Each quarter I post the current state of my peer to peer lending accounts. I am a lender who enjoys maximizing my return through highly-targeted low-grade loans. I opened my first account in September 2011, and have opened two more since then. Last quarter I was uncomfortable in showing off my account values, but this quarter I have gotten over my discomfort because I want people to see how great the returns of peer to peer lending are, as well as how committed I am to it.

As you can see in the following table, I continue to celebrate thriving positive returns on both Lending Club and Prosper.

So many different ROIs!

Calculating your peer to peer lending ROI (return on investment) is tricky business. If you want the easy route, both Lending Club and Prosper offer you their over-inflated number. If you calculate the rate yourself using the Excel XIRR function you get closer (see my article on XIRR), but this still does not take into account any notes that have gone late (and are, as such, no longer worth their full value). Michael’s Portfolio Analyzer on NickelSteamroller includes a reduction from these late notes, so I actually prefer that calculation the most. I have included all three ROIs here for comparison’s sake.

Accounts Breakdown

#1 – Prosper Account (17.87% return):

I live in Washington State. When Prosper recently introduced their bankruptcy protection vehicle (a very good thing), a legal issue forced Washington lenders to be barred from funding new loans. As a result, I withdrew any borrower payments rather than reinvesting them, so my overall account value went down. Thankfully, WA lenders have been recently let back onto the platform, so I am eager to get things moving again.

Overall, I am really happy with my Prosper account. I have done a good job with killer filters and am reaping the rewards for my hard work. I should probably mention how uncomfortable I am with how many of my riskiest Prosper borrowers are defaulting. A piece of me feels guilty about lending money to folks if 10% of them default on their loans. I am conflicted about whether issuing HR-grade loans to people just sets many of them up for further hardship. I will be writing a post this month about the ethics of 30% interest rates. This account only funds E and HR grade loans.

#2 – Lending Club // Roth IRA (16.05% return):

I opened this IRA last year and have put a lot of effort into learning from my past mistakes to earn the very best ROI possible. I am pleased with the resulting few late loans and defaults, though I have had some trouble finding good loans lately; they get funded so quickly and are easy to miss. This account funds E, F, and G grade loans.

#3 – Lending Club Account (10.82% return):

This was my first peer to peer lending account, and has suffered from a few beginner mistakes. This account used to fund B-G grade loans, and now it simply buys just a few $50 D grade notes per quarter.

Peer to Peer Lending Continues to Amaze Me

I am joyful that my average note age is now 9.4 months. The default rate peaks at around ten months, so while I expect some deadbeat borrowers in the coming years, I am glad to be almost over that hump. Additionally, my overall return on investment is really great at 16.88%. While it has fallen 2% since last quarter, this was to be expected because my accounts were still young. Considering my overall target ROI is 15%, I am really satisfied with my overall return.

I continue to be amazed with peer to peer lending, earning a great return for myself while helping people get free from credit card debt. Additionally, writing this post made me realize that LendingMemo launched three months ago. I have really enjoyed these last months and am excited for the road ahead.