If you have been reading this blog, you know that I have to borrow some money to pay off some back taxes. One of the sources for the funds and part of my original plan was to use peer-to-peer lending. Well, there are only 2 major P2P lending outfits in the United States that I could find. They are Prosper and The Lending Club. I had hoped to get the majority of the funds in this fashion. However, Lending Club does not lend in the state of Indiana (one of only 8 where it doesn’t). So that left Prosper.
I went to the website, created an account, and filled out some basic information. Within minutes, I had learned my credit score but was informed that I did not qualify for the full $25,000 loan maximum but only $15,000. I decided that I needed to take whatever I could get since the possibility always exists that something might come up and I only had a limited amount of time to get all the plans in place to pay the IRS.
The application process was a breeze. I filled out some personal and financial information online which then went into a profile that was posted online. Investors could read about my need for funds, the interest rate that the loan was paying, and make an investment in my loan. There was also a verification process that Prosper uses as any bank would with a 3 step code for where I was in the process. This is to help investors know whether or not my financial information had been verified.
Prosper also sent out a security postcard to my address to make sure that it was actually me who signed up for the loan. This was mailed to my physical address and I was asked to enter the code on the postcard online. I thought this was a good step, but wondered what might keep someone from pretending to be me and simply moved recently. I guess if the physical address didn’t match those on a pulled credit report, it might raise some red flags.
I also had to send in some documentation to verify my financial information. This worked out rather well also. I filled out the application on a Thursday evening and was already getting some investors by the next morning. I was a little delayed in getting back my financial information since I was out of town for the weekend. But once I had the time to get the documents together, it couldn’t have been any easier.
I was able to scan everything into my computer and email it back. I needed to send in the latest W-2 form, a recent pay check, and my bank statement to verify the income. I also sent a cancelled check that was used to set up the automatic withdrawal from my checking account to make my loan payments.
Watching the Funding Roll In
Watching the loan get funded was an interesting process. There were several investors that first night, then some more over the weekend. Activity seemed to slow down after the first few days. I suspected that it had to do with the fact that I didn’t have all my financial information back due to the weekend and my being out of town. It turns out I was right, but not in the way that I had suspected.
After emailing my financial information back in, I logged into my account to see if any new investors had added funds to my loan about 12 hours later. Surprisingly, the entire $15,000 loan had been funded just like that. I looked through the investors and found that one investor had funded the remaining $13,000+ down to the penny.
After some searching on the internet, I discovered that there are a few big institutional investors that have made investments through Prosper and one of them had funded the rest of my loan. So, 20 investors are likely individuals and 1 is an institution. That is OK with me since I needed the money.
The funds were then directly deposited into my checking account about 4 business days after the loan fully funded. Again, the process was easy. Now, the payments will be automatically deducted. In fact, the first payment is scheduled to go out tomorrow although I suspect it may end up being Monday since tomorrow is the weekend.
I am a Prosper Affiliate
The process was so easy and worked well for me. So, I decided to become a Prosper affiliate. If you are interested in getting a loan or want to invest your money with them, simply click on the banner in the upper right hand corner of this blog. I know some of my readers invested in my loan and for that I am incredibly grateful.
The interest rate is a little over 18% so it will be a good investment for them. I plan on paying it off as early as possible based upon the other interest rates that I am paying, but I won’t get to it right away. I do still have some other obligations such as the Discover Card first.
Ultimately, I do hope to make a little affiliate income with Prosper. I will be using it for debt pay down like I am doing with all of my blog earnings.
Readers: Have you borrowed or lent through P2P lending? Share your experiences.
Someone asked not long ago what was happening on the income tax front. For those of you who might be unfamiliar with this part of my financial life, I owe some money to the IRS, and it is not just a little bit. It is quite a lot as a matter of fact. The funny thing is: I have the money but it is illiquid in real estate and retirement accounts.
In the current financial environment, it is impossible to borrow money at the bank. Believe me, I tried. Instead I had to come up with another plan which involved borrowing money from individuals so I could avoid paying more taxes plus a nasty penalty on funds withdrawn from a retirement account. Yes, I am a little like Greece and kicking the can down the road, but I think that things will be getting better.
The ultimate plan involves three steps. First, borrow money from Prosper. I did that and the money has already been deposited in my account. I was a little disappointed that I didn’t qualify for the maximum $25,000, but I am pleased with what I got. I will be writing a post about my experience soon if not on Monday.
The second part of the plan ended up involving swallowing some pride and asking my mom for a loan. I knew that she would help me, but it was mighty tough to ask for it. I am fairly independent and strong willed so I really didn’t want to ask except as a last resort. I figured that compared to the tax and penalty alternative of tapping the retirement funds, this was as close to the end as I wanted to get.
We met with the lawyer yesterday and got the promissory note signed. I also got the check and took it to the bank for deposit. Everything is going smoothly and I will repay both my mom and Prosper over the next five years.
The last part that needs to be completed is to mail a big check to the Internal Revenue Service in the next two weeks and then ask for a monthly payment plan to take care of the rest of the balance. That will take care of the 2010 Federal taxes. I should be able to have the remainder paid off by the end of the year.
Future Tax Years
I will still have 2011 taxes to pay, but I might have some more options over the next several months. The first item of business is to finish 2010 and make sure that I have the cash flow to get by month to month. Of course, I will have to see what life brings. No matter what happens, the 2011 taxes will be the end of the whole ordeal since 2012 is being paid as we go. There should not be any balance at all for this year.
After that, it will be time to get crazy aggressive on debt. I have already been able to pay off a few debts and am working on paying off the Discover Card currently. Using extra income from blogging has been a big help allowing me to make bonus payments of several hundred dollars at a time. Hopefully, I will be able to get the Discover Card paid off by the end of the year at the latest.
Needless to say, the whole situation is unpleasant and not one that I would wish on anybody but things could always be worse. I am thankful for what I have and my health and family.
I am also especially thankful to all of you readers. Thanks for taking the time out of your busy lives to read what I have to say and to go through this journey together with me. I derive much inspiration and encouragement from your presence and comments.
I only update my net worth when I have to send the annual personal financial statement to the bank to comply with the requirements for a loan my partner and I have on a commercial building. However, now that I hope to approach my Mom in order to solicit help in the form of a loan for using for a back tax debt, I figured I should go ahead and get the numbers together along with my budget so that I could demonstrate my ability to pay it off.
The last time I filled out the statement was in mid-July when I had a certain positive net worth. It is more than my tax liability, but the problem is that the vast majority is held in real estate and retirement accounts that I can’t readily access. Unfortunately, I did too good a job of paying myself first, but it was at the expense of current cash flow. Obviously, I will have to learn from this mistake.
I was pleasantly surprised to find that in the previous six months, my net worth had increased just over 28%! It was a combination of increased balances in the retirement accounts and decreased debt.
Needless to say, I was quite happy. It is about time that I got a little good news. It has been a somewhat difficult month, although I am incredibly thankful for my overall position in life. The problems that I am dealing with are quite minor in comparison to what could be going on, so I am not going to complain too loudly.
Prosper Loan and Mom
I sent in the requested documentation for the Prosper loan which I am hoping will be funded to take care of some of my tax debt. I am so thankful for those who have already contributed. So far, the loan is 9% funded. Here is the link to my loan. The listing expires in a little over 10 days. I am somewhat concerned that it won’t get funded, but maybe activity will pick up again once all the documentation gives me a level 3 verification. When it is all said and done, I will be able to write a post on the experience so I am looking forward to that.
I also sent an email to my Mom a few minutes ago. I figure that I will get a preliminary reply tomorrow sometime. It was very difficult to swallow my pride and ask for help. I am very independent and have been since I was a teenager. I am sure that I will continue to be independent, but I am hoping to recognize those situations where it might benefit me to ask for assistance. Maybe that is a sign of increasing maturity? Who knows? It was difficult to write and send, but it is done. Now I will wait.
I hope that the next several weeks of posts won’t be dominated by tax discussions, but it is a matter that is front and center right now given my current situation and the time of the year. I trust that most of you will be having less angst when it comes to the IRS, but feel free to write a comment or two.
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