Is the Surge of Repeat Borrowers at Prosper Over?

Regular readers of the blog will know I am a big fan of investing in repeat borrowers. This selection is only available at Prosper and it has been the focus of my investments there for almost a year now. But lately I have noticed that there are not as many repeat borrowers as there used to be.

So, I did a little digging. I fired up Lendstats and went looking for the data. For each selection of loans, Lendstats provides the percentage of repeat borrowers, so I just went through each month and recorded the results in a spreadsheet. Sure enough, we have been on a downward slide in the percentage of repeat borrower loans since November last year. Here is the chart showing all the numbers along with the three month moving average.

Percentage of p2p loans at Prosper that are repeat borrowers

As you can see for several months last year we had quite a bump in the number of repeat borrowers. When you look at the long term average from all of Prosper 2.0 the percentage of repeat borrowers has been about 33%. So it is quite possible we will see another uptick here again soon. So far in March with just a small number of loans issued we are back around 30%.

Why the Focus on Repeat Borrowers?

I have always liked repeat borrowers for one reason: returns. If you look at all first time borrowers on Prosper 2.0 there have been almost 15,000 loans and these have returned 7.62% according to Lendstats. Now, look at just repeat borrowers. There have been around 7,500 loans from repeat borrowers and they have returned 12.1%. So, with just that criteria and nothing else you can potentially bump your ROI by 4.5%. Sign me up.

Of course, there are also plenty of opportunities with new borrowers and if you want to put money to work quickly I highly recommend you include them in your investing. You can take a look here at how I am investing with Prosper in 2012, as well as Lending Club, and you can get some ideas for good filters for new borrowers.

Until proven otherwise, though, I will continue to put 75% or more of the new money I invest in Prosper into repeat borrowers. I just hope we see an uptick in the number of repeat borrower loans soon.

  • Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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