Eric's Credit Community

If you look at the lender profile screen for a lender (or many of the other lender-related reports on this site) you will set a “Total $ Loaned” figure.  Several people have asked me how I arrive at that figure and why it is different than what they see at LendingStats for example.  I was reminded of this recently while reading a rather scathing Prosper related post over at the Motley Fool.  There they mentioned Prosper lender Fred93 as having about $800k invested at Prosper according to LendingStats.  But if you look at the same lender here you’ll see that I only show him as having about $258k invested.  That’s a pretty huge difference!  So what gives?  Which figure is correct?  Well, that depends on your definition of “total amount invested”, but of course I believe my figure is the “more correct” one, and I’ll explain why.

First, here is where the $800k figure comes from: the $800k figure is the total original value of all the loans that Fred has ever made on Prosper.  In other words, if you were to total up all the winning bids that Fred has ever made, you would arrive at right about $800k.

At first glace, this might seem like a reasonable figure for Fred’s total amount invested.  However, the problem lies with the fact that this does not account for repayment of loans and re-investment of principal.  The $258k figure I use on EricsCC.com does account for repayment and re-investment, and therefore should be much closer to the actual amount of money that Fred has invested.

I’ll use a simple example here to illustrate how this can make such a large difference.  Lets say I transfer $1,000 into Prosper and lend it all out on one loan.  At this point (according to either my site or LendingStats) I have $1,000 invested.  Now, lets say that at the end of the first month, my borrower immediately decides to pay back the entire loan.  So, I get my $1,000 back and re-invest it in another loan.  How much money do I have invested now?  I would say I still have roughly (excluding interest) $1,000 invested.  However, the LendingStats figure would say I have roughly $2,000 invested.  If my second borrower were to pay off their loan and I were to invest that money yet again, EricsCC.com would still show about $1,000 invested but LendingStats would now show about $3,000 invested.

Hopefully that explains where the difference in figures between these two great sites comes from.  It is really just a difference in methodology.  The LendingStats figures are not technically incorrect, but I do think they are a bit misleading (and the Motley Fool article confirms this for me) in that they lead you to believe that a lender has much more money in Prosper than what they actually have invested.