Lending Strategy - Top 5 Groups to Lend To

As a Lender on Prosper, one is constantly on the look-out for groups of high quality borrowers, whose listings attract enough lenders to get funded and whose loans yield significant returns. We spent some time looking at groups with high activity levels, where one could find such borrowers in this context.

We started out by saying "can we identify groups that tend to have,

· Low proportion of high risk loans (<33%)

· Above average yields (>14%),

· Above average listings-to-loan conversion (> 20%)?"

Well, we believe we may have found just the groups you need, so that you can make your money work harder, minimizing idle money, while giving better returns. With a lending strategy that allocates a higher proportion of your money to listings from these groups, you might save yourself precious time finding the right listings, get them funded, and get good returns. Here are the groups, and the metrics we used:

Group Name	Weighted Av. Lending Rate	High Risk Volume %	Listings to Loan Conversion Rate
Voyagers Financial	20.21%	16.61%	37.39%
DocProsper's Credit Community	14.68%	12.71%	35.29%
America One Funding	18.59%	14.59%	29.46%
Professors and University Graduates	19.39%	33.80%	23.23%
NuBeginnings	17.87%	31.61%	21.93%

• Data is between November 2005 and December 2006.
• Only groups with more than hundred members have been analyzed.

A quick note on the metrics:

Weighted Average of Lending Rate, defined as the average of Lender’s Rate weighted by the amount borrowed for the loans in a group, is indicative of the yield that a lender can be expect from the group, taking the volume of loan into consideration as well.

High Risk Volume, defined as the percentage of volume of loans that have been lent to low credit grades E & HR, is indicative of the quality of the loan composition of a group. Lower the dollars lent to low credit grades, higher is the quality of the loans.

Listings to Loan Conversion Rate, defined as ratio of loans to listings, is indicative of the group’s contribution in getting its listings funded fully. When a lender bids for listings from groups with high success rate, chances that the lock-in costs are minimized for him.

We would love to hear from you on what you think, and what other analyses you would like to see on this blog.