One of Your Loans Defaulted Due to Bankruptcy

The automated Prosper message title said it all: “One of your loans defaulted due to bankruptcy”. Ugg.

I received two of these messages just recently. It’s not a surprise, since I’ve known that both of these borrowers had filed for bankruptcy. But defaults still suck.

Here’s a little about each of these:


Loan: Consolidation Loan (Listing 30873)
Borrower: SDL
Default date: Apr-30-2008
Principal balance before default: $30.54
Loan value before default: $32.39

This borrower first made 12 on-time payments, stumbled for a few months, then made 2 more on time payments until December 07, when it just died.

After interest is figured in, I lost about $23 on this one. Luckily, this was not one of my larger loans. (my largest is $1,050)

In her profile, she states "I think prosper will be a very good thing for borrowers and lenders.” As for this case, it was not very good for Prosper lenders.

What red flags should I noticed on this one? It appears I didn’t do a very good job of checking previous listings. Her second listing would have scared me off, where she was requesting $22,000 to pay off all credit card debt, and titled the listing, “Drowning in 2 Cards debt with no payoff”. That doesn’t sound good - I should have done my homework. Also, the 37% DTI should have made me more cautious.

Not the worst listing I’ve bid on. It’s too bad it had to end in default.


Loan: Debt Consolidation (Listing 65538)
Borrower: uniguy
Default date: Apr-30-2008
Principal balance before default: $116.43
Loan value before default: $129.99

I wrote a little about this one when the bankruptcy tag first appeared.

This guy only made 10 payments before filing. I lost a lot more on this second loan than I did the first.

Ugg.