I updated our account in Quicken over this past weekend. In doing so, I was able to get a better look at the “real world” performance of my Lending Club portfolio. According to Lending Club, my net annualized projected returns by Grade A-C of 5.11% – 9.29% (be sure to check the Lending Club website for up to date information).
According to Quicken, however, I’m running at a lower rate. Why the difference? The primary cause of this difference has been laziness on my part resulting in an uninvested balance that hasn’t been earning any interest.
When I transfer money in, I don’t always get around to investing it right away, and when payments come in, I sometimes let them accumulate for awhile before re-investing. Unfortunately, Lending Club doesn’t pay any interest on your idle funds.
While it would be great if they did pay interest on your uninvested balance, there are apparently a number of regulatory hurdles that a non-bank must clear in order to do so. The good news is that, as your portfolio grows, a small uninvested balance has much less of an impact.
Regardless, the lesson here is to actively invest/reinvest any available funds if you want to maximize your return. The good news is that Lending Club has an auto-reinvest function (see below) which will automatically create a new investment order when you have funds available, and then e-mail you when it’s ready.
I haven’t really used the reinvest function because I prefer to hand-select my loans. However, I could (and probably should) use it to at least remind when I have funds available. Once I get the notification, I can always login and customize the order. Open a Lending Club account today.