Lending Club Update – March 2012

I’ve been a bit lax about updating our Lending Club performance ever since I decided to start winding down our portfolio. Nonetheless, we do still have a chunk of money there, and it’s still performing reasonably well.

About ten months ago, our portfolio looked like this:

  • 336 loans were current
  • 88 loans had been paid off
  • 2 loans were 16-30 days late
  • 13 loans were 30-120 days late
  • 13 loans had defaulted and/or been charged off

And our net annualized return (NAR) was around 8.3%.

And as of now, our portfolio looks like this:

  • 266 loans are current
  • 146 loans have been paid off
  • 3 loans are currently 16-30 days late
  • 9 loans are currently 30-120 days late
  • 28 loans have defaulted and/or been charged off

And our NAR is just over 7.6%, roughly where it’s been for the past six months or so. I haven’t had a chance to update Moneydance, but our real-world numbers are usually around 0.5% lower due to idle cash, etc.

Since I’ve typically kept our notes small, those defaults have averaged around $17.70/each, totaling just under $500. Given that I intentionally bought a bunch of high risk loans at the very beginning, that’s not too bad.

We’re now approaching three years since I first started investing with Lending Club, so our oldest loans will soon be reaching maturity. I suspect that the increasing age of our portfolio is why our returns have leveled off in recent months.

What about you? If you’re Lending Club investor, how have your investments performed? How many notes do you own? And how long have you been doing it?

19 Responses to “Lending Club Update – March 2012”

  1. Anonymous

    I’d give a warning to any new investors considering putting money into Lending Club. Lately, they’ve been sending out notices to many of the people who have borrowed. Here’s how that works:

    1. Borrower requests loan. Investor assumes they will get interest over the life of the loan and pay a 1% fee to Lending Club as the loan is paid back.
    2. Borrower’s credit score improves when they use loan to pay down credit cards. Seeing this, Lending Club contacts the borrower and encourages them to take out a new Lending Club loan at a lower rate (because of their improved credit score).
    3. Borrower does this and pays back first loan in lump sum. Investors get shafted, as they pay the entire 1% fee on the principle without getting the interest on the full life of the loan.
    4. Investor must now take the lump sum and find another loan to try and invest in.

    In short, investors pay far more than a “1% fee” in practice, and Lending Club does little to respect their investors.

    This high turnover also makes it frustrating investing at Lending Club. It takes a lot of work to find good notes to invest in, and then Lending Club encourages the borrowers to re-fi and take out new loans to pay off their first.

  2. Anonymous

    I’ve been using LC for about 2.25 years now. Have constantly been adding funds. Up to about 1000 notes now – nearly all purchased in 25 dollar (the minimum) notes.

    I’m around 10% real world returns at this point. It’s been inching higher since I started buying higher interest (riskier) notes.

    I have a strategy that involves selling any of my notes for a very slight loss vs. amount due + interest due amount as soon as they enter grace period. While I very rarely lose more than 1 dollar per loan this way, I do sell probably 10-15 per month on average, most of which end up going back into current eventually.

    So I’m still not certain I’m actually coming out ahead vs. just letting them go and having some defaults now and then. But I keep doing it for peace of mind of not having any late notes lol.

    Anyhow. It has been good to me and I highly recommend it to anyone who enjoys some hands on investing. I can’t vouch for the auto invest strategy options LC has.

  3. Anonymous

    I’m a newbie with Lending Club so my data may be too new to have much meaning. But, after 6 months:

    – 146 active notes
    – 0 (16-30 days) late
    – 0 (31+ days) late
    – 4 paid off
    – 0 charged off
    – NAR 17.28%

    After reading many posts about Lending Club, I expect to have a few defaults, but so far so good. Obviously I invest heavier in higher risk notes, but I do spread my investments out (A through G, only 5 are A and 5 are G, the rest fall in between).

    I also invest in Prosper, my average note yield at acquisition there is 24.26%. After 6 months: 133 active notes, 3 currently late, 0 charged off, 9 paid off.

    I agonizingly hand pick all my notes on both platforms.

  4. Anonymous

    29 months in.
    Total loans: over 1200+ purchased.
    Sold: 500+/- (375 at 2% net premium, 120 at 2-3% net loss)
    Currently own: 780 notes (70% 3 yr. notes, 55% B/C grade)
    Late Notes: 0
    Default/Charged Off: 6
    NAR: 12.3%
    IRR: 14% (including new acct/recurring bonuses)

  5. Anonymous

    I keep reinvesting my money to take advantage of the compounding. But this is money I know I am not going to need for a long time. If I was you I would only invest the money I am pretty sure I won’t need. Because it can take a long time to cash out or you can do so at a small loss on the trading platform.

  6. Anonymous

    I have about 20 notes invested in higher risk loans, but with some special criteria I’ve picked. After one year, no defaults all loans are current except for 2 that were paid off.

    What do most people do though when they want to get the money out? I don’t know if I will need this money in 3 years or not, so do you guys keep re-investing your idle cash or pull it out?

  7. Anonymous

    I haven’t invested in LC, but would like to. I believe it is not available to residents of Texas (where I live). The idea is one that I find very appealing (peer-to-peer lending).

  8. Anonymous

    10 loans current, 1 31-120 days late, 6 paid off and 1 charged off. NAR is showing 12.25% with about 50% B, 25% C, and 25% D grades. I did a little trading and got a few bought at a small discount.

    Last year they were doing some investment bonuses of 1-2% but I haven’t seen any more lately for existing investors except with rollovers.

  9. Anonymous

    I have around 2,700 notes spread across multiple accounts (taxable and IRA accounts) and my IRR last year was 8.12%. In the last few months I have moved from a B-C average in loan grade to a E grade average and so my returns are inching up. I also continue to add new money into LC (and Prosper for that matter) but I am also coming up on three years of investing here soon.

  10. Anonymous

    I just got started with Propser and Lending club. I’ve funded a handful of loans with both just a couple of weeks ago so I have yet to receive any payments yet.

  11. Anonymous

    NAR 7.80%, I’ve withdrawn about 40% of what I have put in and have remaining:

    In Funding… 2
    Issued & Current… 244
    Fully Paid… 42
    Late 16 – 30 Days… 0
    Late 31 – 120 Days… 1
    Default… 0
    Charged Off… 9

  12. Anonymous

    My biggest problem with Lending Club is that, at least from what I understand from the prospectus, they retain all the tax advantages of any defaulted loans they issue and you’re stuck with the lost cash. The idea of peer to peer lending is really exciting to me, but I’m still hesitant to pull the trigger.

  13. Anonymous

    My loans have been doing ok so far. I have 49 loans issued and current, 22 fully paid off and 4 charged off. I only invest $25 per loan and I don’t have a lot to invest. I withdraw my money weekly but every time I get enough to make a new loan I go ahead and do that. I am looking forward to getting more loans and investing in riskier ones as well.

  14. Anonymous

    Over 700 notes purchased in 28 months. I have 9 defaults and 3 heading that way. About 90 loans paid off early. NAR of 9.49% Fairly conservative portfolio with about 40% A&B notes. Actual return is 8.51% due to idle cash, etc.

  15. Anonymous

    My IRR since Sept 2010 is about 8.29%- note that LC says it is 12%- this is because LC does not factor in that I made the mistake of purchasing loans off the trading platform at a premium.

    I have 600 loans now. I buy grade C-F loans (‘high’ risk). I used to put in a ‘B’ loan to offset each D or higher loan, but noticed the B default rate was about the same.

    LC reminds me of the ‘cyber pet’ fad we had about 15 years ago- if you don’t stroke or feed your LC account regulary, your rate of return drops due to idle cash earning ZERO.

  16. Anonymous

    I’ve been on Lending Club for about two years, and my NAR is about 12%. I invest in only B,C,D loans, and I hand pick them. I do have some late accounts, but none have been charged off or defaulted yet.

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