Prosper Marketplace – October 2013 Update

Getting closer! I only have seven more catchup posts after my summer’s blogging break.

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. Let’s see how October turned out.

Prosper – Taxable Account
Prosper Marketplace - Main Screen - October 2013

Click for larger image

In October, my Prosper account maintained consistency and increased the total net interest income earned to $18.01. With the full investment of the $300 added in August, I decided to go ahead and invest an additional $600 to bring this account up to roughly $2,000 in value. As of the end of the month, I was able to get about $200 invested or pending issuance. With all of the additional investments, my monthly net interest number should really begin to jump over the next couple of months.

Much to my surprise, I continue to charge forward in hitting my goal of hitting my 2013 goal for Prosper. However, the first potential derailment is coming down the pike as I currently have one note now in late status. It is important to note for those interested in investing in Prosper that you are unable to sell late notes on the secondary marketplace within Prosper. While this doesn’t affect me because of my buy and hold strategy, it is important to realize this if you have an affinity for trading or dumping notes that begin to sour. At this point, I would anticipate this late note not reaching charge-off status until after the end of the year. While this means I should hit my 2013 goal, my net interest needs to increase as I need to average $18.93 per month to beat my goal.

As you can see above, Prosper has provided an all notes return figure of 16.87%, which is a slight dip from last month’s 17.02%. I believe this dip is due to the one note going late. Given the anticipated returns of around 15-16% given my investment criteria, I am assuming this number will increase as the account matures, then drop once the late notes start to hit. The anticipated return based on my investment criteria does not factor any idle cash The real test will be once my notes start hitting the “seasoned” age of 10 months. At the end of September the average age of my notes is 130 days. Looking below now, take a look at the details of the account as it stands now.

Prosper Marketplace - Details Screen - October 2013

Click for larger image

Currently, I have available cash of $441.74 with two notes pending issuance. My account currently holds 64 active notes with one late note, and three paid in full. As I’ve mentioned previously, having notes pay off early increases the note churn in the account and increases the idle cash in the account, lowering my returns.

Given my overall risk of the notes in which I’ve invested, now 22.04% at acquisition, there will most certainly be late notes in this account. 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 October, as I said above, I earned $18.01 of net interest, actually decreasing my internal rate of return (IRR) since opening the account from 15.60% to 15.33%. I calculate my IRR using Excel’s XIRR function. The decrease is evidence of the drag that idle cash can have on returns. Considering this account has seen $900 of additional investments over the last two and a half months, the increase of interest received has not quite caught up to the additional investment. I would expect this decrease to be temporary as the cash gets invested and the loans issued, excluding the effect of any late notes.

Isolating the month of October, my overall internal rate of return came out to be annualized 14.44%. While that level of return sounds high, there is no reason why I can’t achieve something close to that in this account. Given the additional cash drag, I am glad to still have achieved such a high return in such a short snapshot of time! I am looking forward to growing this account so that the compounding will be much more noticeable, as well as the ability to absorb late loans and defaults.

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!

If you enjoyed this post, subscribe below to get to receive new posts by email.

Comments

  1. I gave prosper a try a while back and by “a while back” I mean approximately 6 years ago. Looks like they have improved tremendously!

    • Thanks for stopping by Marvin. I would strongly encourage you to look into Prosper (and Lending Club for that matter) as an additional means to invest and pursue your passive income goals.

Leave a Reply to writing2reality Cancel reply