Default Rates broken down by Credit Grade and DTI Buckets

This post is in response to a post I saw in the Prosper Lender forums requesting for stats on defaults vs. DTI. To obtain this data, I have queried all the loans that have been paid in full, defaulted, or repurchased from 2/1/2006 – 7/19/2007. The query ended on 7/19 because I wanted to give sufficient time for loans to default. Buckets have been broken down based on credit grade and the DTI range. The chart was cut off at 59.99% DTI because there was insufficient amount of data points but the raw data is in the tables below if you are interested in taking a look at them. Please bear in mind that these numbers do not include loans that are still in the repayment phase. That is why the numbers seem exaggerated. You can hover over each point to see the percent default rate.
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The Top 1000 Words in the Description of Funded Listings vs. Non-Funded Listings

I thought it would be interesting to take a look at the word choice in the Description of funded vs. non-funded listings to see if there is anything significant. It could possibly reveal trigger words that appeal to lenders (or repulse them). To obtain this word ranking, I queried all the completed and expired listings from 2/1/06 to 11/2/07 and counted the number of times each word appears. Words that were less than 5 characters were filtered out so that we can see some more interesting results.

To see the counts, just hover over the word with your mouse and the counts will be displayed for both types of listings in that rank. They were hidden to avoid clutter but I know some of you may be curious anyway. The non-funded word counts will always be higher (roughly 4X) so that is why I chose to order them by rank so we can make a comparison.

To display the top 1000 word rankings, 2 tables were created side-by-side for easy comparison. The table on the right contains the word rankings for the funded listings with the right column being the ranking of that particular word in the non-funded listings. The table on the left contains the word rankings for the non-funded listings with the right column being the ranking of that particular word in the funded listings.
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Does the amount of content in the Description of my Listing really matter?

The answer is an unequivocal “YES!” and I have done some number crunching to prove this point. I have queried all the expired or completed listings from 2/6/06 to 11/1/07 and counted the number of characters in the descriptions. The left bar represents all the listings that have completed with full funding. The right bar represents all the expired listings that did not reach full funding. The resulting statistics was surprising but understandable. Read more »

What time of the day are lenders most active?

Using the Prosper API, I have compiled all the bid data ranging from 4/2/06 – 11/3/07 and counted the number of bids in hourly increments. All types of bids (withdrawn, winning, outbid, and partially participating) were included to obtain a real sense of the raw bidding activity. You can hover over the points on the line graph to view the # of bids for each point. Please not that the times are given in Pacific Standard Time.
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Which day of the week are lenders most active in bidding?

To answer this question, I queried all the bids on Prosper.com from 4/2/06 – 11/3/07 and included all types of bids: withdrawn, winning, outbid, and partially participating. This should give us a good sense of the raw bidding activity that goes on.
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The Growth Rate and Ratio of Borrowers and Lenders on Prosper.com

Here are some nice charts displaying the number or borrowers and lenders and their ratios since the inception of Prosper.com. The data is derived from the Prosper API and keeps track of the member roles. If a member has multiple roles such as being both a lender and borrower, then one will be added to the total number of borrowers and lenders group. The data was polled every 4 weeks so the chart does not get too cluttered. This way, we can get a nice visualization of the growth rate and ratios for both groups. You can hover over the points with your mouse to see the exact count or ratio for the given date.
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Which day of the week should I end my listing?

Believe it or not, picking the right day of the week may have an impact on the amount of funding for your listing because bidders may be more active on certain week days. As you might or might not know, listings that are about to end will appear higher in the listings giving you more exposure to potential bidders. Having your listing end during peak times will give you maximum exposure and increase your chances of turning that listing into a loan.

To find out if certain weekdays are better than others, I have utilized the Prosper.com API to obtain the statistics for each day of the week. I have queried all the listings dating from 10/28/06 to 10/28/07 except for the ones that are still currently active. Please note that this data includes listings that have been withdrawn or canceled. Read more »

How long should I have my listing for?

While it may be true that a listing with a longer duration may receive more views or exposure, does this necessarily mean that it will receive more funding? The statistics may be surprising to you.

I have utilized the Prosper.com API to obtain the statistics that I hope can guide you in answering this question. I have queried all the listings dating from 11/5/06 to 10/27/07 (almost a year’s worth of data) except for the ones that are still currently active. The listings has been broken down according to the duration that they were listed for and whether they were 100% funded or not. Please note that this data includes listings that have been withdrawn or canceled.
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Loan calculator with statistics for all listings from the last past year

Here is a neat little calculator that displays a bar chart showing how listings has resulted in the past given the credit grade and the loan amount requested. The results will give a count of the total number of similar listings as well the percentage of listings that were canceled, completed, expired or withdrawn. More importantly, it also shows you the percentage of these listings that were 100% funded versus the ones that did not reach full funding. Statistics also include the average borrower APR and the maximum APR the borrower was willing to accept. This tool can assist you in deciding on a realistic interest rate based on your loan amount and credit grade. Read more »

How do I choose a Prosper loan to fund?

Prosper.com is a people-to-people marketplace where borrowers can find loaners and vice versa. I have spent my share of countless hours on Prosper.com sifting through pages and pages of listings. Since joining in April 2007, I have added 100+ loans with an average interest rate of 20.19% to my portfolio and it has become a bit of an addiction =) I have also been spreading the word to my peers about this great opportunity and many of them have asked me how I choose my loans. One person has even told me that I should put this in a blog so that is how this started. Ok, enough of the gibberish. Let’s get to the criteria that I deem necessary in finding the right loan to fund. Read more »

Taking into account the Prosper fees and net default rates, which credit grade will have the highest return of investment (ROI)?

In order to assist you with making this decision, I have generated 2 tables using default rates originating from Experian and Prosper.com.

Update: Please note that all Prosper loans are 3-year terms and Prosper has only been around since February of 2006. This means that there is not enough data to in giving accurate default rates based on the historical performance of Prosper loans. Prosper is still young and needs to mature in order to obtain accurate statistics. Right now, we can only extrapolate and predict with the limited amount of data that we have.
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How do I create a successful listing on Prosper?

In order to get a good idea of what you should do for your listing, you should first read the post on Lending Tips so that you can get in the mindset of what lender’s are looking for. With that being said, here is a list of criteria that many lenders look for in a listing… Read more »

What interest rate should I use when bidding on a loan?

Here is a simple calculator to assist you in figuring out what interest you should be using when you bid on a listing. It takes into account the borrower credit grade and your desired interest rate. This tool calculates the adjusted interest rate which accounts for the Prosper loan servicing fee and the average default rate for borrowers with the same credit grade. Please note that actual results may vary.

Update: Prosper now has a risk calculator that will estimate your earnings based on the historical performance of similar listings in the past when making your bid. I highly recommend utilizing this tool when bidding as it is more accurate. Read more »

How much money should I bid on Prosper loans?

Like with all types of investments, diversification of your Prosper loan portfolio is key in reducing risk. It is best to spread your money amongst many loans instead of having all your eggs in one basket. The minimum bid on a Prosper loan is $50 and that is what I would recommend to all lenders.

If you have a large sum of money to invest, then maybe I would go with $100 per bid as it is all relative after all. The key is to diversify your portfolio.

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