I'm watching you, Portfolio Plans.
After the latest revision, where the Conservative Portfolio Plan estimates a 5.10% return, I'm watching you.
Andrew was cool enough to post an update to the Prosper Official Blog Friday which outlines a new feature to Portfolio Plans (PP's).
When an update is made to the Portfolio Plans, Prosper lenders using these Portfolio Plans are offered the opportunity to either update their PP's to the latest criteria and bid rates or to ignore them and use the existing criteria and bid rates of the old and outdated plan they originally signed up for.
How many Portfolio Plan lenders using the Conservative Plan be willing to lend at an estimated return of 5.10% instead of the 7.34% offered in the previous revision?
It should be relatively easy to track.
In the past, the Portfolio Plans were so widely accepted that any loan falling within the criteria of the plan would be bid down to the lowest bidding rate offered by the plans because so many Prosper lenders were participating in them.
Now, if a loan is found that is funded, yet the going interest rate is not that of the minimum bid rate of the latest PP revision, but is that of an older version of the Portfolio Plans, then I would say that most PP lenders did not accept the change, and are still letting PP's bid at the old rates.
That is, if this happens, Prosper PP lenders did not accept this recent change of reduced minimum bid rates.
The revised rates for the Conservative PP are just too low to accommodate the risk involved in P2P lending on Prosper, in my honest opinion.
Waaayy too low.
3 comments:
We (I) have many times speculated that lower rates lead to less defaults. It is a case of adverse selection, where the high rates attached to loans with more inherent risk.
One of the ways this can be observed is to look (using the "What-If" page for lenders) on Erics' Credit Community.
One of my more successful Standing Orders implemented this strategy. It was only successful inasmuch as the bulk of lenders did not bid rates down. That way I managed to stay on "good" loans.
Clearly that strategy of mine is now obsolete with the advent of the revised PPs. It is also debatable whether that concept is viable if it is implemented in such a broad manner.
Time will have to tell whether this move will ultimately benefit lenders.
Estimated 5.1% return is worthless.
"The revised rates for the Conservative PP are just too low to accommodate the risk involved in P2P lending on Prosper". Plus to have your money tied up for 3 years at that rate. Then at risk of default.
I've enjoyed your Blog. I'm still a lender ( I haven't gotten a late yet). When that day comes we will see how I react.
Luana
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