Archive - How do I track my Peer-to-Peer lending account?

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Peer to peer (p2p) lending accounts are growing more popular, and you can easily track this kind of investment in Moneydance. To aid in tracking these accounts, I've created a new "Subtype" of security in my data file for p2p notes. I set the security Type as “Other”, and created a new subtype I named “Peer to Peer.” Click the arrow next to the Subtype box to add, edit, or delete subtypes. Creating a custom subtype is one way to add additional tracking information, which is especially helpful when holding non-traditional investments such as peer-to-peer notes, precious metals, or barter items. It's best to use the “Average Cost” method of basis calculation for these types of investments.

p2p_security_subtype.jpg

Then, I created a security for each individual loan. The Security ID and Security Name are the identification code as set by the p2p company (in this case, Lending Club), the price of each is $1, and the number of decimal places is 2 (as payments are made in dollars and cents). All other fields are left blank.

create_new_lending_club_security.jpg

Next, I recorded the transfer of funds from my bank account into my Lending Club account. I also recorded a buy transaction for each security. In the screenshot below, you can see the buy transaction for security 654321. (Lending Club denominates notes in $25 increments, hence the listing of 6 notes equaling 150 shares, and $150.)

lending_club_buy_transaction.jpg

Once I've purchased my initial shares, I need to track the payments I receive each month. As with a traditional, bank held loan, these payments are divided into principle and interest payments. The principle is a return of my initial loan, and is essentially a “sale” of some shares of my note. The interest is income, for which I am using Xfr as the transaction type. The complexity of investment accounts means it's not possible to create split transactions, so each month I'll create two new transactions for each note I hold. Below you'll see my January entries for note 619649, of which I received $3.76 in principle and $.86 in interest.

619649_january_payment.jpg

Now rinse and repeat! I initially found the data entry required for this task onerous, until I thought to use transaction reminders. First, I selected an example transaction, in this case the sell transaction for security 850828, then right clicked (or your system appropriate equivalent) to create a reminder transaction.

p2p_lending_reminder.jpg

This brings up the reminder creation interface. I set this reminder to be due on the last day of each month, but NOT to auto-commit. This is a particularly important piece, as the amount of each transaction changes from month to month. When the reminder is “due,” which is the day I normally wrap up my monthly accounting, I access each reminder from my homepage, change the amount of the transaction, and Record the transaction. I've also created a reminder for the monthly fee I'm charged, although this generally remains the same and can be auto-committed.

p2p_lending_reminder_2_.jpg

In closing, peer-to-peer lending is a fairly new field of investments, and there's not yet an agreed-upon “right” way to track them in your personal finance software. Give this method a try, see what works for you and what doesn't. If you're involved in peer-to-peer lending, as a borrower or a lender, we're curious to hear how you track these transactions in Moneydance. (Disclosure- Moneydance is not affiliated with Lending Club in any way, nor have we been compensated by them for writing this guide.)

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