Prosper vs. LendingClub Investor Experiment: 15.5 Month Update

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After posting the 1-year update (Part 1, Part 2) of my Beat-The-Market experiment back on November, I got bored. I had started with $10,000 split evenly between Prosper Lending and Lending Club, but although this alternative asset class had potential, I just didn’t find it reliable enough for me to invest significant funds in it.

I didn’t sell off my existing loans, but I stopped reinvesting in new ones. I hadn’t logged into either account for months, but this week I wanted to download my tax documents. So, I figured another update was in order, 3.5 months later.

$5,000 LendingClub Portfolio. As of February 19th, 2014, the LendingClub portfolio had 199 current and active loans, 36 loans that were paid off early, and none in funding. 6 loans are between 1-30 days late. 8 loans are between 31-120 days late, which I will assume to be unrecoverable. 7 loans have been charged off ($152 in principal). $1,814 in uninvested cash. Total adjusted balance is $5,305. This is only $1 higher than 3.5 months ago.


$5,000 Prosper Portfolio. My Prosper portfolio now has 185 current and active loans, 56 loans that were paid off early or payoff in progress, and none in funding. 4 loans are between 1-30 days late. 10 are over 30 days late, which to be conservative I am also going to write off completely (~$183 in remaining principal). 14 have been charged-off ($302 in principal). $1,619 in uninvested cash. Total adjusted balance is $5,255. This is $45 less than 3.5 months ago.


What has happened since my last check-in on November 1st?

  1. My total adjusted balance is $10,560, which is a $44 drop over the last 3.5 months. Even with the increase in idle cash, my total balances should still be inching up, not down. It appears that an increasing number of late and defaulting loans are starting to catch up to me.
  2. My idle cash balance across both accounts has increased by $1,527 in just 3.5 months, indicating an increasing number of early loan payoffs and thus fewer people paying me 10% interest rates.
  3. Prosper is currently doing worse relatively than LendingClub. This could change again in the future. Here’s an updated chart tracking the LendingClub and Prosper adjusted balances over these past 15.5 months:

I suppose that I’ll hang onto these loans and see how the rest unfolds. I know that other people report 10%+ annual returns on Prosper and Lending Club and may be better loan pickers than me, but I still be wary setting such high expectations for the average P2P investor. I’m still in the black and doing okay, but I wouldn’t count your chickens until the loans get a bit more mature.

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  1. I have enough invested in LendingClub to understand that these people are either lying, in denial, or they don’t even know how to calculate return on investment! And the tax reporting is not straight forward you need to enter charged off loans on another form if you want them to actually be deducted from your income!

    • Randy,

      I invest in Lending Club and Prosper (Lending Club almost 4 years now) and have listed returns on my site. I did it as an experiment and with full transparency.

      I have had positive returns and decent returns (over 9%) since inception. How am I lying, in denial, or not know to calculate my ROI? There are many others who are similar to my experience.

  2. I’ve been invested in Lending Club since 2008. I like it in principle, but my returns are around 5% over that time and frankly, the tax headache and need for constant vigilence makes it an untenable investment for me going forward. I’ve been slowly divesting (not selling loans, but just puling idle cash as I collect it).

  3. I have similar experience as above. I invested only in lending club but it is a headache to reinvest, tax implications etc. Their collection rate from defaulters is abysmal. I had one case of person taking money and no payments at all. I think people are now realizing illusion of investing in these alternate investments. I have started pulling money as accumulates too. I am better off leaving it an etf or index fund. Less headache gains are losses are visible easily.

  4. I am an early investor in lendingclub too and I have noticed the returns are dropping sharply. I think the site has an imbalance with too much money chasing too few loan which bids down the rate. Meanwhile their defaults appear to be growing as their underwriting standards are deteriorating due to pressure to create more supply of loans. Combine that with their desire to go public and boost prime (notice how they dropped the min to $5K) and it adds up to poor results for individual investors. Oh well, still not a bad part of a diversified portfolio but returns are probably going to drop to 6-7%.

  5. Thank you for this post! I have ~50k held in cash in a ROTH IRA and I was thinking of a rollover to lending club. This post has made me reconsider.

  6. Agreed. I noticed that last 6 months, 55% of my income goes towards charged off loans.. I think this is due to PRIME feature.. Many investors enabled it by default and not “computer” selects loads for you, therefore you giving your money away to deadbeats.

    LC had great returns 2-3 years ago.

  7. I’ve read somewhere that p2p lending is in a bubble. I am not certain if that’s the case but I am cautious.

    I’ve also read stocks and bonds are overpriced, so personally I keep my lion share of money in CDs and short tips. Chasing 10% requires too much risk IMO

  8. As many folks have insinuated, the times have changed with the popularity of Lending Club and Prosper exploding of late. Finding ways to automate your investment will be important should you desire to continue investing.

    As for the returns, reinvestment can certainly mask the overall returns of your portfolio. When I look at my own returns, I generally take an overall look, as well as routinely examine the older “vintages” to see how they are performing. There are certainly plenty of folks who are making double digit returns long-term, but generally mid-to-high single digit returns can be expected for those using even the most basic filters.

  9. I have not seen some of the issues most of you guys are experiencing. I did switch to Prime a couple months ago, but I have a filter set, and it appears to be picking fairly similar to how I was prior to Prime. My default rate has not really gone up. I’m still getting 12.7-14% if LCs calculated return can be believed. But honestly, even if it is half of that, I’m not sure of a better place for the money right now. I fear bonds ATM, and stocks are looking iffy.

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