Comments on: My Lending Club Loan Selection Criteria

By: jackie

jackie — Sat, 13 Mar 2010 16:33:37 +0000

I have been lending on LC for 4 months now. Obviously its a little early yet, but so far I am happy with the results. I’m am wondering if more money could be made by essentially flipping the loans (on their selling site) after 4-6 months of good payment history for a small profit. This would also avoid the potential risk in changes in the borrowers circumstances. Have you any experience/thoughts on this?

By: almost there

almost there — Tue, 02 Feb 2010 23:00:14 +0000

I also had a lender that made two payments and declared BK. On a 15K loan I am only out less than 25 bucks. Thanks for the info. I was investing by letting them pick the notes for me on an 11% return but the money would stay uninvested for up to a month. I now try to buy notes each $100 balance in the cash account. I had better scale down my dti ratio as I assumed it included housing costs.

By: Jon

Jon — Tue, 02 Feb 2010 20:46:48 +0000

Nice article, thanks for sharing, but the housing debt is the invisible elephant in the room. My test lendingclub loan was to a pristine borrower, but that borrower got into too much house and declared bankruptcy.

I don’t think I’ll invest any of my money with lending club until they get housing costs into the dti information.

By: Ace of Wealth

Ace of Wealth — Tue, 02 Feb 2010 06:20:21 +0000

Nickel thanks for these great tips. I definitely will be applying as many of these strategies as possible when I invest in new notes. I had a rough idea of what I wanted, but these are great concrete ideas.

By: LarryF

LarryF — Tue, 02 Feb 2010 03:15:05 +0000

Great article about Lending Club lender stategies. I like to use the 10% of income strategy as well. Too bad there isn’t a filter for that. In that regard, lenders can ask questions regarding secondary or spousal income which can make loans attractive that might not be otherwise.

The next level of strategy involves the use of FOLIOfn to minimize the risk of carrying a Note too long, those that go into grace periods, or those that drop in credit score. Using FOLIOfn effectively can increase your return and lower your risk. Unfortunately, FOLIOfn has no filters so it’s much harder to manage but workable with some practice.

By: forty2

forty2 — Tue, 02 Feb 2010 02:47:13 +0000

Is there much difference between Lending Club and Prosper? I almost signed up w/Prosper as a lender but some of the applicants stories were a little over the top and tripped my b.s. alarm.

I got some $ going around and around at Kiva but that’s entirely different as in I don’t expect any profit on that at all.

By: Nickel

Nickel — Tue, 02 Feb 2010 01:09:32 +0000

I don’t filter by credit score, as the other filters pretty much take care of that. In other words, once I run my filters, the remaining borrowers have realtively high credit scores. Conversely, if I did filter by credit score, loans that break my other rules would often sneak through.

By: Investor Junki

Investor Junki — Tue, 02 Feb 2010 00:05:01 +0000

@Eric: I filter by credit score. Check out my link, I do slightly different than FiveCentNickel.

By: Eric

Eric — Mon, 01 Feb 2010 23:41:37 +0000

Oh I am curious about one thing. Do you not filter by credit score at all? I guess it makes sense if you’re looking for higher interest rate returns. I mainly stick to the A and B grade loans so I prefer people with over 700 FICO score.

Also, for people who need that extra assurance, you can filter if LC has formally verified the person’s income information and credit history. It’s not a dealbreaker for me (the process takes awhile) but it’s nice to know since the initial information is solely self-reported by the borrower.

By: Eric

Eric — Mon, 01 Feb 2010 23:23:33 +0000

Yup, pretty much what I do.

By: Investor Junki

Investor Junki — Mon, 01 Feb 2010 19:38:14 +0000

I think auto selecting the loans to be a bad method to generate decent returns with Lending Club. I mention my filters on my blog post:

http://investorjunkie.com/lending-club-review

As of today I have 10.94% return with no defaults. I can’t complain and plan on adding more funds this year.

By: Nickel

Nickel — Mon, 01 Feb 2010 19:25:40 +0000

That’s good to hear, Matt — though it’s impossible for a loan to have defaulted in just one month.

Regardless, I hope things continue to go well.

By: Matt Jabs

Matt Jabs — Mon, 01 Feb 2010 17:12:47 +0000

Nickel gave me a sneak peak at this info about a month back and I use it each month to fund my new loans.

No defaults yet! Thanks Nickel… great info.