So, a few confessions to start this off.
First, I am still a Quicken addict. It has been thirteen years, I think, since I started using Quicken in earnest to track my finances, and I’m still at it. Despite absolutely terrible releases of the software, and lackluster Mac support, it’s still one of my must-have applications.
Second, I am a big fan of Prosper.com. I found Prosper when it was CircleOne, through some friends from eBay who left and joined the company. As a result, I’m a founding group leader (though not a very successful one), and a shareholder.
So, with those confessions out of the way, on to the good stuff.
If you don’t know what Prosper is, it’s basically a marketplace where you can easily borrow money or lend money to other people. Consumer debt is very expensive, so it’s potentially a way for individuals to get cheaper rates borrowing, and for lenders to make higher rates than normal saving options. Here is a Q&A on Prosper from Money Magazine. Here is a write-up in Forbes of some strategy when dealing with Prosper.
If this sounds crazy to you, here are some of the rates you can earn on Prosper. Note that even for the highest risk borrowers, right now the default rate is around 3%. 24% – 3% is a very good return, but only if you spread your money around with a lot of very small loans.
For the past year, I’ve been struggling with an appropriate strategy to track Prosper Loans in Quicken. I found some information through web searches that seemed appropriate for the Windows version of Quicken, but didn’t work for me on the Mac. The idea was to create an Asset account, which is the loan, and then to set up a loan paid from the asset back to the Prosper account. I couldn’t figure out how to do it.
Since I had trouble finding a solution for this online, I thought I’d post my solution here. Feel free to comment if you’ve found a better way to track Prosper loans in Quicken.
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 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.
Let me know what you think… if this helps even one Quicken addict out there, it will have been worth it. 🙂
Update (4/9/2007): This is why I love blogging. AMF posted my blog comment on a Prosper Board, and now there are good comments there too. Check it out!
Update (4/10/2007): RateLadder.com has their own solution… not as accurate as the one above, but worth linking to. I agree with them that it would be better for Prosper to offer a Quicken-compatible download format.
Update (4/10/2007): Are you interested in joining Prosper.com? If so, please join my group. I originally started it for my investment club, but I’m changing it to be an open group for friends & family. I feel a little lame right now because I only have 3 members in my group, and I am a founding group leader.
Update (4/10/2007): Rateladder.com has merged their approach with mine in a hybrid approach that tracks you entire Prosper portfolio as a single security. Only 3 entries per month! The only downside is you can’t track the performance of each loan this way. Check it out here.
Update (4/11/2007): OK, last update. But Rateladder.com has followed up with a finally post on the topic. Between the two of us, I think we’ve provided the best way to handle this until we convince Prosper to provide downloadable transactions.