I have found what I think is the most complete solution to the Quicken and Prosper dilemma, but that doesn’t mean it is the best solution…  Let me start with the negative and work to the positive…

The problem with his solution is that it is too much work…  I have 70 loans and if I had to update each one it would require 210 transactions a month by hand.  I communicate regularly with people with 100-1000 loans.  Suscintly, the problem with the solution is accurate accounting requires 3 transactions per month per loan by hand.  He even admits as much…

This is likely too much work to do monthly, although you need to if you want Quicken’s IRR calculations to be accurate. Personally, I’ve decided just to update the account once every 3-6 months, which is sufficient for my needs.

I have called for Prosper integration in the past.  With such integration Adam’s solution would be the best solution for the integration.

Here is his solution: 

Step 1: Create a Security for each Prosper Loan. I name them after the unique Prosper Loan number, like “Prosper Loan 335″

Step 2: Create a Brokerage account for your Prosper account. Transfer the money from your checking account to this account when you move money to Prosper.

Step 3: When you make a loan for a certain amount, let’s say $100, then purchase the shares of the Prosper Loan security, at $1 per share. So, in this example, you would purchase 100 shares of “Prosper Loan 335″

Step 4: Whenever you want to update the account, use the following 3 transactions. Use a “Sell Shares” transaction to represent the principal re-payment. Use a “Interest Income” transaction to represent the receipt of the interest payment. Lastly, use a “Miscellaneous” transaction to record the Prosper fees charged.

This works accurately on a number of different fronts, but most appropriately by following the Quicken model enough so that Quicken can calculate your IRR, and you are tracking principal, interest, and fees on a per loan basis.

I think a hybrid of his approach and mine (simplified cashflows only: http://www.rateladder.com/2006/12/31/prospercom-and-quicken-the-workable-solution-for-playmates-that-dont-get-along/) would work great and be manageable…  Here is my proposed merge my existing approach with his…  (I haven’t tried this yet, but I think it will work great.)

Step 1: Create a brokerage account called Prosper.com.  For each transfer from your bank transfer money into the cash balance of this account.  This is easy as your bank likely integrates with Quicken.

Step 2: Create a Single security called “Prosper Loans”.  Set the asset class to “Unclassified” to separate this security from more traditional in your portfolio.

Step 3: For each month, using your lender statement… Buy shares for for the entire principal loaned for the month at $1 per share.

Step 4: For each month, using your lender statement… “Sell Shares” to represent principal repaid during the month; use an “Interest Income” transaction to represent the receipt of the interest payment; and Lastly, use a “Miscellaneous” transaction to record the Prosper fees charged

The hybrid approach retains all of Adam’s original accuracy expect it rolls it up into a single security instead of a security for each loan.  It also, maintains Rateladder’s goal of not spending my entire life tracking Prosper in Quicken.  Most importantly, as you portfolio grows the time required for tracking does not increase rapidly linearly; let alone exponentially.  Anybody care to guess at BigO.  Constant?  LogN? or NLogN?  I think constant, but I will let you know after I update Quicken.

Update 8/28/2007: Default Debt Sale Accounting with Quicken

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