As you know, I’m a big fan of Lending Club as an alternative investment (this is just a small portion of my overall portfolio), and it’s time to do a biannual check in on performance.
I invest in mostly C and D grade loans and anything above a 10% return is very good (and I believe Lending Club is a more consistent and less risky investment than the stock market).
I’ve spent less time looking for loans this year, and as a result I sometimes find myself with several hundred dollars sitting in the account earning 0% waiting to be invested. I want to get those funds invested at all once, but sometimes there aren’t loans I’m invested in. As a result, I have started investing $50 to each loan, which means I have slightly less diversification.
Still, this strategy allows me to only invest in loans I am actually interested in and using my lending criteria, I hope to keep defaults to a minimum.
Because I am investing in riskier loans with interest rates mostly in the 13-19% range, I expect there to be some missed payments and charge-offs occasionally.
In the past, I’ve complained about loans that have been paid off early, but let’s take a look at the account as a whole.
Out of my 307 loans, 50 have been fully paid off early (I opened the account less than 2 years ago, and loans are either for 36 months or 60 months).
The best news I see is that only 1 loans is Late 16 – 30 Days and only 10 are Late 31 – 120 Days. It may sound like a lot, but in my mind, it’s not. I know that out of the 230 loans active loans, only 11 are behind schedule. That’s 4.8%, lower than the 7-9% estimated default rate on C and D grade loans (though overall, I’m right around 9%). Even better, I am very confident that at least 3 of the late loans will get back on track. The notes indicate that the users have contacted Lending Club and are either on payment plans or have made partial payments.
Future Lending Club Plans
I will continue to check the account once or twice a month I won’t be doing much other than simply staying the course by investing in new loans and watching payments come in.