Prosper.com 2-Year Performance Update

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My experiment with peer-to-peer lending at Prosper.com continues, and it’s been a busy year.

New listings are posted at 9am and 5pm, and because the account spins off cash almost daily, I’m kind of addicted to log in and see which new loans I can reinvest in.

Summary

My loans are earning 9.88% (“seasoned”) and 10.21% (overall), slightly better than the 9.69% currently advertised on the homepage. The “seasoned” number contains only notes that are at least 10 months old.

My guess is most defaults happen early in the repayment cycle, so sharing a seasoned number only is a more accurate view of the potential long-term returns.

Updates

Since last year, there are a few newsworthy items to take note of:

  • The super-helpful website Lendstats.com is all but shut down. This is really a shame because the data collected there and the forum were both really valuable.
  • Prosper.com recently scored an additional $20 million in venture funding from Sequoia Capital.
  • I added an additional $5k to my account.

Returns by Loan Grade

Take a look at my returns by loan grade (the lower the grade, the riskier the loan):

These are for the seasoned loans:

returns by grade seasoned

 

And for all notes:

returns by grade all

Allocation

Because of the markedly higher returns among the lower-grade notes, I’ve tried to skew my portfolio toward those. But sometimes they’re hard to come by and 7-8% is still better than having the funds sit in cash and earn 0%.

allocation by rating

Chargeoffs

In total, 6.5% of my loans have defaulted, and another 3.4% are delinquent. Stay tuned later this week for an in-depth study on the defaulted (and likely to default) notes.

Cash Flow by Month

I started tracking cash flow last year as part of my passive income goal. This figure includes payments received less chargeoffs.

  • January  $17.23
  • Februrary  $53.73
  • March  $135.46
  • April  $165.59
  • May  $166.24
  • June  $163.87
  • July  $150.99
  • August  $159.90
  • September  -$35.21 ouch!
  • October  $81.44
  • November  $112.16
  • December  $54.49
  • January ’13  $169.19
  • AVERAGE  $107/mo

Reinvestment

So far I’ve just been reinvesting in more Prosper loans. You know, the power of compounding interest and all that jazz.

Strategy

My initial investment was allocated automatically across a diverse portfolio of loans of all grades. No other filtering criteria was used.

Turns out, that’s not the smartest way to do peer-to-peer investing. Since then, I’ve started to use some of the filters available to hand-select the ones I think will perform well.

Or at least the risky ones with the best chance of success. I’ll examine some of these strategies in a little more detail later in the week with the default case study.

Still a pretty fun and exciting way to invest. If you want to get started with an account of your own, be sure to hit up my affiliate link so I get some credit!

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