$10,000 P2P LendingClub and Prosper Loan Portfolio Update – January 2013

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Here’s the last part of the monthly update for my Beat The Market Experiment, a set of three real-money portfolios started on November 1st, 2012. See also my $10,000 Benchmark and $10,000 Speculative portfolio updates for January 2013.

On 11/1/12, I deposited $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest with an 8% target net return.

$5,000 LendingClub Loan Portfolio, January 2013 Update. (A little late on the update, although only about $9 in extra interest was accrued since 1/1.) Below is a screenshot of my LendingClub account as of 1/9/13. Keep in mind that I had loans before, but sold them all on the secondary market and started fresh for this tracking experiment.

(click to enlarge)

Since last month, I invested another $400 for a total of 191 active and issued loans. I used simple loan filters based on my LendingClub filters post as well as my Prosper filter research noted below, and haven’t spent any time looking through any individual loan descriptions. The portfolio is very young, but so far all loans are current (16 days past due is considered late).

LendingClub.com account value: $5,082.51 (includes principal, accrued interest, net of fees)

$5,000 Prosper.com Loan Portfolio, January 2013 Update. Below are screenshots of my Prosper account page as of 1/9/12.

(click to enlarge)

Since last month, I invested another ~$1,500 for a total of 201 loans after activating the free Quick Invest feature which automatically invests in loans that satisfy my preset criteria. The convenience is great so far. Again, I used loan filters very similar to those suggested in my Prosper loan filters post. I did manage to already have one loan that is 3 days late. After peeking at that individual loan description, and it must have slipped through when I was tinkering with my filters because the borrower listed themselves as unemployed and I filter those out now. Hopefully it will go current again, but this is why you diversify.

Prosper.com account value: $5,033.55 (includes principal, accrued interest, after fees)

Total P2P loan value: $10,116.06 (includes principal, accrued interest, after fees)
I know this isn’t the same as the actual liquid value of the loans, but it’s the best I can do for now. In the future, I plan to assume that any loan past 30 days late will be a full default of all remaining principal.

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  1. What about the $199.70 in charge offs for Lending Club? That was the main reason I abandoned them… Had a bad experience with a loan going late, being sent to collections, written off, the next day the lendee payed collections, yet none of that money came to me. LendingClub was too quick to write off the debt, and screwed me out of the settlement.

  2. I was going to invest via Prosper and Lending Club, but found out that North Carolina doesn’t allow it’s residents to be investors. I can only trade notes. Ruined one of my 2013 goals.

  3. @Ben – For some reason, the LendingClub page includes my old charged-off loans but doesn’t count the active and paying loans that I sold on their secondary market. In my previous LendingClub experience which ran from 2007/8 through the financial crisis, I only invested in the lower-return, lower-risk AA loans, my net return was about 5% even after accounting for the $199.70 in charged-off loans. I’m hoping to do better this time.

    @Grayson – To build your portfolio, look into the secondary market via FolioFN. Many people in states that don’t allow direct LendingClub borrowing are allowed to invested via the secondary market. You buy loans above or below face value and still create a big portfolio.

  4. I’d recommend not reserving 100% for delinquent loans, that is far too conservative. LC includes recovery rates for various classes of delinquency on their statistic pages. Recoveries are as follows Grace Period – 84%, 16-30 days late – 77%, 31-120 days – 53%, 120+ – 4%. I use 85/75/50/0 as my valuation for delinquent loans, although I think I have the 31-120 declining linearly from 50-0 rather than a step function.

    The Lending Club return calculation does not accurately figure in notes sold on the secondary market. I have made a 34.42% annualized return over the last 20 months trading in the secondary market yet LC calculates my net return as 8.66%

  5. @Bill – Thanks for the stats, I haven’t been keeping up with them and remember the recovery rates being much lower in the past. I wonder if Prosper’s numbers are similar.

  6. I’m in the beginning research stages of learning how to invest in P2P lending. How are active loans sold to/in the 2nd market?
    Thanks for all constructive advice.

  7. Even with charge-offs, Lending Club has been awesome for me. I don’t invest without reading the full loan application though.

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