Prosper IRR is a tricky calculation.  The concept is very simple.  The problem lies in how to treat delinquent and late loans prior to the debt sale.   Before loans are late and after the debt sale treating one’s account balance is whole.  While a loan is late the loan’s value must be subtracted from the account value in some way.  The two edge cases are to not subtract anything and to subtract the entire value of the loan.  The problem is the right answer is somewhere in between.  After one month late if it loan payments are subject to some collections fee.  When the debt is sold it yield something even if it is pennies on the dollar.  Over time the current loans in limbo matter less as the roll rate, collection rate, and default sale percentage will “come out in the wash.”

As pensioner said this game

is all about defaults!!!!

The ultimate goal being knowledge, entertainment, and ROI.  I developed a spreadsheet to determine IRR. Pensioner and I have refined the spreadsheet.  Now the IRR calculated by the spreadsheet returns the best case and worst case numbers for the loans more than month late.  The “Game”’s tracking page is at Prosper.com IRR Lender “Game” Tracking Page

So far, I have my numbers and I have pensioner’s numbers and permission to post.  I have invited several other lenders to join my “game” and am awaiting responses.  The “game” is to track the IRR at monthly intervals and see the results.  Hopefully we will gain a better understanding of the marketplace and our own portfolios.

I will post the responses as I get the posts ready.  If you want to participate  send an email with results with explicit permission to post with a short writeup about yourself to kevin [at] rateladder (dot) com.   The writeup doesn’t need to be extensive, but it must be compelling.  For example, pensioner’s writeup would be compelling for the sole reason that he is the largest lender on Prosper.  The fact that he was on the large lender panel at Prosper Days only helps.

Here is the a sample Prosper IRR Spreadsheet.

The reporting and analysis will developed over the course of the “game” as a starting point I will post a the current spreadsheet and bio for each lender as the posts are ready.  Expect at least RateLadder_com and pensioner by the end of the weekend.

Related posts:

• My Prosper IRR Update Normally, I expect to update My Prosper Internal Rate or Return twice a month: last day of the month for account value and the day I get...
• Another Excellent Email from TB on IRR I saw your last comment and wanted to provide you with an Excel sheet showing the implications of not counting the principle payments as cash...
• What is my Internal Rate Of Return on Prosper? Why do I want to calculate my Internal Rate of Return (IRR)?  To make sure it is higher than my cost of money – ergo...
• My Prosper Internal Rate of Return Update (End of Jan 07) — 1.67% I am tracking my Prosper internal rate of return (IRR).  As a reminder my prosper IRR is defined as actual cash flows up to the...
• Year End Lender Statement Arrived via Email Today It is pretty basic…  It has my information, a lending summary, a loan sale summary, and a listing of all loans held and activity during...

If you liked this article, vote for it on del.icio.us and stumbleupon.


Categories:

Prosper Lender IRR "Game", Prosper.com, Statistics, Tools

Tags:

azerbaijan, mozambique