P2P Borrower Profile: A Debt Consolidation Loan

In early 2008 Jillian Kay was drowning in debt. She had multiple credit cards with interest rates of 25% or higher. Then one of her cards increased their rate to over 30% when she missed a payment (it was just a simple oversight on her part). But that was the last straw, she knew something had to be done.

After some research online she found peer to peer lender Prosper and filled out the loan application. It is a pretty simple process and she was able to complete the application quickly. When the loan was funded and she saw the rate was going to be 12.4% she broke down crying. She could really begin the process of digging herself out from underneath all that credit card debt. She used the money immediately to pay off her 30%+ credit card and the remainder went to pay down her other balances.

Now, almost three years later she has been diligently making her monthly payments and her Prosper loan will be paid off in two months. A few weeks ago she received an email from Prosper letting her know they had a new system in place that did away with the old bidding process. Jillian thought now would be great time to apply for another loan and get rid of her credit card debt once and for all.

Her $15,000 loan on Prosper funded in 13 minutes

So one night before bed she filled out the application and applied for her second loan. She put in a complete description of how she was going to use the money and then, in her words, “let the numbers speak for themselves.” She felt confident she would get funded. When she woke up in the morning and checked for loan status she couldn’t believe what she was seeing. Her loan had fully funded overnight but what was most amazing was her loan for $15,000 (Prosper rating B at 13.4%) was funded in just 13 minutes. Wow, she thought. This new system really was working for her.

With this latest loan Jillian expects she will be completely free of credit card debt by the end of the year. You could hear the joy in her voice as she was saying this. She will only have her Prosper loan and her old student loan so she will really be able to focus on ramping up her savings.

Stories like Jillian’s represent what is great about peer to peer lending. Here is someone who could not apply to a bank for a loan but was drowning in credit card debt. She was able to dig herself out of the hole through the help of Prosper and p2p lending.

Subscribe
Notify of
28 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Dan B
Dan B
Jan. 10, 2011 2:37 pm

Having been involved in the entertainment industry for over 10 yrs, might I make a few suggestions……..
I know this is a true story & everything but if you could just spice it up a bit………add some background story, a few unsympathetic characters like a irresponsible boyfriend who maxes out her credit & then leaves her for some bimbo, add some inflexible supervisor & a jerk of a CS credit card rep to the story…………….you know characters like that, then I think I can help you pitch this to the Lifetime channel.
They have a collection of made for tv movies called Lifetime for Women that thrive on these tear jerker/personal triumph feel good stories. 🙂

Dan B
Dan B
Jan. 10, 2011 6:08 pm

Who said she’s making up the story? I completely believe that it’s a true story.
I’m just trying to help you guys flesh it out a bit to make it more marketable. Haven’t you ever heard of “artistic license”? We’ll just say it’s based on a true story. I’m thinking of someone like a Marisa Tomei as the lead or a Mimi Rogers if you want to go with someone a bit older.

Aaron
Aaron
Jan. 11, 2011 12:05 pm

She is not out of the hole yet. She is just sinking slower. I am happy though that she has managed to cut her interest rate in half. I am currently trying to get my sister to take out a loan with Prosper to consolidate her debt because of all the money flooding the site right now. It’s a good time to be a borrower.

As a lender right now, not so much. I have noticed that this “flood of money” has caused many borrowers to request much larger sums of money knowing their loans will likely get approved fast. I fear that this is bad for the lending enviornment because the borrowers are leveraging themselves much more than they used to when there was much more scruteny. If borrowers take out $15,000 as opposed to $5,000 in new debt, they are much more likely to default in the long run. The problem with this is that we probably won’t see the negetive effects for about 9-12 months.

Case in point: I have been getting frustrated that I can’t seem to find anything below $9,000 (let alone A-C at all, but I am seeing a few more of them.) So I decided to roll the dice on a C loan with a paultry $25 investment. This loan was labeled “Extra Money for Wedding.” It had a pretty good description and listed the income vs expenses. It was rated C at 20.40% interest (for the lender) for $10,000.
Bidding started on Jan 7 at 9:16am
Bidding was steady $25-$100 per investor with some random $300 thrown in here and there.
I made my $25 bid around 1:00pm
The loan is on pace to be fully funded within 24hrs, then BAM!
One lender (houli123) finishes it off suddenly with a $3,050.44 bid.

This is crazy. I’m kindof getting nervous about this. I just hope that all this money chasing returns doesn’t bite us in the butt later when borrowers default because they borrowed too much money. All it takes in many cases is a small emergency, a job loss, or a falling economy to come up short on your debt obligations. As I’ve said before, what debt do you think people are going to cut from spending on first? The house payment? The car payment?

Dan B
Dan B
Jan. 11, 2011 4:48 pm

Aaron, you’re absolutely correct. It’s pretty obvious that this type of loan is the first that can go unpaid without any repercussions. It just makes sense………….I’d add to your list by saying that not only would a person take care of their car, house or rent payments first, but they’d certainly pay all their credit cards before the p2p loan. After all, making credit card payments frees up some immediate credit (albeit a small amount with a minimum payment). On the other hand, making a p2p payment doesn’t do anything to alleviate a financial predicament.
I’m not suggesting that any of these situations necessarily apply to the individual in question here, but it’s a fairly safe bet to presume that it’ll apply to the average high interest rate loan seeker that’s currently on Prosper.

Stephanie
Stephanie
May. 14, 2011 9:22 am

I love this story and I think its great that Jillian was able to see her “dream come true”. I currently have a Prosper listing but it doesn’t look like it will be funded, due to my HR rating I’m sure. About 10 years ago I started making bad financial decisions because I didn’t think I could share our financial issues with my husband. After too many years of trying to hide the problems, I finally had to or we would lose our home & everything else along with it.

We ended up filing bankruptcy when we couldn’t see any other way around it. I had ruined both of our credit by trying to “fix” everything on my own.

Now we work on building our credit which has turned out to be hardeer than I thought it would be. We have 3 years of good mortgage & 2 car payments every month but we are still HR. I have taken out 3 small loans, with reputable companies but at VERY high rates. The first was just to get a start but then we had some mechanical problems and had to replace a refrigerator and that’s where the other 2 came from.

I thought the fresh start after the bankruptcy would be a relief but now with no credit, I feel like I’m in the same hole. My husband and I make double what we did when we got into financial trouble so money is no longer a problem but I didn’t get the better paying job until after the fact. Now we would like to consolidate the smaller loans into one loan and put money away for those emergencies in the future. I wish I could find a way to convey to the Prosper lenders that they can take a chance on my HR rating and I will not let them down.

Vanessa
Vanessa
Jun. 22, 2011 4:32 pm

I have a really long story that’s dramatic enough for Dan B. The main character is a single mother in her late 20s who decided to start her life over after multiple infidelities on her ex-husband’s part. She leaves central California and cannot sell her house (the one she paid for every month — on time). Three rotten tenants later and a lender who is unwilling to negotiate the terms of the loan, she loses the house. Her credit cards limits are slashed in half, making it look as though she had maxed out all three cards. This woman who works full time and makes $75K a year, doesn’t qualify for loans on any P2P website even though she has the ability to pay and desperately wants the interest rates reduced so she can finally have some breathing room.

Fast forward to the end: she dejectedly writes this post because this was the last site that confirmed Prosper wouldn’t take someone whose credit score was less than 640.

John P
John P
Jun. 25, 2011 1:01 am

@ Vanessa,

Bless your heart. Don’t give up till you pull through. I don’t know if you heard of RAPID DEBT REDUCTION preached by John Cummuta. Liberating stuff. Learn about it (if you don’t already know), and download a FREE software at rapiddebtreducer.net to get started. My wife and I (combined income $82000) are a year into our 7-year plan to pay off COMPLETELY our approximately $120,000 debt (includes mortgage balance of $85,000 with 20-years left to go per regular schedule + credit cards + what little is left of 2 car loans), saving a whopping $54000 in interest payments. Good luck, and God bless.

@ Peter Renton

Thanks for your links – I will be perusing them myself too.

Vanessa
Vanessa
Jun. 27, 2011 3:24 pm

Peter and John,

Thank you so much for your advice and the links. I realized that I’m probably hurting my credit score by trying to get credit with different companies. I have a budget that I’ve kept online since 2008. It keeps me chugging along, but readyforzero.com appears to be a site that recommends actions to reduce debt.

Thank you again!

Vanessa

John P
John P
Jun. 27, 2011 10:47 pm

@ Peter,

I checked out ReadyForZero.com (RFZ) and it uses the same philosophy as RapidDebtReduction.net (RDR). The advantage RFZ has, though, is the ability to link your credit cards in real time, so that each month you can slightly vary each minimum payment so as to maximize your pay-down on the debt with the highest interest rate (or APR). RDR does the same, but not in real time, but is still very effective – especially if you are not using the credit cards at all (which we are NOT).
The only drawback with RFZ (or maybe I don’t understand it well?) is that it only works with credit cards — I couldn’t add my installment loans, car loans, mortgage, etc., even though I tried to add them using my normal login info. (just as I did with the credit cards).
CreditSesame.com, unfortunately, would not let me log in. I registered, but it NEVER gives me a LOGIN prompt when I was ready to log in. I have tried several times, but to no avail.

@ Vanessa,

Glad you checked back in here. Quitting debt is very hard. Especially if your parents or family left you no foundation or cushion. Also, if others depend on you. You have to be mentally tough, and be able to endure the “shame” that comes from having to say “no” a lot to family members who seem to be perpetually in need, and turn to you “for help” at a hat’s drop! This is our 2nd attempt at this “war” on our debt. The 1st time we failed when an unexpected visitor (a couple in need) burst in upon us.
My wife and I resolved at the beginning of this year (new year’s resolution) to NOT USE OUR CREDIT CARDS AT ALL! We removed them from out of our wallets, and left them at home! Only debit. Now, when we order some things online, we use one of the credit cards (for security) – the one with the lowest APR or the one with the most available bal. for the purpose – but PAY IT BACK RIGHT AWAY FROM our CHECKING ACCOUNT – usually not even waiting for the statement. Debt is a lying snake, and I pray every day for strength and wisdom to not get taken by its lures. We need a new mattress ($500), and we have been saving for it – we have one more month (end of July) to be able to purchase it (CASH) without upsetting the apple-cart, and the delicate balancing act with all the other expenses in our lives. In the past, we would simply have put it on a credit card and LIE TO OURSELVES(!) that we will pay it little by little. Never happens.
So we are chugging along, little by little – sometimes we take 2 steps forward and 1 step backward, but the net effect is forward progress.

I found this article on How To Improve Your Credit Score to be very insightful. I hope it helps. Enjoy.

https://www.bankrate.com/finance/credit-cards/how-can-i-improve-my-credit-score.aspx

Loren @ ReadyForZero
Jun. 28, 2011 11:06 am

Hey Vanessa, John, and Peter,

I’m the director of user experience at ReadyForZero. Thanks so much for the recommendations and for checking us out.

John, you’re right that we are solely focused on CC debt at the moment. Our #1 request is to allow other types of debt, and we’re looking into how we can do this, as well as many other improvements.

Send us an email at support@readyforzero.com, we’d love to follow up personally and hear about your situation & how you think we can improve the product!

Best,
Loren Baxter

John P
John P
Jun. 28, 2011 8:43 pm

@Loren,

Thanks for the clarification and confirmation on RFZ, and the invite. Our plan is to seek a consolidation loan (fixed-term home equity loan at a lower interest rate) to give us some breathing room, even as we stick to our 7-year get-out-of-debt plan. Possibly a 2nd mortgage – still weighing the wisdom of converting non-secured debt to secured (tax benefit notwithstanding). We may settle for one of these social-lending loans, but we want to tip the credit score scale at 700+ when we apply. My wife’s median credit score is 680 (660-680-690). Mine is 650 (629-650-680). Our target loan application date with our credit union is Tues., July 26, 2011, by which time we hope to have tipped 700 FICO. I have this site bookmarked and should be contacting you as the end-of-July approaches. Thanks again for the invite.

@ Peter,

Funny thing: just a while ago, I tried CreditSesame again, and this time they gave me a LOGIN prompt! I logged in, and they asked me the 3 id questions and after I answered, it got stuck again! Maybe it’s letting me in by degrees? Tomorrow it should let me in all the way, what do you think? LOL!

John P
John P
Jul. 1, 2011 9:00 pm

@ Peter,

I did finally get in (CreditSesame) the next day – 6/29. And I was pleasantly surprised. My Experian score (which was the 629 in April in the post above) is now 664, meaning my Transunion and Equifax scores should be even higher. My wife’s is even better – a whopping 731!

The cruel twist now, though, is that WITHIN THE LAST FORTNIGHT our home’s value has dropped almost 40%! From 123K to between 72K (eppraisal.com) and 89k (zillow.com). And we owe 85K on it. This sharp drop is as a result of a recent city council decision to re-open a long-closed landfill a couple of miles away as part of a “budget-balancing” measure. There is a legal challenge in court as we speak and we are holding a neighborhood meeting on July 11 to discuss ways of reversing this truly shocking decision. I live in NC.

So, now I don’t know how our home-equity loan application would go. Our credit union even offers an 84-month, NO CLOSING COST Fixed Equity option for loans over $10K and would even fund up to 100% LTV – can you believe that!

We haven’t talked to the credit union yet, as we were waiting to be fully ready before putting in our application.

@ Loren, too…

Let me ask you this: would p2p social-lending consider a joint application to take advantage of my wife’s higher score now? On our current RapidDebtReduction plan, we should finish paying off all our non-mortgage debts (credit cards, signature/car loans, etc.) in 2years 1-month (JULY 2013). That is assuming nothing upsets our delicate apple-cart. It is a relatively austere living style right now (as our mattress example hints at), and any significant unexpected medical or other emergency could set us back badly.

I am leaning towards applying with Prosper and/or Lending Club NOW, but I should talk with the credit union after the holidays to see what they say. Please feel free to share any general thoughts. I will email if it gets too personal. Thank you both.

John P
John P
Jul. 1, 2011 9:13 pm

Forgot to add… the credit union’s Fixed-Equity interest rates start from 4.75%.

John P
John P
Jul. 1, 2011 9:43 pm

And.. for county tax purposes our property is valued at $104,700.

A Hint
A Hint
Aug. 11, 2011 8:40 pm

I don’t know if Vanessa is still around, but one thing she could consider is using Prosper itself to get her credit up. Take out small loans of $500 or so, then pay them back ahead of schedule. After several of these are incremental transactions she will have established a record of trust, and probably raised her credit score too. Then she’ll be in a better position to go for the big one that consolidates her debts.

la boheme
la boheme
Dec. 4, 2011 5:14 pm

I need a small ($500) short term loan (can pay off in a year or less). I don’t have credit cards, my car is paid off as of several years ago, I don’t have a mortage and am on a fixed income. I used Credit Karma to get my credit score and they couldn’t produce one because I have “thin information” or some such thing on my credit reports — probably because I don’t use credit cards or have any type of extended credit in play. I’ve used payday loans in the past and have excellent standing with the companies I’ve used them but this time, I need more than the amount that is allowed in CA (CA restricts payday loan advances to $255) and need more time to pay off the loan. The extended rates for payday loans, if you don’t pay off the full amount of the payday loan + interest by your due date, are horrifically astronomical. Also, a few years ago I took out a loan from an out of state company (aka predatory lender) for $350 and I wound up paying about 3x what the actual loan was (and this was within a year) which I also paid back in full and on time. I definitely got reamed on that deal. I’m stuck between a rock and a hard place when it comes to qualifying for a loan that won’t rake me over the coals and offers a fair interest rate that benefits both the lender and the borrower. Are there any P2P lending organizations that specialize in small loans (less than $1000) and will work with HR borrowers (or someone with a “thin” credit history ?

la boheme
la boheme
Dec. 5, 2011 12:06 pm

Thanks for you reply. I’ve been looking at Lending Karma and some other similar sites so I’ll give those a try.