Saturday, October 25, 2008

Prosper Goes Quiet

This evening, I decided I would log in and check on my current portfolio of prosper loans. Not long ago, I railed against prosper and now it appears that there is definitely something big going on over at prosper. The message from their website:

start of message
Prosper Filing Registration Statement; Enters Quiet Period

Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account.

If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective.

A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we're required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective.

We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.

end of message

So after reading this short, relatively vague explanation, it makes me really curious as to what they are actually doing. It is not entirely clear if this site is going to start offering different kinds of loans like bonds or what. But I definitely think that there is something big going on and I think that the need for secrecy seems rather odd. In the end, I have to wonder if there isn't something a little more sinister going on here? Like perhaps being bought/influenced by some big bank or hedge fund that actually owns the company and is perhaps now cash-strapped?

I have no information or real idea about what the state of prosper is as a company, but a cryptic message like this really does not help the average lender and I'm disappointed. In this economy, I expect companies that are responsible for literally tens and hundreds of thousands of dollars to keep customers well informed. That announcement above is not clear and we can do nothing but wait.

Regardless of what happens, I've already lost too much money in prosper and I'm starting to withdraw money now. And this announcement makes me even more comfortable with that position? I mean, what feels more safe to me? Money invested in signature loans over the internet or money at my brick-and-mortar bank where I can talk to a teller in person?

Friday, October 24, 2008

In for Two Dollars

I'd like to say that this was going to be good news. It isn't. I just found out, on the way home tonight, that my parking as a commuter in the great state of taxachusetts is going to be going up by 40% starting in less than a month.

MBTA Increases Already Exorbitant Parking Fees is the link to the web page where they shamelessly announce it. My curiousity gets the better of me though. Do they really think, in this economy, in this recession that it is a good time to charge even more for these services, the services that help people work and actually generate real tax revenue?

I'm not completely oblivious; Massachusetts and California were both in extremely dire straits and they needed to get short-term loans at high rates. Details are available at la times website. But in the end, it is not the increases that bother me so much as their size. People can absorb a small increase of a few percent. You adjust your budget, you make small lifestyle changes.

However, this change amounts to more than 600 dollars of net income for me per year. That is a 40% increase all at once. Almost no one can easily absorb that kind of change without giving something up. And for people on the lower end of the income scale, the change is even more acute.

Tuesday, October 21, 2008

Don't Be Fooled - Even A Credit Won't Save You

One of the more advanced topics in personal finance is the use of credit cards for your own benefit. Some people are involved in applying for credit cards and moving the balances around to get balance transfers. Others are simply using cards that have the best interest rates and reward programs.

Now that I am credit card debt free, I have chosen to continue to use a single credit card because I get rewards on the card which can be used later on for higher-education related expenses. So, this is what I have been doing for the past year or so. Every time I buy essential expenses like gasoline or groceries, I buy them with the credit card and pay the balance each month.

Recently though, I've become aware that credit cards have resumed their dirty tricks and have started moving around the due dates of the statements. This means that inadvertently, you can miss the payment date and be slammed with late fees and extra interest. So, I decided to fight back. I wanted the rewards but I didn't want the risk of being late on a payment. So, I started pre-paying my card by a couple of weeks when I knew I had purchases that were on there.

I was foolish though. Banks, and especially credit cards, always win! This past month, my card had a 93 dollar credit balance in the middle of the month. Less than 5 days later, there was over 100 dollars worth of charges on the card. However, on the date that there was a credit balance, they zeroed it out and cut a check for the credit. Then, the charges hit and now, here I am, wondering whether or not to pay the card.

Now I have to cash the check and send it right back to the credit card company.

1. For me, it makes sense to carry the "credit" balance for a week or two at a time on the credit card. It makes me no money in the bank checking account and I use the card usually 2-3 times a week. There's always new expenses.

2. Obviously, it seems like a ploy by the company to rack up the balance and then charge me late fees and interest when I don't pay enough or don't pay on time.

Moral: Be careful. Carrying a credit won't save you.

Friday, October 10, 2008

Save The Economy

You'd have to be living under a rock at this point to be unaware of how scary the situation is with the global economy. That's right, GLOBAL. Even though we like to segment our countries into developing and developed...and give them even fancier names like 'frontier', the reality is that this current situation shows just how coupled all of the world's economies still are.

The big concern for many at this point, and many of the government officials is the fact that the credit markets are not yet flowing. Instead, all of the money is being locked up nice and tight at banks and they are not lending. In the end, I am interested in considering prosper and some of the other peer-to-peer lending sites.

In the event that these banks do not open up lending, we will be in a severe recession quite fast. But for the average person, there is a genuine concern that there might not be enough money for their boss to get enough cash to make payroll, or that there might not be money to get the new car their family needs.

What I am considering here is whether or not prosper is a good idea here. My gut feeling initially several weeks ago once this downturn was that perhaps sites like prosper would help to curb the problem of funds availability. But, what I've noticed personally is that I am not as free with my lending. And even those who are fortunate enough in this market to get loans are finding that they are much, much more expensive. The credit problems elsewhere have definitely come home to roost on that site.

Prior loans are no defense either. Three of my loans are late and it looks like there is very little hope of them being repaid. Only one or maybe two of them seemed risky to me at the time. This makes me think that some of the delinquency is due to the overall slowdown. So can prosper save the economy? I don't know. We'll see. Personally, I'm doing the same thing as the banks, paring back my prosper loans.

Saturday, October 04, 2008

Staying Focused, Staying Confident

In the craziness that continues to happen in this economy, it is important to stay focused and remember to review your overall plan. Focusing on this plan is a big part of making sure that you are able to withstand all of the news and panic that is running amok lately.

For me, personally, the plan is pretty straightforward and so I figured I'd share it with you.

1. Pay all bills. Not just on time. Early. Period.

2. Never commit to debt that I am not extremely comfortable with paying off in 3 years or less. The only possible exception to this is a mortgage in the event of a move.

3. Continue paying down outstanding debts, focusing mostly on the smallest debt until it is paid down. Personally, I do not focus every free penny on debt paydowns like some personal finance experts advocate doing. I think that the importance of a significant emergency fund is just ignored during these broad statements about debt reduction.

4. Continue building the emergency and freedom funds with approximately 10% of net pay each month. Emergencies happen, and it will feel great to have money for these items when/if they come up. Although as a general rule, I try to pad the monthly budget so that most minor emergencies can be absorbed without tapping the fund.

5. Increase contributions for retirement accounts in small increments; currently focusing on slowly increasing the roth ira contribution until it is maxed out.

6. Continue to seek out additional sources of income; and cultivate the value I add for my company at work and improving my life. This step is something that I think people can forget. When layoffs happen, they keep the people that are the most valuable to the business. When raises happen, they are given to the people that are appreciated based on what they bring to work each day.

So in the end, there's really no magic. Just keep doing what I'm doing. And I'd encourage everyone to do the same thing. Most of what happens 'out there' is beyond our ability to seriously influence. This bill passing even though a large number of constituents voiced their concerns is a good example. So, do what you can control, by sticking to your plan.