Bidding Do's and Don'ts

DO keep your bids small. I would recommend bidding no more than 1-5% of your total account value on any one loan. The $50 minimum bid limit makes this difficult so just stay at the minimum until your account value is over $1,000. The beauty of Prosper is that it allows you to spread your money arround to minimize risk...Take advantage of it!



DON'T transfer money in large amounts. Make small regular transfers into Prosper. Making bids IS work, and if you have a lot of cash to put to work you might be tempted to make bids that are too large or too aggressive.



DO make sure the loan is in the best interest of the borrower. While you aren't there to babysit the borrower, make sure the loan makes sense. If that AA rated borrower with 10% debt to income is asking for a loan at 20%, the borrower is either not very bright, or not very honest.



DON'T assume a homeowner is a better borrower. This ties into the previous statement. There are many financial options available to a homeowner, and Prosper is more expensive then most. If the homeowner is turning to prosper, they propbably have little to no equity in their residence.



DO set a target rate that you would like to achieve. Make bids based on your target rate. The spread between your target rate and your minimum bid should be Prosper Service Fee (50 basis points for AA/A, 100 basis points for others.) plus Experian Default Rate * personal adjusment factor. I use a value of between 0.5 and 1.5 to adjust the expected default rate based on my impressions from the bid.



DON'T bid only on a few credit grades. There are plenty of good risks in all credit grades. Take a look at all of them.



DO be realistic in your expected rate of return. Keep in mind some "junk" corporate bonds currently yield around 8%. I am currently shooting for a 9% rate of return.



DO bid on loans from highly rated groups. If there is a group leader reward make sure the group has some "skin in the game" I really like to see loan requests where the group has provided significant underwriting in the form of large bids at the initial rate AND some bidding down to the final interest rate.



finally,



DO bid on NorthPlainsCapital loans!