Yesterday I inquired about the absence of Prosper bloggers lately and I received a few responses from Brandon, Mapgirl, Mike & Lazy Man but I decided to do my own little research and I found some startling information.

As you can see from the table below, the top 10 lenders appear to have high default rates and horrible returns. I would imagine that the top 10 lenders with vast sums of money 600k+ would do their best to mitigate losses but that’s not really what the table shows.

Prosper October 2008

Name Loans +4 Month Late Default Dead Money Est. ROI
carrey79 935k 18.89% 18.97% 37.86% 4.43%
shark 884k 11.92% 4.54% 16.46% 2.12%
pensioner 883k 17.95% 32.33% 50.28% 1.45%
Fred93 825k 6.75% 4.84% 11.59% 6.8%
Aberdeen 706k 0.22% 0.00% 0.22% 0.47%
L5 629k 10.48% 19.16% 29.64% 7.73%
Annaolis82 613k 14.13% 8.06% 22.19% 3.04%
MaltinVACOL 611k 7.35% 0.57% 7.92% 4.06%
rwm684 408k 9.31% 15.76% 25.07% 2.93%
MuleShoes 404k 15.91% 43.38% 59.29% -17.85%

I took these stats from LendingStats which tracks Prosper loans.  I simply picked the top 10 lenders and sifted through some of the statistics.   I mainly focused on +4 months late and default loans and returns.  Note that I added a column named “dead money” as this is a combination of +4 month late loans & default loans.   I’m going to guess that +4 month late loans aren’t going to be paid back and might as well be default.

Assuming, however, that the +4 month late loans don’t count, the returns are still horrible.

The average default rate for the top 10 lenders is 14.76% and the average estimated ROI is 1.518% on average loans of 689k.   If you add back the +4 month late loans then the average “dead money” percentage jumps to 26.04 percent!

From this page, I calculated that 330 lenders out of 6010 listed earned 10% or better returns on prosper.  That ratio breaks down to about 5.4% of total lenders beating 10% ROI and 94.6% earning less than 10% return on their investment.

Oddly enough, this seems to fall in line with the empirical rule and normal distribution curve which I’ve previously written about here.