February 2012 marked a strong month for my peer-to-peer lending portfolio.

Lending Club:

My Lending Club account now has a balance of $96,806.35 and I’m currently earnings a net annualized return of 13.58%. I had three new notes go into default during the month of February, which did not have a significant effect on my net annualized return (NAR). My NAR actually went up a by 0.37% since last month. This is almost certainly the calm before the storm. I know that as my portfolio ages that more loans will go late and default, lowering my rate of return.

I didn’t place any new money into my Lending Club portfolio last month, and don’t anticipate doing so for some time.  I did make an additional deposit of $7,400 into my Prosper account though

Prosper:

My Prosper account now has a balance of $18,226.67. I currently have 79 notes in my portfolio that have an average note age of 46 days. Prosper currently reports that my average rate of return is 16.73%. This number appears great on face, but really is meaningless since the average age of my notes is only 46 days old.

At this point, all of my notes are current, but I don’t expect that to be the case over the next several months. I am investing in riskier loans on Prosper and will likely see higher defaults as a result, but am getting much higher interest payments as a result.

One big difference between my Lending Club account and Prosper account is the size of my notes. There aren’t very many notes on Prosper that meet the relatively strict criteria that I use to select notes. As a result, I’m using a note-size of$200.00 for the notes that I’m most interested in investing in and $100.00 for other notes.

I’ve also become a big fan of the ability to automatically invest in loans that meet your criteria on Prosper. This feature enables you to get in on hard to find loans and makes one’s peer-to-peer lending investment a passive growth investment. It’s certainly nice not having to log into my account on a regular basis and reinvest funds that I’ve received.

My Future Plans:

In 2011, putting money into peer-to-peer lending was one of my major financial goals. In 2012, my wife and I have other financial goals that we’ll be pursuing (paying for the second half of my graduate degree and building up some cash for a down payment on our next house). I plan on building my Lending Club account up to $100,000 and my Prosper account to $25,000 then using the income from those two investments as passive income sources to fund our other financial goals.