Comments on: Lending Club Historical Repayment Rates http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/ personal finance tips, tricks, and commentary Sat, 21 Nov 2009 22:51:28 -0500 http://wordpress.org/?v=abc hourly 1 By: Will http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132327 Will Wed, 10 Jun 2009 16:26:43 +0000 http://www.fivecentnickel.com/?p=3408#comment-132327 Hey Nickel, After reading your initial post on Lending Club I decided to investigate and either invest and/or place a request for a loan. I read through their website and linked to the prospectus filed with the SEC. I was at first alarmed to see that their independent accountants gave them a "going concern" caveat--but I felt that that was in part due to the situation where they stopped funding loans (I believe in 2008) while their registration statement was pending. The other question I had was whether the loans they processed prior to the SEC registration were actually "legal". Despite these reservations I thought I would give it a whirl. I placed a request for a loan for $25,000 to consolidate current credit card debt and an auto loan. The request was posted on their site and immediately individuals started funding the loan request. However, the posting was tagged as "Credit under review". I sent in the initial documents requested, and several days later received an automated phone call requesting documents (but not saying what they were). I reviewed my email and noticed one from lending club where they categorized what they needed for various situations; e.g. if you are self employed, if you are retired, if you are disabled, and if you are receiving a W2. I called Lending Club and was referred to the credit department. I spoke to an individual who appeared extremely overworked, discussed what was needed, noted that I had requested an extension for my 2008 income taxes (as I always do since my former accountant once told me that I had less of a chance of audit if I did so) and I sent in a 14 page fax (in addition to the initial 4 page fax) with what I thought was required--I am disabled, receive an income of over $7,100 monthly basically tax-free, own my home free and clear, own another small home free and clear, have a rollover IRA of over $400,000 and debts of approximately $17,000. I asked for the full amount of $25,000 just because it was available, and I thought I would do some future remodeling on my primary home. Bottom line, time was going by, the account was in "credit review" status and a long holiday weekend was coming up where I thought the staff would not be working to review files and change them from "credit under review" to "approved". I felt that the only way to receive full funding was to have an approved status for a reasonable amount of time to enable investors to select my loan. At this time I already had about 40 to 50 investors with funding totaling $2000 to $3000. On the Friday before the holiday I sent an email to Lending Club (credit dept) to delete my listing unless it was at approved status by Friday evening, giving investors the chance to fund over the long weekend when many would have time to review potential loans. I also noted that if there was good reason to not approve my loan, I would understand, but thought that the possibility was nil. Well, per my request my file was deleted from an active listing--however I received an email stating "ADVERSE ACTION"--noting that I could not be funded due to : Thank you for your recent loan listing request with Lending Club. Your loan listing request was carefully reviewed, and we regret that we are unable to approve your listing at this time, for the following reason(s): Your income is insufficient for the amount of credit requested Your application reveals that current obligations are excessive in relation to income. Let's see, I have a tax free income of over $85,000 per year (translating into a taxable income of over $120,000/year)----my current obligations are $17,000 with no mortgage and the auto payment included in the $17,000. The credit department either sent out a form email or just either did not have the time or the expertise to examine my income (which basically shows as nil on my 2007 tax return due to the non-taxable nature of my income-I had provided explanations along with supporting data showing the income coming in and that I had purchased my disability policy after tax, thus not being taxed on the benefits, if needed). I was afraid that their decision would be reported to the credit agencies and affect my FICO score which is in the 700's. I wrote an email to all of the officers of the company,from the founders down (which I found in their prospectus), even asking for an apology if warranted, and noting that I would apologize if warranted) and all I received was an email in reply simply stating that I could refile my request for a loan if I submitted my 2008 income taxes. Well, my 2008 taxes will show the same as the 2007--a very low income since my income is essentially non-taxable. And, of course the email did not really address the questions I posed after I received their "Adverse Action" email. I know this is wordy, but I do think that the problem is that their credit review department is understaffed and unable to make reasonable decisions for those whose profile does not fit into the "mold". I have two suggestions for Lending Club, in case they are reading this blog--1. Either staff up the credit review department and/or 2.Do not post the loan request until the credit status is "Approved", thus giving investors the full 14 days to fund the loan. Despite my unfavorable encounter with Lending Club, I am thinking of actually being on the investor side--I believe they have enough controls in place in case the firm goes out of business. But I have no intention of ever requesting a loan from them--first I don't need it ,and second--their processing/operations need great improvement. Hope you all have not fallen asleep by now :-) ...Will Hey Nickel,
After reading your initial post on Lending Club I decided to investigate and either invest and/or place a request for a loan. I read through their website and linked to the prospectus filed with the SEC. I was at first alarmed to see that their independent accountants gave them a “going concern” caveat–but I felt that that was in part due to the situation where they stopped funding loans (I believe in 2008) while their registration statement was pending. The other question I had was whether the loans they processed prior to the SEC registration were actually “legal”. Despite these reservations I thought I would give it a whirl.
I placed a request for a loan for $25,000 to consolidate current credit card debt and an auto loan. The request was posted on their site and immediately individuals started funding the loan request. However, the posting was tagged as “Credit under review”. I sent in the initial documents requested, and several days later received an automated phone call requesting documents (but not saying what they were). I reviewed my email and noticed one from lending club where they categorized what they needed for various situations; e.g. if you are self employed, if you are retired, if you are disabled, and if you are receiving a W2. I called Lending Club and was referred to the credit department. I spoke to an individual who appeared extremely overworked, discussed what was needed, noted that I had requested an extension for my 2008 income taxes (as I always do since my former accountant once told me that I had less of a chance of audit if I did so) and I sent in a 14 page fax (in addition to the initial 4 page fax) with what I thought was required–I am disabled, receive an income of over $7,100 monthly basically tax-free, own my home free and clear, own another small home free and clear, have a rollover IRA of over $400,000 and debts of approximately $17,000. I asked for the full amount of $25,000 just because it was available, and I thought I would do some future remodeling on my primary home. Bottom line, time was going by, the account was in “credit review” status and a long holiday weekend was coming up where I thought the staff would not be working to review files and change them from “credit under review” to “approved”. I felt that the only way to receive full funding was to have an approved status for a reasonable amount of time to enable investors to select my loan. At this time I already had about 40 to 50 investors with funding totaling $2000 to $3000. On the Friday before the holiday I sent an email to Lending Club (credit dept) to delete my listing unless it was at approved status by Friday evening, giving investors the chance to fund over the long weekend when many would have time to review potential loans. I also noted that if there was good reason to not approve my loan, I would understand, but thought that the possibility was nil. Well, per my request my file was deleted from an active listing–however I received an email stating “ADVERSE ACTION”–noting that I could not be funded due to :
Thank you for your recent loan listing request with Lending Club. Your loan listing request was carefully reviewed, and we regret that we are unable to approve your listing at this time, for the following reason(s):
Your income is insufficient for the amount of credit requested
Your application reveals that current obligations are excessive in relation to income.
Let’s see, I have a tax free income of over $85,000 per year (translating into a taxable income of over $120,000/year)—-my current obligations are $17,000 with no mortgage and the auto payment included in the $17,000.

The credit department either sent out a form email or just either did not have the time or the expertise to examine my income (which basically shows as nil on my 2007 tax return due to the non-taxable nature of my income-I had provided explanations along with supporting data showing the income coming in and that I had purchased my disability policy after tax, thus not being taxed on the benefits, if needed). I was afraid that their decision would be reported to the credit agencies and affect my FICO score which is in the 700’s. I wrote an email to all of the officers of the company,from the founders down (which I found in their prospectus), even asking for an apology if warranted, and noting that I would apologize if warranted) and all I received was an email in reply simply stating that I could refile my request for a loan if I submitted my 2008 income taxes. Well, my 2008 taxes will show the same as the 2007–a very low income since my income is essentially non-taxable. And, of course the email did not really address the questions I posed after I received their “Adverse Action” email.
I know this is wordy, but I do think that the problem is that their credit review department is understaffed and unable to make reasonable decisions for those whose profile does not fit into the “mold”.
I have two suggestions for Lending Club, in case they are reading this blog–1. Either staff up the credit review department and/or 2.Do not post the loan request until the credit status is “Approved”, thus giving investors the full 14 days to fund the loan.

Despite my unfavorable encounter with Lending Club, I am thinking of actually being on the investor side–I believe they have enough controls in place in case the firm goes out of business. But I have no intention of ever requesting a loan from them–first I don’t need it ,and second–their processing/operations need great improvement.
Hope you all have not fallen asleep by now :-)
…Will

]]> By: Neal@wealth pilgrim http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132324 Neal@wealth pilgrim Wed, 10 Jun 2009 14:50:38 +0000 http://www.fivecentnickel.com/?p=3408#comment-132324 Joe, Makes sense. Red, I'd be interested in knowing how you determine which loans to make. What is your process? Nickel....could this be a post subject? Pretty please????? Joe, Makes sense.

Red, I’d be interested in knowing how you determine which loans to make. What is your process?

Nickel….could this be a post subject?

Pretty please?????

]]> By: RedKimono http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132322 RedKimono Wed, 10 Jun 2009 14:21:46 +0000 http://www.fivecentnickel.com/?p=3408#comment-132322 If you are lending "blindly", then stick to the A-D loans. But I'm a bit of a risk taker and I have been lending to E F and G when the story makes sense. So far, so good. After a year, my returns are around 9.5%, which is slightly higher compared to an A loans only portfolio. I think the trick is diversification + risk mitigation based on careful selection of loans. If you can do both, more power to you. Diversification: lend to as many loans as possible. Risk Mitigation: don't lend to hokey stories, ask questions, make sure the person has a stable job, look at the credit numbers, etc. If you are lending “blindly”, then stick to the A-D loans. But I’m a bit of a risk taker and I have been lending to E F and G when the story makes sense.

So far, so good. After a year, my returns are around 9.5%, which is slightly higher compared to an A loans only portfolio.

I think the trick is diversification + risk mitigation based on careful selection of loans. If you can do both, more power to you. Diversification: lend to as many loans as possible. Risk Mitigation: don’t lend to hokey stories, ask questions, make sure the person has a stable job, look at the credit numbers, etc.

]]> By: Jeremy Olexa http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132321 Jeremy Olexa Wed, 10 Jun 2009 14:19:55 +0000 http://www.fivecentnickel.com/?p=3408#comment-132321 Joe R (#3) : You may be interested in selling your "bad" loan on the secondary market. You can really save yourself if you are worried about it. A couple dollar loss instead of a $25 loss sounds better to me..depends how risk-adverse you are. Neal (#2): I'm taking the approach of investing $25/month for a year as my experiment with mostly A grade loans. I don't have the capital funding to be able to invest a large chunk such as Nickel does ;) Joe R (#3) : You may be interested in selling your “bad” loan on the secondary market. You can really save yourself if you are worried about it. A couple dollar loss instead of a $25 loss sounds better to me..depends how risk-adverse you are.

Neal (#2): I’m taking the approach of investing $25/month for a year as my experiment with mostly A grade loans. I don’t have the capital funding to be able to invest a large chunk such as Nickel does ;)

]]> By: Joe R http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132320 Joe R Wed, 10 Jun 2009 14:12:20 +0000 http://www.fivecentnickel.com/?p=3408#comment-132320 I'm currently lending with Lending Club. Unfortunately one of my two loans fits into the C grade 31-120 days late for 2009 category. I don't think the guy is ever going to catch up on his payments. It looks like I have reason to expect better results from my A grade loan... but one never knows. I’m currently lending with Lending Club. Unfortunately one of my two loans fits into the C grade 31-120 days late for 2009 category. I don’t think the guy is ever going to catch up on his payments. It looks like I have reason to expect better results from my A grade loan… but one never knows.

]]> By: Neal@wealth pilgrim http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132318 Neal@wealth pilgrim Wed, 10 Jun 2009 13:46:54 +0000 http://www.fivecentnickel.com/?p=3408#comment-132318 I am also interested in this. I am also frightened of it. I guess I should give it a try with a little cash.... If you had similar hesitations, how did you overcome your fear? I am also interested in this. I am also frightened of it. I guess I should give it a try with a little cash….

If you had similar hesitations, how did you overcome your fear?

]]> By: DDFD at DivorcedDadFrugalDad http://www.fivecentnickel.com/2009/06/10/lending-club-historical-repayment-rates/comment-page-1/#comment-132316 DDFD at DivorcedDadFrugalDad Wed, 10 Jun 2009 11:36:39 +0000 http://www.fivecentnickel.com/?p=3408#comment-132316 Very interesting. The data seems to suggest that it seems to work. How recently was the data collected? A week, month, two months? I am getting more interested in this as you share your experiences. Very interesting. The data seems to suggest that it seems to work. How recently was the data collected? A week, month, two months?

I am getting more interested in this as you share your experiences.

]]>