Do you ever have the thought ”I could do X and my spouse would never know”? When it’s about buying yourself a piece of candy at the grocery store, it’s probably not a big deal. We’re at a point right now where I could throw $1,000-2,000 into our Prosper account and C would have no idea. I’m not going to do that, because that’s not the kind of relationship we have, but after doing the research for this year’s update on how our Prosper investments are doing, it sure is tempting.

Year	Account Total	Overall Rate of Return	1 Year Rate of Return	2 Year Rate of Return
2011	$135.00	(10.7%)
2012	$172.50	(9.5%)	27.8%
2013	$226.00	(7.6%)	31.0%	67.4%

As the overall rate of return shows, we’re still down based on the amount of money we originally invested. But that is because in 2009/2010, we pulled about 85% of the money we had invested in Prosper out. Not because the returns were bad (though they were), but because that is when C was laid off. We pulled the money out of Prosper in order to pay off our own debt. It was the right financial decision for us, but it did actualize our losses.

What has my attention now is not the overall picture but the year over year returns. Last year, we were up 27.8%. This year, we are up 31%. Our 2 year rate of return is 67.4%.

This number seems a little too good to be true. And maybe it is.

Year	Charge Offs	Paid in Full	Active Loans
2011	26	28	3
2012	26	28	5
2013	26	29	6

Please note that since I started tracking our Prosper progress for the blog, we have had very few active loans. The first 54 loans (the 26 charge off and 28 paid in fulls) were purchased during our first year investing with Prosper, from April 2007 to March 2008, before the site went dark for about 18 months while going through the accreditation process. We have made only 7 loans since then, meaning that my sample size is very small- very small.

This means my average rate of return over the last 2 years is not typical. It apparently also means that either I have gotten very good at reading the Prosper profiles and determining risk based on my yearly analysis, or that I have gotten lucky (this is the bigger likelihood).

Still, there’s good news here. We have not had a single charge off in the last two years. I actually thought we were going to have one, as, when I looked yesterday, one of my active loans was over 30 days late. However, when I logged in today for all of my numbers, that account had been brought current.

Those six loans are a mix of 3 and 5 year loans, with one or two scheduled to be paid off every year from 2014-2018.

Original Loan Amount	Interest Rate	Amount Paid	Prosper Credit Rating
$75	15.2%	$0	B
$30	30.77%	$10.08	HR
$45	30.77%	$23.05	HR
$40	17.45%	$18.92	B
$60	20.99%	$43.48	C
$25	26.75%	$32.56	D
Total
$275	22.07%	$128.09

(Please don’t try to make the numbers add up to the $226 active total. Remember that the money that has been paid off has been reinvested into new loans, and that one loan was paid in full in the last year.)

Per this chart, I have $275 invested at a 22.07% interest rate. If you run the numbers only to show what is still owed (so currently invested), you get that I have $146.91 invested at 20.02%.

Given my 2011 analysis, I’ve got a pretty good mix. For us, Bs and HRs have the best combination of risk vs return. Bs have slightly less risk; HRs have slightly higher return, but both came out well.

D’s were among the most risk with the least return on that analysis, but since I have already turned a profit on the one D loan I have, I won’t worry if that one goes into default. C loans had only a slightly better risk profile than Ds, and, in fact, the C loan was the one I thought would end up in collections.

If I keep investing in only 2 new loans a year, I will likely stick with Bs and HRs from here on out. But I have to admit, given the rate of return I’m currently seeing, and where we are financially right now, throwing another thousand or so into Prosper does not seem like a bad idea (at which point I would not guarantee a strict B/HR portfolio mix).

Are any of you invested in Peer to Peer lending? How is it working out for you?