YadYap Peer-to-Peer Payday Loans

YadYap website.
YadYap, payday spelled backward (how’s that for a rickety but innovative name), is the first people-to-people lending platform specifically for the payday loan industry. YadYap is looking forward to an official launch soon. It is interesting that I should hear about YadYap (thank you Jared) so soon after I wrote that “there will be many peer to peer lending websites.”

The Inspiration for YadYap

According to their website, YadYap was inspired by three characteristics of the payday loan industry:

  1. The significant need for short term loans.
  2. The controversy over lending rates charged.
  3. The lack of borrower representation in the market.

How do Borrowers Benefit from YadYap?

  • Instant loan approvals.
  • Funds quickly deposited to their bank account.
  • Lending rates determined by the free market through a competitive auction.
  • Good repayment performance is rewarded with lower interest rates and loan fees.

How do Lenders Benefit from YadYap?

  • Provided with pre-screened loan applicants.
  • Credit / payment history is tracked resulting in a YadYap risk rating.
  • YadYap handles all documentation, fund transfers and loan administration.
  • Lenders benefit from both monetary and social returns on their capital.
  • YadYap takes the inefficiencies out of the market.

The biggest advantage of YadYap is the almost instant liquidity that comes from offering short term 2-4 week payday loans. Unlike Prosper and Lending Club, no secondary market is needed to achieve liquidity for lenders. When YadYap opens, this may prove to be a significant advantage for them. And maybe there will be a few less “Payday Loans Here” signs on main street as business migrates to the web.

Updates

5 Mar 2009 I removed my instant liquidity link to YadYap’s blog. All it returns is a WordPress message that reads:

This blog has been archived or suspended for a violation of our Terms of Service.

Not a good sign. I wonder if they need a payday loan to tide them over?

12 Mar 2009 Restored my instant liquidity link to YadYap’s blog, which has changed location and is now called [link no longer works]. Set aside money for a payday loan to YadYap through their platform once they launch.
19 Oct 2010 Yadyap launched. In this first phase, all lending will be done by YadYap LLC, their affiliates, and other institutional lenders.
25 Feb 2012 ConnectFund link no longer works, replaced all references to it with this bracketeted phrase: [link to longer works].

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Trading Loans on Lending Club

Map of Lending Club fully funded loans in Utah.

Getting Ready To Trade Notes

I previously wrote about my experience with Lending Club. None of my loans have turned rickety and I have even signed up for FOLIOfn’s Note Trading Platform. Here is what Lending Club has to say about trading:

If you are a Lending Club lender and wish to sell some of your Notes, or buy Notes currently held by other lenders, you can now use the Note Trading Platform operated by FOLIOfn, member FINRA/SIPC. You will need to open an account with FOLIOfn, but you can use the funds available in your Lending Club account to buy Notes through the Trading Platform, and receive the proceeds of any sale of Notes (minus a 1% trading fee) directly into your Lending Club account. Only Notes that were issued after October 12, 2008 can be traded on the Trading Platform.

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My Experience with Lending Club

Lending Club

Getting Started

Ten days ago I funded my Lending Club account with a few spare dollars. On Monday the transfered money was available for use. Lending Club connects those seeking a loan with lenders. Risk of default from rickety borrowers can be spread out by investing only $25 per loan. Unlike Prosper, the interest rate is determined by Lending Club and remains fixed during the funding process. Lending Club sets the interest using a base rate and adds to it an adjustment for risk and volatility.

A few months ago I opened a Prosper account but the company is currently in a quiet period. Hence I moved my Prosper earnings over to Lending Club. I was able to invest in several notes without any difficulty. The software did present two procedures that were a little awkward at first but I readily adjusted. I will detail them below. Also remember that I am showing you how easy the process is but I am not telling you which loans to choose.

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Dow Ten Largest Daily Point and Percentage Losses

When you feed the bears, it can get brutal.

Dow Losses

I find it interesting (and depressing) to look at the all-time Dow Jones Industrial Average largest point and percentage losses. The recent losses have been bad news for most people’s 401Ks. The tables show only the largest one-day losses between a given day’s close and the close of the previous trading day.

Notice that the top point losses all are from 1997 onwards whereas only three of the the top ten percentage losses are from 1987 onwards. As a percentage loss, 2008 only appears in ninth place but takes first, second, fourth, and fifth places in point losses.

Further, the last ten years have claimed eight of the ten highest point losses with half of the top ten taking place in 2008.

Dow Top Ten Largest Daily Point Losses

Click ONCE on column headers to sort.

Rank Date Close Change % Change
1 9/29/2008 10365.45 -777.68 -6.98
2 10/15/2008 8577.91 -733.08 -7.87
3 9/17/2001 8920.7 -684.81 -7.13
4 12/1/2008 8,149.09 -679.95 -7.70
5 10/9/2008 8579.19 -678.91 -7.33
6 8/8/2011 10809.85 -634.76 -5.55
7 4/14/2000 10305.78 -617.77 -5.66
8 10/27/1997 7161.14 -554.26 -7.18
9 8/10/2011 10719.94 -519.83 -4.62
10 10/22/2008 8519.21 -514.45 -5.69

 

Dow Top Ten Largest Daily Percentage Losses

Click ONCE on column headers to sort.

Rank Date Close Change % Change
1 10/19/1987 1738.74 -508 -22.61
2 10/28/1929 260.64 -38.33 -12.82
3 10/29/1929 230.07 -30.57 -11.73
4 11/6/1929 232.13 -25.55 -9.92
5 12/18/1899 58.27 -5.57 -8.72
6 8/12/1932 63.11 -5.79 -8.4
7 3/14/1907 76.23 -6.89 -8.29
8 10/26/1987 1793.93 -156.83 -8.04
9 10/15/2008 8577.91 -733.08 -7.87
10 7/21/1933 88.71 -7.55 -7.84

 

Source

For more tables of the Dow largest point and percentage losses see Wikipedia.

Photo Credit

Bear Market by Mark Rain.

Updates

Added a 679.95 point loss for December 1, 2008.
Added a 634.76 point loss for August 8, 2011.
Added a 519.83 point loss for August 10, 2011.
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Lending Club Open for Loans, Prosper in Quiet Period

Lending Club

Prosper Quiet Period

Prosper will not accept new lender registrations or allow new commitments from existing lenders. This is called a quiet period. During this time they can register with securities authorities promissory notes that may be offered and sold to lenders through Prosper in the future. I wrote about my Prosper experiences in August. Currently I have 35 loans with three of them a little rickety at less than 15 days late. I am earning 17.34% with a goal to earn 10%, hence I have allowed for several defaults. I have been reinvesting the principal and interest back into new $50 loans. Now that I cannot make new loans I will move the cash from the repayments over to Lending Club.

Lending Club

Lending Club opened up to lenders again at just the right time now that lending at Prosper is temporarily closed. According to the Lending Club blog, Utah, where I live, has already been added:

We were delighted to open our doors to lenders again on Tuesday this week and see hundreds of lenders signing up for the new program in just a few days. In addition to the federal filing with the SEC, we have made a coordinated “blue sky” filing in all 50 states, and state clearances have been trickling in all week, with four new states already added: Hawaii, Nevada, Utah and Wyoming.

What I am most interested in trying is the Note Trading Platform. This is how it works:

If you are a Lending Club lender and wish to sell some of your Notes, or buy Notes currently held by other lenders, you can now use the Note Trading Platform operated by FOLIOfn, member FINRA/SIPC. You will need to open an account with FOLIOfn but you can use the funds available in your Lending Club account to buy Notes through the Trading Platform, and receive the proceeds of any sale of Notes (minus a 1% trading fee) directly into your Lending Club account. Only Notes that were issued after October 12, 2008 can be traded on the Trading Platform.

A benefit of trading Notes is that you can review loan payment history and credit score trends since the date the loan was issued. You can buy Notes that have a shorter maturity. You may identify Notes that are priced below their fair value. Notes can be sold to obtain liquidity. I may try this just to see how it works.

Lending Club statistics are reasonable. Since 1 June 2007 Lending Club has issued 2,447 loans worth $19,541,150 and has declined 18,802 loans valued at $151,626,494. There have been $577,586 (2.96%) in late loans (31-120 days) and $970,225 (4.97%) prepaid. Defaults (120+ days) are $327,862 (1.68%).
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Taking Stock of my Personal Finances

Market Losses

Several bloggers have been posting about the effects of the recent rickety stock market on their finances and giving advice. I am appreciative of this, it helps to see how others are faring — I might learn something. So it is time for me to do the same and perhaps you may pick up something of use. Today for the first time in months I checked the status of my retirement account. For the last three years I have been invested in the 2020 Lifecycle Fund (L Fund) which, according to the Thrift Savings Plan (TSP) website, works like this:

The L Funds provide you with a convenient way to diversify your account among the G, F, C, S, and I Funds, using professionally determined investment mixes that are tailored to different time horizons. Your “time horizon” is the date (after you leave Federal service) that you think you will need the money in your TSP account. Because it is important for each L Fund to maintain its target investment mix, the TSP will automatically rebalance each L Fund daily. Then, each quarter, the investments in each L Fund will shift to a slightly more conservative mix. In addition, experts will review the investment mixes periodically to be sure they are still appropriate.

So the L Funds include a mix of all available funds:

  • Government Securities Investment (G) Fund.
  • Fixed Income Index Investment (F) Fund.
  • Common Stock Index Investment (C) Fund.
  • Small Capitalization Stock Index Investment (S) Fund.
  • International Stock Index Investment (I) Fund.

As you can see I am well diversified. In the recent stock market declines the G and F funds held steady while the C, S, and I funds took a pounding. For the quarter ending 30th September I had a loss of $16,663.71 which also includes money contributed. Not bad. But from 1st October to 9th October I had an additional decline of $31,665.27. So even a diversified account is getting hammered. When the roof falls in it takes about everything with it. However, it is not all bad news. For 2006 the L 2020 earned 13.72% and in 2007 6.87%. As of yesterday those earnings approximately equal the losses.

Other Funds

I recently reported on Prosper where I now have 34 loans earning an average of 17.5%. While the stock market is causing grief throughout the land with seven days of triple digit declines, my Prosper loans serenely cruise along with not one point of return disturbed. Of course I plan for defaults but I haven’t had any yet.

Where to put one’s petty cash? I have mine earning 6.01% in rewards checking accounts at Coulee Bank and 5.01% in Lee County Bank and Trust (the rate was reduced from 6.01% today). I’ve not understood why more people don’t take advantage of a FDIC insured rewards checking account that pays this high of an interest rate. Of course I also have a local bank and credit union.

My Plans

My plans now are to the leave my L Funds as they are and continue to contribute the maximum amount. As soon as the stock market settles down there will be a flood of money coming back into stocks. Then we will see a number of triple digit increases.

I plan to wait a few weeks and watch how Loanio progresses and either invest some money there or in Prosper. I will look around for another bank to replace Lee County Bank and Trust. I think the minimum rate for a rewards checking account should be 6%, considering the monthly requirements that are demanded.

As far as spending is concerned I will continue as normal. What is normal? For me it is conservative but not spartan. That’s about it — business as usual. And if you’ll excuse me for tonight, I have a retirement fund I want to check again.

Update

1 Mar 2009 I did indeed leave the L funds as they are and continued to contribute the maximum amount. Recently I put new contributions into the G fund. Loanio and Prosper went into “quiet periods” so I put money into Lending Club instead. Lee County Bank dropped their rate to 3% so I joined my local Deseret First Credit Union to earn 5%. I continue to spend as normal, which wouldn’t even bring a mouse out of recession.

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Kiva Lending Team: Kiva Mormons

I’ve blogged about Kiva before. Kiva is a non-profit organization that uses the internet and a worldwide network of microfinance institutions to enable individuals to lend as little as $25 to help fund small businesses run by low-income entrepreneurs. The lender chooses who to lend to from a database of profiles. When the loan is repaid the money can be withdrawn or loaned out again.

I have made several loans and they have been repaid within 6 months to a year. It is a lot of fun to pick where you want the loan to go and also to lend your money again and again to help someone. A change was made recently where you get your payments back immediately instead of having to wait for all of the loan to be repaid.

Another change that I like very much is the introduction of Kiva Lending Teams. Members of these teams continue lending as individuals, but they have the option to count each loan they make towards the overall impact of one of their teams. As of today there are 1,650 Kiva Lending Teams. The top team in terms of members is the Atheists, Agnostics, Skeptics, Freethinkers, Secular Humanists and the Non-Religious with 845 members. I passed on that one, I wouldn’t be able to remember the name of my team. KivaFriends.org has the highest number of loans at 2,236 and the highest dollar amount, $58,575.00.

I joined Kiva Mormons with 61 members, 107 loans with a dollar amount of $3,350. Here is what part of our lending page looks like today. It will change as more loans are made. Recognize me on the left?
Kiva Mormons team lending page.
You can see who on your team made the last five loans. The loan from Orange Third Relief Society, which is classified as an individual lender but is made up of several women. Only new loans can be credited to a team so you have to wait until a loan is repaid and a new loan made before it can be counted. This is important for our friendly rivalry with the Flying Spaghetti Monster. With just 71 members (10 more than us) they have 209 loans, leaving us in the dust. Then there are the Kiva Baha’is that raced passed us with 157 loans with only, get this, 14 team members.

Are you are part of a Kiva Lending Team? Tell me about it and why you joined your particular team.
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Stimulus or Bailout: Is There any Difference?

From the steps of the Federal Hall National Memorial is visible J. P. Morgan & Co. Building (left) and the New York Stock Exchange (right).
Debate continues in Congress on the proposed $700 billion bank bailout. The rickety stock market slumped again as investors awaited the outcome of the Senate bank rescue hearing. One informal internet poll with 143,046 respondents had 52% rejecting the whole plan. People are just not happy that the “fat cats” will be getting free money. Here are some comments from around the internet. I could find precious few that were in favor of the bailout:

  • “I don’t see any reason to give Henry Paulson $700 billion in taxpayer money.”
  • “With this bailout, Paulson has effectively legitimized financial fraud.”
  • “Let the chips land where they may.”
  • “I knew I should have just overspent like everyone else and then let someone else pay for it.”
  • “Write your local congressmen an email… say ‘NO!'”
  • “I just don’t get it. Why can’t we just let some of these companies fail?”
  • “We should let Wall Street crash and burn just the way ordinary Americans and small businesses have been treated.”

Now recall the stimulus checks where most of us received $600 from the government. Was there a great outcry against the borrowing of $152 billion to finance this election year bribe? Not that I can recall. All I could muster was, “I cannot think of a more stupider plan!” Except perhaps for a second round of stimulus checks. How totally silly, such incredulous bogosity. But I still put my $600 in the bank and said, “Thank you very much, Sir.”

Now consider if the rest of you, unlike me, had protested strenuously to your elected officials that you wanted no such stimulating. You would have explained to them the foolishness of borrowing billions only to have to pay every last $600 back with interest. Do you think that Congress then would even dare to debate $700 billion for bankers? Well, maybe they still would have.

Seems to me that one of the most prevalent comments is the best solution of all. Come November, “just vote the bums out.”
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Teaching Children Financial Principles

Tithes and offerings.
Four questions showed up recently in a comment about a post on debt.

1. What advice would you give for teaching young children and teenagers these principles?

First we need to identify the principles mentioned in the post. They are:

  1. Debt is worse than the plague.
  2. Never pay credit card interest.
  3. Borrow only for home, health, and education.
  4. Pay tithes and offerings.
  5. Be charitable.
  6. Never co-sign for a loan.
  7. A bargain is not a bargain if you don’t need it.

Obviously some of these principles would be lost on young children. The easiest principles to teach them would be tithes and offerings. When offerings such as for the Fast are made this is being charitable to the poor or those in temporary need. Number seven on our list can be taught by allowing safe but unwise purchases so that children can learn by their own experience what is and isn’t a bargain.

In our home we kept a small box that contained change in a small can and dollars in an envelope. It also contained tithing slips and envelopes. When the children received their allowance my wife and I would help them figure their tithing and write out the slip. We had change on hand (in the small can) so that they could submit the correct amount. By the time they were teenagers they took care of their tithes and offerings by themselves.

When the children reached twelve or thirteen I would open a credit union account for them complete with checks and a Visa debit card. Around eighteen I would make sure they got a credit card. That way they could start building a credit rating without me having to co-sign for a car. The credit card had a $200 limit which was raised over time.

Was it successful? The children know how to handle credit cards without incurring debt. They automatically pay tithes and offerings. They are very good savers.

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