Sunday, March 26, 2006

Advanced listing strategies for borrowers, 1st in a series of...1?

People have already posted on various obvious, and not so obvious strategies re: getting loans funded, on the prosper message board. As such, I'm dedicating a post to various, more obscure inefficiencies to be lept upon, as they may disappear as Prosper becomes more efficient over time:

1.Due to Prosper's ACH system, that is, the process by which lenders move their money into Prosper for lending purposes, there is a predictable lag time to prosper account funding requests. In other words, people requesting funds on Saturday, Sunday, Friday (after ~6:00-7:30 PM EST), and Monday (before ~6:00-7:30 PM EST), will see their money become available to invest at 2:30 PM Pacific Standard Time, on the Thursday following.

My guess is that a disproportionate number of people look at on the weekends (ignoring people who look at prosper (I've decided that henceforth, prosper shall remain uncapitalized in my blog -- or at least until I put together something hacky to automatically capitalize for me. Even a find and replace function over my files, a dirty non-dynamic solution, but easy to implement for the code-minimally-versed -- ie, me) all the time, and people who party way to hearty on the weekends), so a proportionately disproportionate number of funding requests fall over the 3-ish day period in question.

Few people are going to predict that they'll want their funds to clear on Friday, allowing them a leisurely stroll through the funding park on Saturday and Sunday. Furthermore, I suspect that many people, upon funding their lender accounts, for the first or the tenth time, w/however hundreds or thousands, or even hundreds of thousands, of dollars, are like kids in a candy store -- they bid more aggressively, they bid more per loan, and so on. This effect tails off as their prosper balance does, or so I think.

GogMagog believes in time diversification as a method of achieving efficient search-cost adjusted lending w/adequate return diversification. In non-econ wonk speak, he thinks people who due diligence everything, then put $50 in each are stupid. He'd rather research until he gets 2 ideal loans a month, and put, say $500 in. Rinse, add bleach, and repeat for 2 years, and you have a nice diverisfied package of loans. It's a very good strategy. His would be an extreme example of fund availability, I suppose...

I happen to think that shifting vintage loans are also advantageous for reasons beyond time efficiency -- for instance, you get exposure to different economic climes, though a 3 year term makes this effect perhaps negligible w/ respect to default rates.

Strategy Ratings:

Personal Factor:I'm generally better at planning ahead for future consumption than most, though frequently I think so much that I end up missing my consumption deadline -- but guess what -- I have a big chunk coming in on Thursday at 5:30 EST

Further thoughts: Ask someone w/much-muy-more-better coding skills to scrape and parse bidding pattern history and fill rates

Persistence: High-ish, insofar as even a shortened ACH period will still count Sat/Sun/Mon as the same request start date.

Conclusion: Set up your loans to start or end on Thursday/Friday/early Saturday. I favor end.

EDIT: After talking w/an eBay powerseller, I've been told that Thursdays are dead -- perhaps even more than Fridays (correct me if I'm wrong) -- while crossover potential for eBay bidders and Prosper bidders may be debatable, I'd heed his advice. Maybe end on Friday night? Sunday night?

EDIT: funds now clear at 2:30 PM PST, not 5:00 PM PST


At 5:44 PM, Blogger Everyday Finance said...

Greetings, I’ve been using prosper for a few months now and I’m quite pleased with the results. I have over 20 loans out with an avg rate of over 13%. All loans that have existed for a few weeks are current with their payments. I’ve posted on top groups and strategies for those interested at my blog. Good luck!


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