Prosper – June 2013 Update

As part of my effort to catch up from my blogging hiatus this past summer I am going back and posting my monthly updates.

After investing with Lending Club for four years, I decided to diversify my peer-to-peer lending asset class and make an investment with Prosper. Having been bullish on peer-to-peer lending since opening that Lending Club account back in 2009, I am excited to see how my investment in Prosper grows over the next several years. In order to bring some level of transparency to my investments, each month I plan on providing an update on how my Prosper investment is performing. While a bit delayed, this is my first Prosper update. Let’s see how June turned out.

Prosper – Taxable Account
Prosper Taxable - Main Screen - June 2013

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As of the end of June, my taxable account with Prosper saw its first month with net interest income with $11.15. This is a great start, and should hopefully get the ball rolling on my 2013 goal of $120 from Prosper in net interest. As with my Lending Club accounts, I am tracking net interest, which is the total interest received less any fees, defaults and charged off loans. Prosper actually makes this process easier as I calculate my return on an actual account balances while ignoring accrued interest, which Prosper does not include in the account balance.

As you can see above, I don’t have a return figure from Prosper in which to compare to just yet, but have invested in C, D, and E graded notes. While I haven’t posted my investment criteria just yet, it should be coming along later this month. Looking below now, take a look at the details of the account as it stands now.

Prosper Taxable - Details - June 2013

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Currently, I have available cash of $23.53 with one note still pending. Once that note goes through, I will have fully invested the original $1,000 investment. Again, as I have done with Lending Club, I will be rolling the payments I receive into additional loans at $25 per note. Given my overall risk of the notes in which I’ve invested (21.76% at acquisition), there will most certainly be late notes in this account. With Prosper, the selling of these loans is not an option, so I will be continuing my buy and hold strategy, by default. Naturally as I continue to track the performance of this account, you will see how these notes perform and what my default rates end up being.

Prosper Summary

As for my earnings, during June, as I said above, I earned $11.15 of net interest, giving me an initial internal rate of return since opening the account of 6.98% using Excel’s XIRR function. Given the smaller size of this account, and the short time frame in which I was able to get all of my money invested, there was a smaller amount of cash drag than I would have originally anticipated. I am expecting this to increase as the effects of that cash drag minimize.

Isolating the month of June, my overall internal rate of return came out to be annualized 14.44%. Not a bad start at all! Moving forward I would expect this to stay in the 14-17% range as defaults, late loans, and uninvested cash drag the returns down slightly. All of this is to be expected, as I mentioned before, given my overall higher risk profile of the notes I am investing in currently.

I have updated my Prosper page with this information.

Interested in investing (or borrowing for that matter) with Prosper? Feel free to check them out!

Have questions about peer-to-peer lending? Just ask!

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Comments

  1. Wow you’ve been doing p2p lending for 4 years? Other than diversifying accounts, why might an investor choose prosper over LC? I’ve been doing LC over a year, but know next to nothing about Prosper. Thanks!

    • That’s correct, I’ve been investing for four years and watching for five! Much like many folks eventually diversify to multiple brokers for their equity investments, I decided to also gain diversity in my peer-to-peer lending accounts. While there are more than a few reasons why, I will lay out a three of them. The first is the different underwriting and credit grading at each company will provide a different mix of loans under different criteria. The second is entity risk, which while still not a major factor, is one to consider. Lending Club doesn’t provide any guarantees for small investors like ourselves if they were to go bankrupt, Prosper does. The third is the opportunity for higher returns and additional note availability. As you know, staying fully invested in Lending Club is tough, so between the additional note opportunity and the higher interest rates (and hopefully higher returns), I’ve added Prosper to the portfolio.

      Thanks for stopping by CI and let me know if you have any other questions about Prosper or peer-to-peer lending!

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