Prosper, a popular Peer to Peer lending program does not come with a personal finance software integration feature for Money Plus Deluxe (nor Quicken or just about any personal finance software out there). Tracking your lending portfolio is essential to ensure your strategy is on course with your expectations.

Tracking Your Cash Flow

While there is no exact science to this, I have discovered a fairly simple way to track my lending portfolio based on a few things I do know will work. It took me a little amount of time to set this up in my Money Plus Deluxe software and enter the data. Once you have all the data entered, then you will be able to create a routine where you only need to update this once a month. Right now, I only have 11 loans so it only takes me a few minutes to update my account information. I would imagine if you have a 100 loans or more, it would take a little bit longer but shouldn’t take more than a few hours a month.

Setting Up Your Prosper Account in Microsoft Money Plus

I set up my Prosper account in Money Plus Deluxe using the other account type since it is not a banking, credit card, investment, nor a bill payment service provider. When I was asking around, one personal finance blogger told me that he set up the account as an investment and it seems to be working fine for him. If you set it up as an investment account, the process is a little different due to terminology. One reason why I chose to set it up as other is because of the additional tools available for me to utilize such as forecasting my cash flow.

Inputting Your Data

If you are setting this up for the first time but have been a Prosper lender for a while, you have the option to go back to the beginning if you are interested in tracking the entire history of your lending portfolio. It may take you some time to do this depending on your history. It would certainly be a rewarding source of knowledge for you to see how your portfolio has grown.

Here you can see my first deposit into Prosper for $100 dollars as well as subsequent deposits. (I know the picture may be fuzzy and I apologize for that, there is only so much real estate on the website.) My first two bids at $50.00 each were successful which resulted in a loan origination date of March 20th. This means the borrower is expected to make monthly payments on the 20th of each month for the next 36 months as per the terms set in the loan contract between the borrower and Prosper.

As you can see, the first of the payments were made on April 20th which included the interest. Since the interest will be recurring on a monthly basis, I set up my account to track only the interest I earned. The principle payment is still part of the “deposit” amount so there is no need to change anything. I know it sounds confusing but simply put, personal finance softwares are not set up for tracking loans you make, rather they are set up the other way around, for the loans you pay.

In order to keep it simple for tracking purposes, I only list the interest I receive as “Income/Interest”. Since I know the borrower has to pay at least the minimum by the agreed date each month, I can set up the next payment date for the same date at a monthly frequency. However since it is a loan which means the interest will decrease over time, the recurring interest I earn will also decrease. In order to make it easier to forecast future interest earnings, instead of setting an amount, I have set up the recurring interest to be estimated on the last 6 instances this specific interest is paid.

Each Prosper loan has the same set of terms, pay at least the minimum at the interest set by the bid-down process over 36 months. By entering the first interest installment, I know there is 35 months left in this “series” of transactions. This will allow Money Plus to provide a forecast on this specific series of transaction which will end in 35 months. No need to go crazy trying to figure out when each loan will end, Money Plus will track it for you.

You have the option to let Money Plus Deluxe automatically enter the transaction before the payment date or on the date itself which is what I do. Once it is entered, the date can be easily adjusted if the borrower was late or the earned interest is lower.

If the borrower was late, then there will be an additional fee the borrower has to pay. Since Prosper reports this as income, I simply add a one time transaction as Income/Interest and note in the memo area this is a “Late Fee” transaction.

Now, remember, the borrower has the right to pay more than the minimum or pay the loan off in full ahead of schedule. That is okay because I get my money back sooner than later. I can always remove the recurring transaction if this happens. If the borrower choose to pay off the loan as set forth in the terms of agreement, then Money Plus Deluxe will automatically end the recurring payment in 35 months without needing me to do anything.

Here comes the cool part…

Money Plus comes with a cash flow forecast which allows you to see over a range of dates how much money you have coming and going in and out of your account. For the purpose of this article, I will only be referring to my Prosper account. Here is a screenshot I took of this forecast a few weeks ago.

The forecast has been set for the next 12 months. Using the recurring transaction which includes the estimate of the last 6 transaction in the series, I can see how much my account will grow over the next 12 months. In this screenshot, you can see a significant jump where I scheduled a deposit into my Prosper account for future loans.

Fast forward a few weeks to this week after I made two more new loans and scheduled two more new recurring transactions. You will also notice a drop where I have scheduled a withdrawal from my account, $50 which is part of my investment strategy to preserve my capital since I already have earned over $50 dollars in interest up to that point.

Despite the withdrawal, you can see as a result of recurring interest, in less than 12 months from the date of withdrawal, I will earn another $50 dollars plus additional interest. Bear in mind that this is still a new experience for me, I have only been a Prosper lender for a little over a year now. Eventually in time, as the years go by this will certainly change and I look forward to showing you a screenshot like this one below.

My 1st Year in Prosper

As you can see, I stopped making deposits for a time because I wanted to see how this lending process worked. It was a very slow growth as I patiently waited for my interest and principal to accumulate to a point where I could reinvest at least $50 dollars again which is the minimum amount Prosper will allow you to lend. I started making $25 dollar deposits towards the end of 2007 when I figured out the beginning of my strategy.

So now you can see how Money Plus Deluxe can help you track your lending portfolio through Prosper. This may work for other P2P lending programs but I do not know. I am limiting my risk exposure to Prosper so I can increase my learning experience.

Your feedback will be greatly appreciated.  If you are a Prosper lender and use Money Plus, I would welcome your thoughts in this matter.