About a year ago (March 2018) I wrote an analysis of my results from P2P lending site Harmoney.

The goal was to invest $5,000 and see what kind of returns to expect.

At the time of writing that update, I had been invested in Harmoney for around 9 months. I had grown my Harmoney account from $5,000 to $5,322, an annualised growth rate of 8.6% after tax.

It’s now 13 months on, so what’s been happening?

Let’s take a look:

(Everything about Harmoney has been included in my first update. If you haven’t read that yet, you should do so now).

Results after 21 months

First of all, let me apologise first for the weird time periods. Normally results should be done at standard intervals, like every 6 or 12 months. I kind of just write these things whenever I feel like it, so you’re getting it at 9 and 21 months, bear with me! We’ll annualise them and get through this together 😀

First, here’s what my dashboard looked like in my last update:

Here’s what my dashboard looks like today:

First thing you should notice is my interest revenue has more than doubled. It’s grown from $404.80 to $836, which is more or less within expectations. Actually I expected it to be slightly less than that, as I was constantly withdrawing funds during the year.

Second thing you should notice is my defaults also increased heavily (more than quadrupled). I’ve now had $118.46 worth of loans written off, plus $5.19 in arrears. That’s a huge chunk to cut out of my profits (about 14%).

The RAR that Harmoney has calculated for me is constant with last time (11.01% compared with 11.39%). I don’t pay much attention to that figure anyway, as I have no idea how they calculate and cannot seem to backward engineer it so, whatever.

Profit after 21 months

Okay, let’s get to what really matters. CASH FLOW.

Harmoney likes to throw lots of fancy numbers at you, but all that matters is how many dollars you’ve made. Let’s check it out.

First, the update from 9 months:

The update from today:

Again, we’re only judging this by the final dollar value of money owed to me or withdrawn by me. That’s made up of principal which is still owed to me by borrowers, funds I’ve withdrawn to date, and funds available to withdraw or lend.

Here’s what that looks like:

Principal owing: $2,295.06
Withdrawals: $3,181.40
Funds available: $53.98

Total: $5,530.44

That means my $5,000 has grown to $5,530.44 after 21 months, giving a total return of 10.61% over 21 months, which equals around 6.06% per year.

Why are returns so low?

Compared to the last update, that does seem low. However, a few important things we need to note:

1. I’ve been withdrawing funds.

Once I started receiving interest, I started withdrawing funds to make sure I secured some capital back. At the first update I’d already withdrawn $1,101.73, by this update I’d withdrawn $3,181.40.

This means that the return I’ve calculated above is NOT an accurate return of a $5,000 deposit. It’s more like a return on $5,000 for about six months, plus a return on $4,000 for about four months, plus returns on $2,000 for around 12 months (I don’t know exactly but hopefully you get the point).

If I hadn’t withdrawn everything and left the full $5,000 in there, I’d expect the my account to be closer to $6,000 by now (depending on defaults).

2. Loan defaults have been high

At the first update I’d only had $26 of loan defaults (meaning the borrower either went bankrupt or disappeared or just didn’t pay back the money).

Today I’ve had defaults of $118 which is more than 4x the previous update.

Here we can see charged off loans – one A loan, a C loan, an E loan and an F loan. This range of loans suggest weeding out “bad” loans is more difficult than you might think.

Is Harmoney worth it?

Even at the very inexact return of 6.06% per year, Harmoney still offers better returns than a standard bank term deposit or finance company. If I hadn’t been withdrawing capital, I estimate that number would be closer to 9% which is very attractive.

In fact, one thing that is great about Harmoney is it’s set up in a way that allows you to make those regular withdrawals.

One thing to note is we’re in an upward economy right now and things are rosy. It’s very easy to earn reliable interest when people’s incomes are stable and increasing. However, if we ever experienced a crash like we did in 2008, it wouldn’t be surprising for half of your Harmoney loans (probably more) to default overnight.

That’s why I’d still keep Harmoney as a “side project” type of investment rather than putting any significant capital into it.

Hope this helped and good luck!

BM