Homesteaders! Unite!

bare · #1 09/13/06, 01:33 AM

This post probably doesn't belong in the Homesteading Questions forum, but I've put it here, since it's mostly in response to Ken in NC's dilemma in this forum.

I'm not all that familiar with the program I'm about to explain, so please bear with me and check it out.

I propose that interested members of our forum form a Prosper investment group. http://www.prosper.com/

In short, it's a peer to peer lending/borrowing organization.

While I am proposing it initially as a way for all of us to possibly help out a fellow homesteader, it could actually be a useful way for us to invest in each others dreams as well. Need a new chicken coop? Post a proposal and maybe we can fund it.

Now, certainly I don't have all of the details regarding Ken's situation, so folks in the know will have to get together and see if it's possible to do anything within the constraints of the system. Maybe Ken and others can put a proposal together and ask us to help finance a loan, either to buy out his existing mortgage from Greentree, or even to surrender his mobile and still have enough money to make something suitable to live in on his property.

The one drawback that comes to mind is the three year payout idea, but maybe agile minds can find ways around this.

I particularly like this method because it's not a handout, but a hand up. The financial risk or reward is spread amongst lots of people so no one individual is likely to suffer in case of default.

bare · #2 09/13/06, 09:57 AM

Lead balloon.

PineRidge · #3 09/13/06, 10:20 AM

First thing i noticed is....to get a loan you have to have a bank account, for the automatic debit. Now that's really not a big deal, but I don't deal with banks, lol.

The three year turn around is long, especially since I can't see someone here asking for large amounts that would take years to pay back.

And, I think the majority of us would like to help someone out, but we might have only $20 to spare (well, maybe that's just me

) I don't see how it would work if someone needs $3000, and gets it $20 at a time.

I also think most of us would rather just give, no expectaions of being repaid. It just feels good to try to help. Loaning the money would not have that "good feeling".

Lastly (didn't realize I had so much to say) I think people here wouldn't want to ask for help. Even in the form of a loan.

Just my thoughts

mightybooboo · #4 09/13/06, 11:44 AM

Bare,I read your post and am thinking about it,just didnt have a good reply.
It really requires some good deep thought,not a quick answer,at least from me.

So I dont really see it as a lead balloon.Its worthy.

BooBoo

bare · #5 09/13/06, 11:48 AM

Yup, that's true, you do have to have a bank account and hopefully some sort of credit history, though I see folks on there who have zero history, still getting their loans fully funded.

If you only have 20 dollars to spare, that's all you need to spare. You toss your 20 in along with thirty or more other investors to make up the difference.

I know for myself there have been times in my life where a small loan would have made all the difference. Banks are rather firm in their practices, so lots of folks can't qualify.

Always wondered what I'd do with a million bucks if it dropped into my lap. Thought it might be fun being a small time investor, making micro loans to folks in need.

MorrisonCorner · #6 09/13/06, 12:06 PM

This looks like what I've read about "tontons" only slightly more formalized. As I understand the tonton a group (usually family members) bands together and each family contributes a set amount to the pot for a set period of time... let's say 10 members each pay $100 into the pot for 10 months.. creating a monthly amount of $1000. The families draw lots to see who gets which month's $1000, or I suppose, if various members had the need earlier on it might be agreed that they'd take the first pots. At the end of 10 months the families, together, have saved and lended back to themselves a total of $10,000.

Of course, each family could have saved their $1000 on their own over those 10 months, but usually a tonton is for longer periods of time and substantially more money per month and is used to do things like finance a start up business or buy travel to bring family members to "the new country" wherever that happens to be.

Anyhow, if you're the last to collect your $1000 you'd have to have serious faith that everyone else would continue paying in as they're supposed to!

But a variant on the theme might be forming a family "mutual fund" or "revolving investment fund" where family members contribute a set amount every month and those monies buy shares, just like a mutual fund. The money is then invested in various instruments... from stocks to bonds to family enterprises or revolving loans. But it seems to me this would run afoul of various banking and commerce laws in the USA unless it were very carefully structured. And you'd have to think very far out: what happens if someone dies owning shares in the family investment fund? Dies owning the fund money? Defaults?

This sort of investment strikes me as the sort of thing one might want to get involved with only with money you can afford to lose. If it works, it would be great... but I wouldn't have any more than I could afford to lose tied up in it.

But then, I'm a cautious old fart!

bare · #7 09/13/06, 12:33 PM

I agree completely. But what investment is without risk? The idea that appeals to me is that the group suffers or gains by the integrity of it's members.

There is a chance and opportunity to get pretty decent returns on your investment, far better than you would with your 50 bucks sitting in a savings account. The way the program looks to be set up is potential loaners actually bid on taking on the risk. If there are more loaners than need, the interest rates start coming down.

I wouldn't mind investing a bit and will likely do so even if there isn't interest here on the forums, but if anyone else might be into it, maybe we could generate a bit of interest here.

michiganfarmer · #8 09/13/06, 01:49 PM

I'd be interested. It could be like building a big savings account for whoever had an emergency.

AngieM2 · #9 09/13/06, 02:11 PM

I'm reading and thinking....
Angie

marvella · #10 09/13/06, 03:37 PM

bare, i saw it this morning, but didn't know quite what to say.

i guess i am wondering...

how can a person who has had a lifetime of financial mistakes do any better with something like this? i guess i don't understand it. wouldn't those who invested well be dragged down by members who did less than well?

cindyc · #11 09/13/06, 04:20 PM

ARE we talking about a lifetime of mistakes, or a bad run? I know there is a school of thought out there that says that there is no such thing as a bad run. You are good with money-or not. We had a bad run once. I don't believe that. Dh is a computer programmer with experience and he is very marketable. Anyone can have a bad run. When you HAVE to in order to survive, you make more risky decisions...
But that is not the topic of this thread. People who can't afford health insurance do this sort of thing all the time... pool resources for an eventual need. But I do have to admit that if you already have a horrible disease, you are probably not eligible, becuase you will drain the system. So, the GROUP carries a ryder for unexpected catstrauphic illnessess that happens to a member. The group doing it makes it affordable, and the system is not drained.

Anyway, I am also listening...

Cindyc.

bare · #12 09/13/06, 05:19 PM

Here is the way I see it. Please forgive me or throw some arguments out here for discussion. I tend to see opportunity around every corner but I'll be the first to tell you that things don't always work out the way I think they will.

Like many, I've been a member of this forum for a good long time, since before it even was a forum I guess. Over the years I've seen many tragedies in the making. Lot's of unfulfilled dreams. I, as have many others, felt compelled to contribute toward making someones life a bit easier, or wanted to help them fulfill a dream that's just a tad out of reach.

I ran across Prosper, or peer to peer investing, on another board I'm a member of, the credit boards. http://www.creditboards.com/forums/ On that board, there are several investor groups that have been involved in borrowing and loaning each other money under the aegis of Prosper.

As noted in my original post, concern for fellow member Ken in NC inspired my bringing the idea to the board. If Ken had a figure in mind that would help to keep the wolf away from the door until disability payments or more lucrative work came available, he could join prosper, lay out his proposal and ask for financing. In joining Prosper as either a borrower or a lender, you have to submit your credentials and agree to a credit and background check.

For instance. It sounds like he owed 20,000 balance on his home and had 25,000 in equity, as well as two and half acres of paid for land. He could undertake a number of options. He might ask to borrow 10,000. I have no idea what his credit grade is, so at this point, lets just arbitrarily assume he has a "B" rating, shown that although he has had minor credit problems in the past, he's always eventually managed to work things out and get them paid off, indicating that he's a pretty good risk.

So, he asks the group to finance 10,000 at say 10% interest for three years, figuring he can prepay his mortgage with green tree 40 months. In the meantime he promises to pay the group back 322 dollars a month for 36 months. That gives him breathing room to find other options. Trade down, find better paying work or collect disability.
No more threats of default, or worrying about you and your child thrown out on your collective ears. Then if he does default, he's only let down members of his own group, ideally made of of friends and acquaintances here on our forum. You know he'd be loath to do that and would go the extra mile to ensure that didn't happen.

Now, say I felt compelled by his plight and wanted to help Ken out somehow. I might have an extra $100 I'd be willing to risk, but really would rather get it paid back eventually and maybe even earn a little bit of interest. All it would take is another 99 people here to invest at that level to fully fund his request. If he DID default, I'd be out a portion of that 100 bucks. But if he is true to his word, and pays the debt off, I'll end up getting 130 bucks back that I can turn around and loan to some other deserving soul or put back in my pocket.

Really, it's just a social support system. I know that losing 100 bucks isn't something that will radically alter my life, but 10,000 can radically alter another family's lives and ideally, there's every possibility I'll get it back, with interest.

This is already too long, so I'll post other potential scenarios later.

bare · #13 09/13/06, 05:49 PM

Ok, here's a simple proposal. Say ten Homesteader families here start the intitial group off. One of said members, bare, sure wishes he had 500 bucks to build that chicken coop. I've planned it all out, bought the chickens, calculated feed needs, see an opportunity to sell 25 dozen eggs a week and think I can pay off a 500 dollar loan in three years from the profits.

Here's my proposal:

Fellow homesteaders, you've all known me for many years. I know you all love me, even you die hard republicans. I want to start raising chickens to supliment my income here on the homestead, but it sure would help get things off the ground if you could see your way clear to loan me the money so that I might build a chicken palace. I figure I can do a real nice job for 500 dollars and I'm willing to pay 20% interest. I promise to make regular monthly payments of $18.58 for three years.

Now, say 8 members of that original group decide, yeah, I've read bare's posts for awhile now and he seems a decent sort. His credit grade looks pretty good. I've got an extra 50 bucks sitting around I don't care about too much and I sure do like the idea of making 20% interest!

Two members of the group are thinking, that bare feller, he ain't nothin'! I wouldn't trust him with a pair of dirty socks.

So, now bare's got 80% funding and his time is about up. a couple member decide they REALLY like the idea of 20% interest and just happened to find another 50 bucks under the seat cushion.

Fast forward a year. bare's been fantastically successful in his chicken operation and has managed to not only expand from his original plan, but fulfilled the terms of his loan two years early! In fact, he's so successful now, that he has an extra 50 bucks a month that he can use to help finanace some other homesteaders wildest dreams.

Does that make sense?

Arkie1 · #14 09/13/06, 07:11 PM

It makes sense to me & initially sounds good.

As with all financial proposals, there's a few questions.

Who sets the interest rates both for the investors and the borrower?
Aren't there rules in place either State by State or Federal regarding the maximum interest rate that can be assessed otherwise it becomes usary which is illegal?

Next question: who is the person determining a potential borrowers credit? Is this a group decision or would there just one person working on credit & background checks? I know for myself; I don't especially like my financial affairs distributed to more folks than necessary.

bare · #15 09/13/06, 07:25 PM

You really need to poke around the Prosper site linked to on the first post.

The person asking for the loan picks the initial interest rate they are willing to pay. However, if there are more people interested in financing the loan, they can offer to finance it at a lower rate to get in on the pool. Again, if you look at some of the current loans on the front page, you can see examples of this.

When you first sign up to be a Prosper member, you present your credentials to Prosper and authorize them to pull your credit score and a background check. From that information each person is issued a credit grade. AA, A, B, C, D and so on. No other member, not even the group leader sees or has access to your personal information other than the credit grade and what you may disclose when asking to be considered for a loan. If you were just an investor for instance, I don't think anyone can even see your credit grade though I might be wrong on that.

Qwispea · #16 09/13/06, 10:00 PM

My curiosity is 'piqued' ..I am interested.
In fact ..if it can help Ken get over the 'hump' ..I'm very interested.

Will investigate more fully tomorrow. Thanks for posting the idea.

MWG · #17 09/13/06, 10:12 PM

You would probably have to create a corporation since the man will want to tax the income from this.

bare · #18 09/14/06, 12:09 AM

Prosper takes care of all that corporation stuff for you. If you make a profit at the end of the year you get a 1099 to turn in with your taxes.

jnap31 · #19 09/14/06, 01:27 AM

Quote:

Originally Posted by Qwispea

My curiosity is 'piqued' ..I am interested.
In fact ..if it can help Ken get over the 'hump' ..I'm very interested.

Will investigate more fully tomorrow. Thanks for posting the idea.

DITTO this post

Northumberland · #20 09/14/06, 06:46 AM

I would be interested.