Update of My Prosper Account

Last week I took a look at my Lending Club account and how it was doing.  This week I'll examine my Prosper account.  For those who don't know, both Prosper and Lending Club are Peer to Peer Lenders.  They take applications from those who want to borrow money, review the applications and offer loans to those who qualify.  The interest rate offered depends on the credit-worthiness of the applicant and the risk factors associated with the loan.  Once that is determined, the loan is offered to investors who can purchase as little as $25 worth of the loan, either by personally reviewing data about the loan or by setting the computer to automatically invest any available funds in loans that meet criteria you have set.

Here is a screenshot of my Prosper dashboard.  You can see that Most of my money is in C, D, and E rated loans.  You can see that if you look at all my notes, the annualized return is 13.39%, but that if you look at my seasoned notes--those that are more than 11 months old, the return is 12.88%.  That is because the older a batch of notes gets, the more defaults there are.  It is been Prosper's experience that once a batch of notes reaches 11 months of age, returns stabilize.  The dashboard also shows you the annualized return by grade of my seasoned notes.  

If you click on the screenshot you can see it better but a few highlights: 

• The average interest rate of the notes I own is 17.5%
• My payments in excess of principal are $3,076.21
• The amount of principal that has been charged off is $1,115.95
• My gain to date is $1,960.26 (the account is about 18 months old)
• 49 notes have been charged off and/or sold (they sell charged off loans and you get a few cents on the dollar for them)

As with Lending Club, the rate quoted above does not account for cash drag--money that is in your account buy not earning interest because it is not currently invested in a note (as of this minute that is $200, which is pretty typical for me).  If you look at the increases in the value of my account the last few months, since the last principal infusion, and annualize it, you'll see that I'm earning about 6.6% annually.  If you use the XIRR calculator on my account, the annualized return is 10.9% reflecting, as did the Lending Club calculations, that the effective rates drop as the accounts age.  Still, whether 6.6% or 10.9%, it is more than I got in the stock market last year.