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Lending Club Update – December/January Performance

Written by Nickel - 22 Comments

It’s been awhile since I’ve provided a Lending Club performance update, so today I’m going to be covering what’s happened in the past two months. As they say, no news is good news…

As of February 1, I’m rocking a 10.23% net annualized return on a portfolio that is currently composed of 233 notes. You can see from the graph below that my performance is currently right around average. I’d be thrilled if this keeps up.

Regular readers know that I’ve had one default thus far, which was a byproduct of my initial “high risk,” auto-selected portfolio. I’ve had one other loan in that portfolio go late, though that borrower is not on a payment plan and has been meeting their obligations.

In contrast, all of the loans in my “low risk,” auto-selected portfolio are current. The same can be said of my hand-selected portfolio, which is how we’ve invested the bulk of our funds. If you’re curious about how I select notes, check out my Lending Club loan selection criteria.

If you’ve been investing with Lending Club, I’d love to hear the details. How long have you been doing it? How many notes do you have? How do you select them? And how has your performance been?

Published on February 3rd, 2010
Modified on June 27th, 2011 - 22 Comments
Filed under: Saving & Investing

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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22 Responses to “Lending Club Update – December/January Performance”

  1. 1
    Brent Says:

    I haven’t used Lending Club, but after reading some of the posts on your website I’m super excited to give it a try with a little bit of money. I’ve been trying to learn how to actively invest in the stock market, but there is just too much risk and work for such little reward. A 10% return sounds good to me. Even if there is a risk of people defaulting on loans, is that any riskier than the stock market tanking and dragging your investments down with it?

  2. 2
    Midg Says:

    I’ve been invested with Lending Club for several months now and am enjoying it. Just checked my numbers and they show me at 12.99% return with 46 loans. My calculated XIRR is 11.72%. I’m seriously thinking about adding regular monthly deposits to help build my portfolio. Any chance you would share your XIRR and Lending Club $ composition? It would be interesting to see how your loans are spread out and what your actual time based return is.

    Brent: It’s good to read that you are doing your home home on investing. So many don’t. Lending Club and Prosper are great additions to an investment portfolio but are not without risk. Learn everything you can about P2P lending before investing any large amounts. Starting with a small amount like $1,000 is a good way to learn about P2P lending.

  3. 3
    Brent Says:

    Thanks Midg. That is exactly my intent — start with a low dollar amount to learn the details. That was something I did NOT do with stock investing and it cost me a bundle (tuition payment to the school of hard knocks).

  4. 4
    chris Says:

    I have been investing with Lending Club for 9 months. In those 9 months I have acquired 167 notes with a 11.71% return. I’ve had 5 paid in full, 0 defaults, and 1 late payment in December. So far, so good. I’m currently investing $300 /month. I hope to step up my contributions next summer.

  5. 5
    Doctor Stock Says:

    Geez… I keep thinking I should look into this further, but keep stepping away. *sigh* Perhaps I should revisit this again!

  6. 6
    Lee Says:

    I started really small with Lending Club 4 months ago. I’ve built up to 7 notes and average return is now 11.2%. I started small to get the feel for how it worked. I’ve noticed that once payments accumulate, it’s best to re-invest to keep your money working. LC is not a very liquid investment compared to stocks. It’s a long haul investment approach, since to keep earning the nice return, you keep reinvesting. It’s interesting to be operating like a banker through LC. One realizes why those bank buildings are so nice.

  7. 7
    bob Says:

    Anyone have experience selling notes? On a lark, I decided to put some of my loans up for sale, just to test the liquidity. I marked them up about 3% each and to my surprise one of the three I listed sold within the three-day period they were for sale. I didn’t really make any money on it, but I think the notes are somewhat liquid based on this experience.

    It is unfortunate that LC doesn’t provide volume and buy/sell data for their trading site. That would make pricing notes easier.

    Another consideration is that the sold notes are taxed like profits on stocks (i assume short term gains?), but, based on my reading of the tax code, as long a note you own nets no more than $10 of interest payments in a year, you are not taxed. This means that as long as you stick with sub-$50 notes, you will avoid taxes on the interest. (Like a Roth IRA without the restrictions!)

    I imagine that as P2P lending proliferates, the IRS will figure out a better way to tax these things, but for now, that is an awesome deal and a good reason not to sell notes.

  8. 8
    Ted Says:

    I am currently in the process of getting a loan from lending club (2 days in and 13% funded). The feeling from my side, as someone being invested in, is priceless. I didn’t go to a bank and get approved to give them money. I am being accepted by people who I want to have my interest. It just an awesome feeling. I can’t wait to turn around and invest in others.

    Thanks for the update! Keep it up.

  9. 9
    Dan Says:

    Prosper is a lousy place to “diversify” your investments. Their screening process is much more lenient than Lending Club’s, so they let in a lot more bad apples. The average return to date for Prosper loans is -1%!

    I’m not putting much stock into Lending Club’s returns until the platform has matured, and many loans have been repaid.

    To answer Brett’s question, yes, there is more risk with peer-to-peer lending. If a loan defaults, it’s gone for good. A stock can tank and bounce back — the only exception is if a company files bankruptcy. So as long as your investments are in solvent companies, it’s not a given that they’re gone forever.

  10. 10
    Caro Says:

    I signed up for LC with one of the promo offers (I think I got a free $25) about a year ago. I left it largely alone but kept reading more and more, so I picked up a few more notes. Two months ago I read about how the money you have sitting around in LC doesn’t do you any good, so I decided that I would start buying 1 note a month and just putting in the difference between what I had repaid that month and the cost of a note. I’m up to 8 notes now.

    I have been using Kiva to do micolending as a charitable effort for a long time (couple years) and I really enjoy being at the point where I earn back enough each month to buy a new loan. My goal is to get to that point with the Lending Club.

    I also have a proper account because they offered a promo amount of money, but didn’t like the format as much and also didn’t like what I was hearing about them. So I’ll watch that promo money (free money) and see how I feel about them in a few years. For now, I’m very pleased with LC.

    Oh yeah, and I invest conservatively, with an even mix of A and B rated loans. When I compare the return to what I get for a 3 year CD, it’s still a huge difference, even at the lower end of the scale. I’m also a lower-risk personality.

  11. 11
    John Says:

    I bought 5 notes in November and December. Most are class C with 1 class A. They all made their first payment without issue, but the first one I bought has went into the grace period on the second payment. It isn’t late yet, but the automatic payment obviously failed for some reason. It would be quite annoying to lose the $25 promo money on a bad note right off the bat like this.

  12. 12
    almost there Says:

    Bob, I noticed that too. I had to call LC because my interest was way more than what was on the 1099OID statement. They had to explain that only notes that earn $10 or more are reportable. They also subtract their fee and I hope any for next year any charge offs bucause I will have three notes that are not being paid.

  13. 13
    Storch Money Says:

    I created a 40-note, $1,000 test portfolio in the second half of 2009, over a couple of months. My progress to date has been somewhat disappointing. Three of the loans are currently 30-120 days late, with all three making only 1 or maybe 2 monthly payments before stopping entirely. A fourth loan is currently 15-30 days late. Two notes were paid off entirely, very early, with my “profit” being less than $1.00 in interest.

    Lending Club apparently doesn’t adjust your expected rate of return downward until a loan is actually charged off, but it seems very unlikely that people who only made one payment are going to get back on track after a long late period. It may be that 10% of my portfolio is almost a totally lost cause.

    Needless to say, I’m not rushing out to purchase more notes. My notes spanned different grades but I always selected people with no defaults in the past two years (thinking, apparently erroneously, that this predicted repayment). I think the early payoffs were a C and a D and the very late ones are an A, B, and a C.

  14. 14
    scsigirl Says:

    Although MA has not approved Lending Club for investing, it’s still possible to invest. I have found that DCU.org works as well as INGdirect.com. I’m assuming other online banks not based in Mass. will also work. It’s easy to find out by entering your banks info and clicking the Verify Account button. If it works you’ll see a Lending Club transaction within a few days. If not, try another bank.

  15. 15
    Dollars Not Debt Says:

    I would be very leery of LC. Sounds like the next big news story (scheme?) Lots of risk here my friends.

    Dollars Not Debt

  16. 16
    Parker Says:

    I’ve been reading a lot about lending club and finally decided to join…and then found out that you have to live in certain states in order to be able to join. :( Are there any other similar sites out there that anyone has had any experience with?

  17. 17
    scsigirl Says:

    Parker, You can still invest in Lending Club through any number of internet banks that are not based in the states that are excluded. I know that INGdirect.com works and also discovered that dcu.org works. Try the banks that you already use, you might be pleasantly surprised.

  18. 18
    Parker Says:

    Thanks scsigirl,
    I actually have an account with ING, so awesome! I’ll give it a try.

  19. 19
    Parker Says:

    @scsigirl so on the sign up page did you put your home address with the ING or DCU state or their address and state? Doesn’t seem an above board thing to do. Just concerned this will come back to bite me.

  20. 20
    scsigirl Says:

    Parker, I entered all correct info. I didn’t know there were restrictions at the time. I only discovered that when the first bank I tried to verify didn’t work. No transactions from Lending Club ever showed up. That’s when I tried INGdirect.com.

  21. 21
    Parker Says:

    Great. Thanks again.

  22. 22
    Rob Says:

    $1,300 Invested
    9.72% Returns
    52 Notes (2 fully paid, 48 current and 2 in funding)

    Been using LC since March 2009.

    I seem to have had better “luck” with LendingClub than Proposer when it comes to Defaults/Charge Offs.

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