• Facebook
  • Twitter
  • Member Sign-In

LendingMemo

  • Read investing blog
  • Watch video courses
  • Download lending eBook
  • Borrowing made simple
  • About LendingMemo
  • P2P Lending Basics
  • P2P Lending Strategy
  • Editorials
  • News & Community
  • My P2P Lending Returns

My returns at Lending Club & Prosper for Q2 2015

by Simon Cunningham on July 17, 2015 in My P2P Lending Returns

Shares25Facebook25Tweet0LinkedIn0Pin0Email0Print0
Lending Club Prosper 2015 Q2

Don't miss new articles. Follow LendingMemo:

To encourage more people to start investing, each quarter I post the current state of my personal peer to peer lending accounts.

Because of my age and life-situation (32 – single), I am an investor who feels comfortable taking on more risk. While this means my returns are potentially higher than average, it also means my portfolio is more susceptible to macro economic factors like a rise in national unemployment.

Q2 of 2015 Breakdown (Trailing 12 Months)

Into mid-2015 I continue to celebrate great returns at both Lending Club and Prosper:

2015Q2-P2P-Lending-Returns

Notes:

  1. Account values, defaults, and interest are pulled from each platform’s monthly statements (See your Lending Club Statements or Prosper Statements).
  2. The important figure of 12mo. Gain (highlighted in yellow) is calculated by taking the interest paid over the past twelve months and subtracting that period’s defaults.
  3. The 12mo. Return, also highlighted in yellow, is done via XIRR (see: XIRR calculator), the best way to independently calculate your peer to peer returns. Most investors will probably not need to go to such lengths, and can trust the onsite return at Lending Club or Prosper.
  4. With an average age of 13 months, the notes in my Prosper account are not yet seasoned. Read: The P2P Return Curve
  5. All earnings are pre-tax.

Lending Club IRA: Earning 11.3% Interest

Lending-Club-IRA-2015Q2

Over the past year my Lending Club account continued to pay out a welcome 11% ROI. I attribute filtering and a focus on riskier E-grades as the main reasons for this success. See my Lending Club filters.

As a Roth IRA, these earnings accrue tax-free, which is helpful considering the interest does not receive a special tax treatment like capital gains. Also, during this year we’ve seen Lending Club continue to drop their interest rates, and investor returns have fallen by 2% since 2013. But my account seems less impacted by this change since 90% of my notes are in 5-year loans. This will change eventually though.

Here is another breakdown:

Lending-Club-IRA-2015Q2-Breakdown

The biggest item of concern has been the amount of principal in notes over 31 days late (currently $999). This number continues to rise each quarter, recently delivering the biggest three-month default period since the account began. See below:

LendingClub-Returns-by-Month

The large spike in defaults on the far right is three months (April, May and June) each above $180. The annualized return of this quarter was just 6.8%, a far cry from the 11% earned over the past twelve months. It will be interesting to see if the following months continue this trend.

Another fun thing is the $5,000 contribution in May of 2014. You can watch the payments from interest grow after this deposit is made, and continue to trend upward as the investment exponentially grows. Potentially, the recent rise in defaults is related to this contribution 13 months ago.

Prosper Taxable: Earning 15.9% Interest

Prosper-Marketplace-2015Q2-Returns

While my Prosper account earned almost 16% this month, this return is not sustainable. The account nearly doubled in size less than a year ago, so the majority of loans have yet to mature. Many are set to default in the coming quarters. That said, I do believe it will end up earning a higher ROI than my Lending Club account, and I attribute this to the wider credit spectrum that Prosper offers (their E and HR-grade loans can be riskier than Lending Club’s G-grades). I also believe Prosper’s underwriting is slightly better.

Some of this success comes from the filters I use (see them here) as well as an API to grab the rarer D/E/HR grades.

I don’t understand why my XIRR calculation gives me a full percent higher ROI than Prosper’s onsite figure (14.3% vs 13.3%). Typically this is the other way around, with onsite ROI figures not accounting for cash drag. Any ideas?

Another breakdown:

Prosper-2015Q2-Returns-Breakdown2

Further evidence of the oncoming defaults is seen below. The $10,000 deposit made in late July has caused the monthly interest payments to nearly double in size, yet defaults remained constant for two years.

Prosper-Marketplace-Return-by-Month

I am going to make a prediction: next quarter will have a record number of defaults for my Prosper account.

A Word on Mature Returns and my Non-P2P Investments

One fair critique that people have against this investment is that people with public investments, like myself, continue to add to them, and thus the accounts never mature and the ROI remains artificially inflated.

To answer this critique, I’ve decided to stop making further deposits into these accounts for the next twelve months. I want to see what they earn per year if left completely on their own. Already the Lending Club account has not had a deposit for over a year, and next quarter the Prosper investment will be in the same boat. It will be interesting to see where the ROI settles at, particularly with such a focus on 5-year loans.

This allows me to focus on the non-p2p sides of my retirement accounts, namely stock and bond investments. As I’ve mentioned earlier, I think many investors should hold 20% of their investable assets in peer to peer lending, which leaves 80% to other investments.

Stocks-Bonds-Peer-Lending

I’m interested to see how these grow vs. peer to peer lending in the coming year. My assumption is that my bonds (intermediate term corporate and government) will have the most consistency per decade, followed by peer to peer lending, with stocks and REITs (held in low cost index funds) having the highest yield but lowest consistency.

Related items: stock market quarterly updates

Comments

Profile pictures via Gravatar

  1. Dominic @ Gen Y Finance Guy says

    July 17, 2015 at 3:05 PM

    It will be interesting indeed to see the performance of these accounts without future contributions.

    Cheers!

    Dominic

    Reply
    • Simon Cunningham says

      July 17, 2015 at 3:59 PM

      Totally. The final equilibrium will not be hit for many years, but even another 12 months should give a clearer picture of what we can expect. I’m eager to see your own returns Mr. Gen Y!

      Reply
      • gtgeek says

        April 25, 2016 at 6:30 AM

        sooo it’s been almost a year. what’s the final word?

        Reply
  2. Jorge says

    July 19, 2015 at 10:29 AM

    Hi Simon,

    It’s very interesting your graphical 20/100 allocation in P2P. It’s inn line with Lending Robot study.
    I actually invest 15/100 of my portfolio in my country (Spain) in P2B.

    Greetimgs.

    Jorge

    Reply
  3. Francisco says

    July 30, 2015 at 10:17 AM

    Why 20 % only in p2p lending out of the overall portfolio.? What is the mathematical theory behind that assessment?

    Reply
  4. Dennis TOtah says

    August 6, 2015 at 3:59 PM

    Are you experimenting mostly with new notes, or buying and selling on the trading platforms as well? How have your results been on trading platform vs. net new?

    Reply
  5. Michael Bulcock says

    August 27, 2015 at 2:14 AM

    You mention as a younger investor you are taking higher risks for potentially higher returns. However, the returns that matter are the returns over the complete business cycle. It may turn out that investing in higher quality A and B grade loans outperforms your strategy.

    I’m just formulating my strategy but I’m thinking along the lines of keeping the P2P part low risk and taking risk in the stock portion. For example I could keep reinvesting loan payments in new notes while the CAPE is high. When CAPE drops below say 15x I could then divert loan payments into stocks. If I were mainly in C-G grades, at the precise point I needed the cash for stock investments defaults would be rapidly increasing and reducing my loan payments. The opportunity costs of not investing in stocks at low valuations could outweigh any gains from higher risk notes in the good times.

    Reply
  6. jack says

    November 23, 2015 at 7:30 PM

    Hi, new to LC and your site. Love the writing and the detail explanation on the purpose and the reason why. This might be a silly question but why do you exclude the state of CA and FL for your LC filter? I would think those states are above US income average. Thanks.

    Reply
    • Simon Cunningham says

      November 25, 2015 at 11:59 AM

      Hi Jack. See here: https://www.lendingmemo.com/filters-lending-club-prosper-2015/ and here https://www.lendingmemo.com/redlining-florida-lending-club-prosper/

      Reply
  7. f fisher says

    February 26, 2016 at 1:39 AM

    Enjoyed watching your vids and reading up on articles, any updates?

    Reply
    • Simon Cunningham says

      March 1, 2016 at 12:03 PM

      Perhaps soon. We’ll see.

      Reply
      • John Merced says

        March 21, 2016 at 12:49 PM

        I’m interested in some updates as well!
        Regards,

        Reply
  8. AdamG says

    August 29, 2016 at 11:48 AM

    I recently got into P2P and sent $25,000 of my ROTH account over to Prosper…..couldn’t do Lending Tree from my State. I’m certainly more diversified/conservative than you with my current breakdown like this:
    AA – 14%
    A – 20%
    B – 22%
    C – 20%
    D – 16%
    E – 8%
    HR – 0%
    Cash – 0%
    My projection with this mix is 7.4%. It will be interesting to see how yours finishes.

    Reply
  9. Mike says

    February 26, 2018 at 9:10 PM

    Wow no updates in exactly 2 years. Did they all default? Why no updates?

    Reply

Leave a question or comment Cancel reply

Our learning center makes peer to peer lending simple and rewarding:
  • Video courses for beginner and seasoned investors

  • Helpful eBook on the basics of lending

  • Monthly newsletter with news and analysis

Sign up for free

LendingMemo Media is affiliated with both Lending Club and Prosper. See disclosure.

begin lending today

Signup is free and secure.

featured articles

Peer to peer lending: What is it?
Review of Lending Club for new investors
Review of Prosper for new investors
Lending Club vs. Prosper: Know the differences
How to try p2p lending with just $2,000
LendingMemo

Popular Posts

  • A few beautiful photos of Prosper Marketplace

    110 Shares 0

    Prosper Marketplace Headquarters
  • Why Wells Fargo is terrified of peer to peer lending

    98 Shares 0

    Wells-Fargo-Lending-Club-P2P
  • Reader story #4: Meet Jason, a Foliofn investor from Detroit

    94 Shares 0

    Reader-Story-Jason
  • Interview: Renaud Laplanche on how Chase Bank is like Blockbuster Video

    76 Shares 0

    Renaud-Laplanche-Interview-2013
  • Interview: Renaud Laplanche on Lending Club post-IPO

    71 Shares 0

    Renaud-Laplanche-Lending-Club-Interview
  • Peer to peer lending sites - An exhaustive review

    67 Shares 0

    Peer-to-Peer-Lending-Sites
  • What is a peer to peer loan? What is p2p lending?

    67 Shares 0

    Peer to peer loan
  • Lending Club's historic IPO is probably just days away

    55 Shares 0

    Lending-Club-Prepares-for-IPO
XIRR Calculator - Verify your return %

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Get LendingMemo's newsletter, have updates sent straight to your inbox.

No spam. We promise.

Peer to peer lending made easy.

  • Facebook
  • Twitter

Lending Club Review · Prosper Review
NOTE: all content is for information purposes only and is not investment advice. Terms of Service · Privacy Policy · Affiliate Disclosure
© 2021 LendingMemo Media LLC // 38 West Fulton Ste 400 - Grand Rapids, MI 49503

Share this ArticleLike this article? Email it to a friend!

Email sent!