Prosperity

I love statistics that show that I rule - I mean, who doesn't? For example, this Prosper Lending Statistics site estimates lender ROI based on late and defaulted loans and your current average interest rates. Of 900 lenders with portfolios larger than $5K, I am currently ranked 15th in estimated ROI, raking in a delightfully usurious 17.01%. I'm sure part of it is luck (no defaults and only 1 loan currently late), although I do scrutinize the listings carefully.

I wonder how default rate changes by loan age? Just one of many fascinating questions I'd love to ask the data if I had the free time to play with it...developing a good model for Prosper loan performance would be very fun. Although with it being taxed as ordinary interest, I'm somewhat skeptical that you could make enough to beat the stock market. For example, my 17%, even if it holds, is 10.2% post-tax at a 40% marginal tax rate, which I think is about what you get from holding index funds long-term.

Actually, looking at the estimated ROI for portfolios larger than $50K, it seems likely that you can't do anywhere near this well - only 4 or 59 portfolios are higher than 10% pre-tax. Although these estimates are all very fuzzy, because of how fast Prosper is growing, the estimates are all based on current projected loan performance, not actual results, because few loans have gone the full 3 years. In fact, loans are so young that late loans drastically outweigh defaults, and it's impossible to know how many of these late loans will end up in default. And the estimated performance is dominated by what will happen with the late loans - for example, look at the biggest lender on Prosper. This individual has loaned $882K, with an estimated ROI of 11.44%, 0.00% defaults, and 9.25% late loans. Pensioner's actual ROI will depend heavily on how many of those late loans end up defaulting, so we'll have to wait years to find out.

Which is why it's fun to speculate on and about.

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