For the last year now I have been investing in peer to peer lending through my Prosper account. For those of you who may not be familiar with them Prosper pairs investors like myself with people looking for loans. I deposit money into my account, search the available loan listings for one that I find appealing, and select a loan to fund. Once the loan is fully funded the money is released to the borrower and they make their monthly payments. Prosper pays me back that portion of the principal plus the interests every month for the life of the loan.
So how did I do? Well in the last year I have deposited $1100 into my account. During that time I have earned $84.75 from my 29 loans, a return of nearly 8%. Now I realize the dollar amount is small, but you won’t find a return like that at any bank that I know of. My local federal credit union is currently paying 1.3% on a 3 year CD, if I had invested my $1100 into that my yearly yield would have been about $15. The only upside to CD’s is the extremely low risk, CD’s don’t default.
Going back to my loans, none of them, knock wood, have defaulted. None of them have even been delinquent. As you can see from the illustration the majority of them are rated “A” or “AA” by Prosper. I have chased the higher yield of riskier borrowers and so far it seems to be working out. My “AA” loans have an interest rate of about 6% while my only “E” pays an interest rate of 28.25% and he’s made all of his 11 payments on time.
If I were to give this experience a grade thus far it would be an A-. The prosper site is very easy to use and the information they offer is very detailed. Their rating systems is an excellent tool and I will continue to use this site for my investing. Over the next year I would like to build the value of my account to $3000.00. As long as the economy remains stable that will be my plan.