Author Topic: Good Returns on Prosper?  (Read 976 times)

RetailAnalyst_Help

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Good Returns on Prosper?
« on: November 02, 2020, 05:05:47 PM »
I am trying to decide if I should invest on Prosper, since LC will close down its retail channel. What do the NARs (and seasoned NARs) look like for y'all?

mrwhizzard

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Re: Good Returns on Prosper?
« Reply #1 on: November 04, 2020, 09:35:45 PM »
I am trying to decide if I should invest on Prosper, since LC will close down its retail channel. What do the NARs (and seasoned NARs) look like for y'all?
I guess I'll let you decide your own definition of "good", but I have a seasoned NAR of 5.75% currently (and I believe it has ranged from around 5%-6%, more or less). I've had my prosper account open for around 5 years now, and currently have a 39/29/17/15 mix of B/C/D/E grade notes.

My experience with Prosper was much better than with LC (where my NAR is between 0.5% and 1.0%, with roughly the same mix and time frame), but I put very little effort into picking notes (I use(d) the auto-invest feature on both platforms).

Fred93

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Re: Good Returns on Prosper?
« Reply #2 on: November 04, 2020, 11:23:28 PM »
For me, Prosper reports 4.98%. 

macroman7799

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Re: Good Returns on Prosper?
« Reply #3 on: November 05, 2020, 12:18:52 AM »
I carefully pick my notes though I have not always. I've really learned to avoid lower income and high balance borrowers.

A 6 year old non-IRA that I'm not reinvesting in is at about 3.86% all seasoned.
A 3 year old IRA where I am reinvesting is 5.7% seasoned and 5.85% all notes

Both are as reported by Prosper. One problem with Prosper's reported returns is that they don't really account for delinquencies until the notes are written off. Depending on the risk of your mix this overstatement can be substantial. Prosper uses grades AA-E and HR for high risk. Both my Prosper portfolios are pretty low risk approximately

AA-5%   A-35%  B-35%  C-15%  D-HR-5%

For comparison my 4 year old LC IRA is reporting 5.3% using roughly the same strategy even though I ran it on autopilot when I first dumped the funds in there and the LC return was between 2-3% for a long time.

Another thing that I don't like about Prosper is that their loan information is much less granular. Income categories for example are annual income 0-25K, 25-50K, 50-75K, 75-100K and over 100K. In today's world I would like to know the borrower's income more precisely and in many areas the 100k income really is not enough to fund the average lifestyle and loan repayments. LC by contrast reports a fairly specific monthly income amount.

Overall I am happier with LC and I'm sorry to see it go. I don't think that I will move LC funds to Prosper.

lctz

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Re: Good Returns on Prosper?
« Reply #4 on: January 25, 2021, 05:41:49 PM »
Prosper charges you 1% fee based on outstanding principal.  LC charges you 1% of monthly payment.  They are the same if the loan matures.  However, if the loan prepaid within one year, prosper will still charge you 1% of outstanding principal at prepayment date; but LC won't.
Prosper's fees are heavy in the beginning and light at end while LC's fees are constant.
The earlier the loan terminated(prepay or default), the more fee you pay with Prosper.
In general, the prepay+default rates are high; which means your return will be lower with Prosper than LC even if you have exactly the same portfolio.
« Last Edit: January 25, 2021, 05:52:54 PM by lctz »

macroman7799

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Re: Good Returns on Prosper?
« Reply #5 on: January 27, 2021, 11:08:36 PM »
I am running about 5.7% on a 3 year old account and 3.8% on a 6 year old account that I am no longer investing in. You decide if that's good. I view it more favorably than 1.0% 10 year Treasuries.

mrwhizzard

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Re: Good Returns on Prosper?
« Reply #6 on: January 28, 2021, 10:40:57 PM »
However, if the loan prepaid within one year, prosper will still charge you 1% of outstanding principal at prepayment date; but LC won't.

This is inaccurate. The Prosper 1% fee is paid on the outstanding principal, but only for the number of days since the previous payment. Per their FAQ:

Quote
Investors pay an annual loan servicing fee, currently set at 1% per annum of the outstanding principal balance of the corresponding borrower loan prior to applying the current payment. The fee accrues daily, the same way that regular interest accrues on the corresponding borrower loan. The servicing fee amount netted out of each loan payment is calculated by multiplying (a) the outstanding principal of the loan prior to applying the current payment, by (b) the annual loan servicing fee divided by 365, and then multiplying this amount by the number of days since the borrower’s last payment.