month loan term is still shortened to 27 months
• Your total interest paid has been reduced from $431 to $309, a savings of a whopping $122 which adds up to a 29% reduction on interest
• $122 on $1,000 is 12.2% of the principal!

Now that we are scaling these calculations up to higher interest rates, let’s scale it out again for higher loan amounts:

At $10,000 and 25% interest, the 12.2% still applies, so you’ve saved $1,222 in interest payments. That’s a lot of money. At the $25,000 maximum the savings are a whopping $3,050!

The 1% rule
I like the 1% rule because it’s easy to calculate and easy to do. No matter how much you borrow and no matter how much your interest rate, a 36 month Prosper loan will always be reduced to 27 months by simply paying 1% of the loan amount on top of your regular payment.

GenX Finance offers How to Tell if You Have a Bad 401k Plan.

Rich Credit Debt Loan tells you How to Keep Cash Flow Coming In.

LazyMan covered a recently reemerged story in Extreme Foreclosure!.

The Digerati Life laments Lost Money: How Money Drains Add Up To $175,000 In 10 Years.

Cash Money Life discusses the need to Get It In Writing.

Brip blap has a desperate addiction – political news is a disease.

Mrs. Micah is discussing The Logistics of Snowflaking Extra Payments

Prosper Facebook Application Reaches 5,000 Users

A rare solar eclipse was caught on camera from Siberia…

Want to be a part of this round up in the future? It is easy… leave a relevant blog comment and/or link to a Prosper blog post in a relevant way from your own blog. Then, when I stop by your blog to see who you are, be sure to have fresh content as most of the posts that will be highlighted here will have been published in the last week.

Plus blogs that send trackbacks that are approved will be featured in the sidebar while their trackback remains one of the last 5 received.

While this will not guarantee that you will be included it will certainly get my attention… The blogs featured here already have my attention. Will you be next?

—

RateLadder is a Prosper lender and has been since July, 2006. He has a passion for p2p lending. He owns RateLadder — My Prosper.com Journey and other P2P Lending Adventures, P2P No Bank the P2P Blog Aggregate, and ProProsper — Professional Tools for Prosper Lenders featuring SQL access to Prosper data.