Lending Club And Prosper Update (October 2012)

One of the things that makes me somewhat unique with Lending Club and Prosper is I not only give them good ratings, but I actively invest in both. While I don’t think either service is for a beginner investor, I do think anyone that’s considered an accredited investor by the SEC should include it in their asset allocation.

I’ve decided to merge my quarterly updates for Lending Club and Prosper in one post.

Latest Happenings

Peer-to-peer investing is slowly becoming mainstream. Lending Club will soon reach $1 Billion in investments in the next month or so. I believe P2P will become one of the main alternative asset classes in the next five years. I was also interviewed by Peter Renton, of Lending Academy, for an upcoming E-book on both P2P lenders. Since my last update, I’ve added an additional $2,000 to my P2P investments. This brings my grand total invested to $12,423.61.

Lending Club

Lending Club Returns (October 2012)
Since my last update, I have added an additional $2,000 to my Lending Club account. I decided to add $1,000 of new money to Lending Club. I also just had another 5-year CD mature and decided to put some of it into Lending Club. I recently deposited the other $1,000, and the summary does not reflect the additional $1,000 yet.

My new goal with Lending Club is to eventually reach $20,000 – $25,000 in the next 1-2 years with deposits and interest. Based upon current returns, it would mean approximately $200 – $250/month in free cashflow. It is still a means to juice my taxable fixed income/CD returns and is just a small portion of our net worth.

My NAR has increased from 10.24% to 10.76%. This is because of the new loans (higher rate of return), and the newer filtering I am performing on investments. I now have 3 more charged off notes and have added 81 new loans since July. Since then I’ve also seen a large amount of loans (35) get paid off early. I suspect as the economy improves this number will increase.

Prosper

Prosper.com Returns (October 2012)
At the moment, I have not added any more money to my Prosper account. I’ve been finding it hard to pick loans that meet my filter criteria. Therefore, it’s taken me longer to find investments, and from this delaying adding new money.

It appears Prosper notes are of a slightly lower credit grade to my liking. Granted this also means much possible higher returns than what Lending Club offers, but I am not sure how much to invest in the risiker notes. In the amount of new loans Prosper receives monthly, it is about 1 1/2 years behind Lending Club. As of today, I have no issue finding loans in Lending Club that meet my criteria. If you you see my previous Lending Club updates, you will find it took sometimes 1 – 2 months to fill $1,000 worth of new deposits. I will continue to push forward with Prosper as well, though at a much slower pace.

Comments

  1. Hunter F says

    I’ve been with LC for a little over a year now. I have 119 notes earning 15.90% NAR. I’ve been lucky thus far in that I haven’t had a default yet. I like reading your posts, keep them coming.

  2. says

    I live in Pennsylvania and am thinking about Lending via foliofn , What do you think? Prosper isn’t available in Pennsylvania at all. I’ve heard both good and bad about the foliofn platform, please add your thoughts. I do follow your blog and mention it from time to time as a solid financial site.

    • says

      Hi Mike,

      I would avoid the secondary market (foliofn) for either company. It is currently too clunky to use. Though there are possible third party solutions in the works.

  3. says

    I’m just on Prosper because I have a TINY amount there, but I’ve been tracking it for three years. You’re right about the quality of the loans and the credit grades. Still, this beats interest paid by general savings accounts at banks big time. This should be a part of everyone’s portfolio.

  4. Peter says

    Ive been using prosper.com for a short period of time and I’ve noticed better loans tend to fail more frequently in the verification process. I’m glad this is happening, but do you think they should require more verification up front so investors do not need to keep continually re-investing the same money over and over until a loan finally sticks? I’m assuming these funded loans fail the verification process due to fraud. Thoughts?

  5. Adam says

    I have been using lending club for about 6 months now, and you posts have helped me along the way. I would be interested in seeing more snap shots from your account like the one where it shows a pie chart of how your notes are spread out over the different credit ratings. It would be helpful if you could give us some insight to some of your defaults and late payers. Are they random or do you see some patterns.

  6. says

    I have been with prosper for two years now and my returns are great… My seasoned loans rate of return is around 17%. I think we filter very close to the same loans. Lendstats suggest that D & E grade notes are the best but E notes have given me more problems than HR. Currently I have only had one loan charged off. With three delenquint out of 67

  7. Travis says

    Peer to Peer lending has just been brought to my attention and I haven’t invested any money yet. However the more research that I do it seems to be more likely that I will begin investing soon. My question is, how do the taxes work. Does Lending Club and Prosper send you a 1099 form every year or,,,?

  8. says

    The tax responsibilities are similar to a mutual fund but instead of dividend income most of the income from Lending Club and prosper will be interest income.Probably reported via the 1099-OID. If the notes are sold via the secondary market then a 1099-B will be issues. Lending Club has recently improved its reporting on the 1099-OID form, while Prosper has always done a good job at reporting all interest not just income of more than $10 on a loan. All interest income should be reported on your tax return. Also some expenses can be deducted as investment expenses on Schedule A if you itemize. Even though I am a tax professional, specific advice should be sought by your own tax professional.

  9. Adam says

    Hi Larry

    I really enjoy your prosper and lending club quarterly reviews. I have accounts with both of them and your advice and suggestions have significantly helped me. I know you mentioned not doing these updates anymore but you sounded uncertain. Will you continue the quarterly reviews?

    • says

      I’m still doing updates. I might keep doing quarterly. I at least plan 1/2 year and yearly. My returns hasn’t really changed, nor do I have much new to report.

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