Finance – Page 3

Problems with Checking Finder Identity Check

March 26, 2009 by Anonymous 6 Comments

My guest writer today is Anonymous who identifies a problem with Checking Finder that I have also experienced. My situation was resolved eventually by the bank to which I was applying when they contacted me directly. Read on to learn how to avoid the potential pitfalls during sign up.

Avoid the Mistakes

I had an interesting experience in trying to sign up with one of the banks on your list. I would like to somehow convey this information (without revealing my identity) to readers out there so that they can avoid some common mistakes that many people (including me) could make when going through the on-line application process.

Beware because not all identity checks are created equal.

The Problem

Many banks and credit unions use an outside service provided by Checking Finder which goes through a three step process of:

Taking your application information.
Verifying your personal identity.
Passing this information back to the bank or credit union.

Step (2), the identity verification process, has major problems in it that could result in your disqualification at one or more banks.

The Culprit

Checking Finder contracts out to a third party who, based on the social security number and valid drivers license number you provide, looks at your credit report and develops a series of security questions about your financial history. This is done in real-time and appears on your computer screen as you are filling out the application on Checking Finder. If you get any of the questions wrong, Checking Finder notifies the bank or credit union that you are applying to stating that you were unable to answer all the questions accurately.

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Comparing Lending Club with Prosper

March 8, 2009 by rickety 2 Comments

The following information may help you in your peer-to-peer investing decisions.

The Comparisons

A useful comparison of Lending Club and Prosper would be to invest the same amount of money in each company and review the progress a few months later. And that is just what I did. However, an exact comparison was not possible because first Lending Club and then Prosper were in quiet periods. So while my Lending Club loans span only four months, Prosper’s cover eight months. Also my Prosper loans cannot be re-invested because of their quiet period whereas Lending Club has no such restriction. Note too that Lending Club tends to have lower interest rates thus giving a lower return.

The Numbers

	Lending Club	Prosper
Total investment	$4,100.00	$3,000.00
Date of first loan	28 Oct 2008	09 Jun 2008
Active loans	115	34
Interest rate — lowest	8.00%	11.50%
Interest rate — highest	15.37%	30.00%
Interest rate — average	11.34%	17.46%
Net interest	$158.54	$422.29
Loans paid in full	5	5
Late loans — number	0	1
Late loans — grade	N/A	B (1)
Late loans — value	N/A	$74.28
Loans in collections — number	3	6
Loans in collections — grade	B (1) and C (2)	AA (4); A (1); B (1)
Loans in collections — value	$161.07	$576.47
Cost of auctions	$60.72	N/A
Profit (interest minus losses)	-$63.25	-$228.46

Table last updated: 16 July 2009
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In the table Net interest includes late fees, collections, and administration fees. I have counted Loans in collections as well as Late loans. However, there have been some small collections made and frequently loans that are late are caught up.

The Conclusions

Even though Prosper has the higher earnings its losses are greater. Bear in mind the loans on Prosper have been running twice as long as my Lending Club loans, hence more opportunity for loans to fall behind. My losses on Prosper have been aggravated by my having one loan of $200 in collections and the rest that are behind all at $100. The idea is to invest no more than $50 a loan. My mistake. Over time I believe my Prosper profit will go into the black but I see Lending Club giving a better return. I have thought for awhile that Lending Club does a better job of rating the risk on the loans and these results tend to confirm it. Consider that four out of five of my Prosper late loans are rated AA and the remaining loan is rated A. One would never have thought that these higher rated loans would be the first to cave.

When Prosper reopens I probably will not resume investing but will in the near future pick up the pace with Lending Club. If you are going to try peer-to-peer investing plan on losing some of your money. But with a little more care than I exhibited you should still make a better return than with a Certificate of Deposit.

Looking over these numbers what do you conclude?

Updates

7 Apr 2009 Updated the table.
23 May 2009 Since I last updated the table I have added another $1,100 to my Lending Club account. Although small, Lending Club is now reporting a loss. In a change of direction, today I put up for auction five of my $100 loans. It is time for me to move out of peer-to-peer lending and put more into my FDIC insured rewards checking accounts that return a steady 5%.
16 Jul 2009 Updated the table. Late in May I liquidated all my Lending Club holdings except for the 3 loans in collections. Over a period of three days I placed and auctioned off all the loans. I paid 1% commission on the selling price. I also discounted the price by 1/4%, 1/2%, or 1%. They were purchased very quickly because almost all the good loans are not discounted. The total cost to sell my loans of $4,048.13 was approximately $60.72. This makes early withdrawal very fast and relatively painless. I was happy with the result.

Four New Features from Lending Club

January 3, 2009 by rickety 4 Comments

The Lending Club blog announced four new features today:

Notes Already Invested in
Charged off loans and notes
Give your friends $50
Reinvesting Monthly Payments

These are all very useful features. I checked them out in my Lending Club account. But first, to give you some idea of the possibilities of peer to peer lending here are a few details of my rickety lending. Currently I have 44 notes in Lending Club that have a weighted average interest rate of 11.45%. None of my notes have ever been late. Based on outstanding principal the composition by rating are A 6%, B 55%, and C 39%. It seems to me that this is a very good interest rate when compared to Certificates of Deposit.

Notes Already Invested In

The “Notes Already Invested in” feature was one that I had requested in October. The part that is most useful to me is the ability to exclude notes already invested in when browsing and searching. I just have to select the check box at the top of the search page.

Charged off Loans and Notes

As far as “Charged off loans and notes” are concerned, I don’t have any of my notes that are past due so there is nothing for me to see — yet. Here is what Rob has to say:

We have added a “charged off” status to your account, so that you can now differentiate defaults from charge-offs. While “default” occurs automatically when a loan is 120 days past due, a loan or note only gets charged off when Lending Club considers it unrecoverable after a review of the collections activities (which can happen before or after 120 days). These charge-offs will appear in your end of year statement so that you can report them as losses for tax purposes.

Give Your Friends $50

The “give your friends $50” feature appeared at first to me to be a gift certificate I would have to buy. But no, it is a promotion and a very good one. Lending Club explains their generosity:

Well, we spend around $50 attracting a new customer anyway so instead of making an ad agency richer, we thought it would make more sense to let you invite your friends and deposit $50 in their account, make them $50 richer and make you look good in the process!

I have already sent invites to several friends and family who will appreciate $50 to play with. The slick interface allowed me to choose from my email contacts and edit the email invitation if I wanted.

Reinvesting Monthly Payments

“Reinvesting Monthly Payments” offers the ability to schedule a search that runs automatically when your cash balance equals or exceeds a given amount. This feature currently uses LendingMatch; Lending Club will be adding the ability to use the more granular credit criteria soon. I am using this feature by setting the minimum amount of $25 and the lowest target average interest rate. As soon as my cash balance reaches $25 I should be notified by Lending Club of the order that is waiting. I’m not interested in the order — I pick my own notes — I just want to be notified that I have enough to invest in another loan. We will see if it works the way I have set it up.

Update

22 Feb 2009 A Lending Club Investment Analysis (PDF) was conducted by Javelin Strategy & Research (January 2009). Accounting for loans paid off early, late payments, defaults, and a Lending Club 1% service charge, the overall investment return still averaged 9.05%, with a median return of 10.48%, based on a Weighted Average Return on Invested Capital.

Five 2009 Predictions

December 31, 2008 by rickety 12 Comments

Fear not for the future, weep not for the past (Shelley)

I am joining in the fun and releasing my predictions for 2009. See you back here at the end of 2009 to see how I fared. What do you predict for 2009?

1. The Dow will exceed 12,000 FAILED

In October 2006 the Dow Jones industrial average crossed over the 12,000 mark briefly for the first time in its 112-year history. The Dow crossed the threshold twice, before retreating slightly, closing just under 12,000. Yesterday the Dow ended the day at 8,668.

2. Gas will stay below $2 a gallon in Kaysville FAILED

The price of gas here in Kaysville, Utah is currently $1.29 a gallon.

3. Proposition 8 will be struck down FAILED

Sadly I am predicting the worst for Proposition 8. With the California judicial, executive, and legislative branches all bent on reversing the will of the people look for Proposition 8 to be no more in 2009.

4. Gold will pass $1,200 an ounce SUCCEEDED

Since 1968 the price of gold on the open market has ranged widely, from a low of $252.90 an ounce on 21 June 1999, to a high of $1,023.50 an ounce on 17 March 2008. Since April 2001 the gold price has more than tripled in value against the US dollar. Indexed for inflation, the 1980 high of $850 an ounce would equate to a price of around $2,400 in 2007 US dollars.

5. Unemployment will remain below 7.5% FAILED

The 2008 national unemployment rate was at 4.9% in January and by June had risen to 5.5%. November saw joblessness at 6.7%. I expect the rate to keep rising but then level off and remain below 7.5%.

Rewards Checking at Deseret First Credit Union

December 30, 2008 by rickety 6 Comments

Regular readers of the Rickety blog know that I am a big fan of rewards checking accounts. They have a high interest rate, are FDIC or NCUA insured, and are very liquid. Lately I have been tracking accounts that pay 6% or more but today I will make an exception. One of the drawbacks of banks that offer rewards checking is that it is usually not straight-forward to get signed up, unless you live close enough to go to a branch in person.

For the convenience of having a bank or credit union that offers rewards checking and is also close to home I joined Deseret First Credit Union. The nearest branch is only eleven miles away, their rewards checking is at 5%, and of course it is a credit union, which I prefer. To be eligible to join, one has to be a member of the Church of Jesus Christ of Latter-day Saints or be employed by the Church. To earn your 5% you have to do the usual monthly direct deposit or ACH, ten debit card transactions, and receive eStatements. You don’t have to access your account once a month as an additional requirement to earn your 5%.

In the Locations / Contact Us section is a list of over 2,000 basic transaction branches where you can use credit unions throughout the U.S. to make deposits, withdrawals, loan payments, etc. All you need is your account number and a government-issued photo identification. I haven’t heard about this service because my current credit union does not offer it.

As a bonus, the credit union does make humorous ads, though you might need to know a little about the LDS life-style to find them funny. The ad below is my favorite but also check out “The Weddings” and “Active“.

Updates

30 Mar 2009 Today I received this email:

…we would like to inform you that your Rewards Checking account rates will change as follows, beginning with the next monthly qualification cycle starting March 31, 2009:

$0 – $25,000.00 balance w/ minimum requirements    3.01% APY
$25,000.01 & higher balance w/ minimum requirements    0.70% APY
Balances w/o minimum requirements    0.20% APY

Unfortunately I will be drawing my account down to the minimum of $25. For 3% it is not worth the effort to get the required transactions. The account was no trouble to open and it will be even less trouble to pull out my money. There are a number of banks still at 5% and I will be looking at one of those.
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Credit Karma Checkup

December 15, 2008 by rickety 3 Comments

Credit Report and Credit Score

When it comes to a checkup of our credit standing, most of us know we can go to AnnualCreditReport.com for our free credit reports. Every four months I check my rickety credit with one of the three credit reporting agencies, Equifax, Experian, and TransUnion, so that for example, Experian is acessed once a year. But if you want to see your FICO score you usually have to pay for it. Unless you use Credit Karma.

Free Credit Score

Credit Karma provides users with free credit scores and will track these scores for you. There are also tools to to help you learn about improving your credit scores. The scores range from 300 to 850 which corresponds to the same scale as the FICO Score. Credit Karma shows personalized offers based on your credit profile. This subsidizes the free credit score tracking. The site also has a very informative blog, for example, read about Planning an Emergency Fund.

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The Mattress Race

December 10, 2008 by rickety 1 Comment

Here is a 70 second video that confirms what many of us have already found out by experience. You will know what I mean after you see the video. Presented is a race among equity mutual funds, bonds, a balanced fund, and mattress saving.

Micro Glossary

Equity Mutual Funds
Equity funds, which consist mainly of stock investments, are the most common type of mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds in the United States. Often equity funds focus investments on particular strategies and certain types of issuers.

Bonds
Bonds are bought and traded mostly by institutions like pension funds, insurance companies and banks. Most individuals who want to own bonds do so through bond funds. Still, in the U.S., nearly ten percent of all bonds outstanding are held directly by households.

Balanced Funds
Balanced Funds invest in stocks for appreciation and bonds for income. The goal is to provide a regular income payment to the fund holder, while increasing its principal.

Mattress Saving
Thousands of Northern Rock savers found themselves walking away from branches last year with bags full of cash. Now that the money is safe at home, many of them are probably scratching their heads trying to work out where to put it now.

Budget Shortfall Smaller in Utah

December 6, 2008 by rickety 4 Comments

Governor Huntsman delivers the State of the State

This morning the Deseret News was reporting that Utah’s budget shortfall was smaller than in many states. Indeed, the governor’s spokeswoman, Lisa Roskelley, said:

It’s important to understand that Utah, though in a difficult economic situation, certainly is in a better place than many other states throughout the country.

And the governor himself had this to say:

The environment is a tough one. Forty-five of 50 states are facing serious budget shortfalls.

For the 2009 fiscal year there are twelve states that have no budget shortfall. They are Alaska, Arkansas, Indiana, Louisiana, Michigan, Missouri, Montana, North Dakota, Oklahoma, Texas, West Virginia, and Wyoming. However, some of these states face a projected 2010 budget shortfall. I only list thirty-eight states with deficits so perhaps Governor Huntsman is also including projections for 2010 in his quote above. Also the reference to Arizona’s almost “25 percent budget gap” appears to be for 2010.

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YadYap Peer-to-Peer Payday Loans

November 10, 2008 by rickety 17 Comments

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:

The significant need for short term loans.
The controversy over lending rates charged.
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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