Peer-to-Peer Lending ROI Calculator

This calculator models what an investor actually nets from putting money into peer-to-peer lending platforms like LendingClub or Prosper, after every real-world drag on the headline interest rate. It first computes gross interest income using a standard loan amortization formula — the same math a bank uses to calculate a monthly payment — applied to your investment amount, term, and rate. From there it subtracts four separate costs: net default losses (defaulted principal minus whatever recovery/collections claws back), lost interest on those defaults (approximated as half the loan term's worth, since defaults are assumed to happen roughly mid-term on average), the platform's service fee (charged on interest actually received, not lost to defaults), and a cash-drag cost that captures the opportunity cost of money sitting idle for a period before it's reinvested into a new loan. The result is both a dollar net return and that figure annualized to a percentage — the number worth comparing across investments of different lengths.

The calculator then benchmarks that against a simple alternative fixed-income yield (like a Treasury bond or high-yield savings account) invested over the same period, showing the "excess return" your P2P risk is actually buying you. The biggest limitation to keep in mind: this assumes a single loan grade with a single default rate, when in practice P2P investors typically diversify across many small loan fractions of different grades, and real defaults cluster unevenly rather than landing precisely at the midpoint of the term. Treat the default rate, recovery rate, and cash-drag inputs as estimates to stress-test rather than guarantees — historical default rates by grade (Grade A near 2-3%, Grade E+ often 15-25%+) are a reasonable starting point, but recessions and platform-specific underwriting quality can move them substantially.