It has been a while since I last posted the status of my peer lending income stream using Prosper. There is also a very good reason why I haven’t kept up with monthly status updates. My Prosper investments have basically turned into a high risk savings account! The number of charge off loans that are in collections is increasing, along with loans moving into a late status.
As the economy continues to struggle, so do the peer loans I have made over the past 18 months. The one bright side to my status is that even as bad as things are, I am still in positive territory looking back to when I first started lending money in January of 2008. I am earning just enough interest from the good loans to offset the toxic loans.
Here is a recap of my peer lending status at the start of 2009, my current status, and where I am heading.
2008 Prosper Recap
As of December 2008, I had the following assets in my Prosper account -
- Total Investments – $2,213.09
- Interest Earned – $222.33
- Charge Off Loss – ($148.43)
- TOTAL Earnings in 2008 – $73.90
- Return on Investment 2008 – 3.34%
2009 Mid Year Status
At the midpoint of 2009, I had the following assets in my Prosper account -
- Principal Value – $1,373.48
- Cash Balance – $904.39
Total Assets in 2009 – $2,277.81
My total assets at the beginning of 2009 in this account were $2,286.99, so I have lost ($9.18) or (-.4%). I have not contributed any additional funds to this account during 2009, nor have I funded any new loans. These results are strictly based on peer loans established in 2008.
Toxic Loans
I have my share of toxic loans that were funded during 2008 in my peer lending account. I have 9 loans that are in a charge off status in collections which I don’t expect to see any principal or interest returned. There are also 9 loans in a “late” status, with a few on the verge of moving into collections.
One observation of the late and charge off loans that I currently have is that they are widely spread across borrowers. Based on Proper’s lending grades, I have charge off loans that range from grade A – D. In addition, the original principal borrowed on these loans range from $1,500 – $24,000. The point is that my bad loans are evenly spread across borrowers with good and bad credit who have taken out large and small loans.
Final Thoughts
Now that Prosper is opened back up again for new loans and lenders, I still cannot lend any money. As I live in North Carolina, my state no longer allows me to fund any new loans. As a result, I will begin withdrawing my cash balance and using it to fund other passive income projects and investments. Based on my poor performance in peer lending, this is probably a blessing in disguise!
What kinds of returns are you seeing from peer lending?
Originally posted 2009-07-21 08:34:10. Republished by Blog Post Promoter
Related posts:
- Peer to Peer Lending – 3rd Quarter Review (2009)
- Peer Lending – Review of 2008 Prosper Rate of Return
- Peer to Peer Lending – Status (January 2009)
- Peer to Peer Lending Status – December (2008)
- Peer to Peer Lending Status – November (2008)
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That’s an interesting way to make a little extra money. I guess Prosper works in pretty much the same way as Zopa – which is the one I’ve heard about in the UK, although there is also a US branch.
I was thinking of reallocating some of my stocks and shares capital; maybe I’ll dig a little deeper into Zopa, and see how they handle risk of default. I’m glad you didn’t lose too much via Prosper. I notice that the frontpages of Prosper and Zopa claim average annual returns of 7.06% and 8.2% respectively. No consolation if you’re the one left holding the toxic stuff though, I guess.
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Have you tried Lending Club? I would be happy to offer you a referral link where we could both make $ out of each other
I did a LC thing in early 2008, got a $25 bonus which I cashed out and invested $25 in one loan which is still paying. 1-2 months ago I slowly started building a loan portfolio and now have 5 loans. My goal is to eventually have about $800-$900 worth of loans, where proceeds (interest and principal) would fund one new loan every month. I do have a strict criteria for entry however, which means that sometimes it is impossible to find decent loans..
Thanks for the tip on LC. I’m a Brit though, so I don’t think I’d feel comfortable doing lending (esp. for the first time) in a different market – I’m not sure as a non-US citizen that I’d be allowed to even. The UK and US ways of doing “P2P” lending are very different, as US uses third party financial institutions (eg credit unions) whereas in the UK it is truly person-to-person (actually person-to-people to minimise risk). And after digging around, I withdraw what I said previously about Zopa being in the US – actually it lasted less than year in the States, as the model didn’t work very well, and they closed it (not sure whether it was over-regulated).
I’ll continue investigating Zopa UK, but from perusing their forums, I’m going to take my time, as I can hardly understand what is being discussed on there – I need to learn the ‘lingo’ first!
@Neil – I had actually looked into Zopa as well about 18 months ago but decided to go w/Prosper instead.
@BB – I opened up an LC account several months ago, only to learn that NC wouldn’t allow me to loan money through them as well. I actually got an email yesterday from Prosper stating they are working to get approval to open up lending in NC.
Dang, that’s a lot of charge offs!
When do you raise your investment to big bucks like $20-50k?
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@Financial Samurai – I can no longer bid on any Prosper loans based on the state that I live in. I am just waiting for all my outstanding loans to be paid off or charged off.