At Least it Looks Like I’m Making Money On Prosper
I’ve been investing a little money each month in Prosper for almost a year now. Each month they send a statement detailing the account balance. I calculate the different between the current month and the previous month to determine how much interest to add to my account in Quicken. Of course, the amount of interest I earn each month has been increasing as I slowly add new loans.
I just got my statement for January and my total account value is just over $2,000 now including 31 loans valued at $1565.81 (the rest is in cash or pending bids). That is an increase of $18.11 from the previous month or is equivalent to an annual interest rate of almost 14% (if I did my math right). Sounds good so far, right?
The problem is that I now have two loans that are over 4 months past due, and two that are over 15 days late. There is a decent chance that those two late ones will still become current, but the two that are 4 months past due are probably gone for good. They were each loans for $50 to begin with, and the combined remaining balance on them is over $95. I think eventually Prosper will sell them to a debt buyer and I’ll get a small portion of that back - probably less than $5 each.
So, when taking that into consideration, my earnings from Prosper are much more modest. I’m still in the black as long as those two late loans become current again. The good side of it though, is that I am learning a lot. Those two bad loans are from the first couple months when I was just tinkering with it, and I’ve gotten a better feel for lending now. Also, I’m continuing to add new low-risk loans, and as I continue that trend, the diversity should make the inevitable losses cause less of a dent in my overall account value.
I’m also diversifying a little bit by experimenting with LendingClub as well. I like it better in some ways, and dislike it in others. But that is the topic for a future post…
