Lending Club Returns at 15.87% in February 2012

My goal is to achieve a greater than 13% return using Lending Club, and right now, I’m kicking that goal’s butt.

I aim to reduce defaults by using smart criteria for picking loans, and while I’ve been doing pretty well overall, I have had a few setbacks this month. Still, even with 6 loans not paying at all, I’ve been able to increase my rate of return slightly.

15.87% Interest Rate

Since I sold a few loans last month and reinvested the cash in higher interest rate loans, I thought my interest rate would rise a little more than it did. However, I had several setbacks which pushed the rate down. It’s hard to complain about a nearly 16% rate of return, so I won’t. Take a look at my account snapshot:

lending club

I had a few setbacks this month, including 2 loans that have been sent to collections. I assume I won’t get another penny from them. It sucks, but it will happen to a certain percentage of loans. The fact that I was able to keep up my high interest rate even without getting paid by 6 loans this month is really encouraging. If even one or two of the six loans get back into good standing, I could see my interest rate increase.

Two more borrowers fully paid off their loans, which I’m not too ecstatic about, but what can you do. Having loans paid off early hurts my performance, but better early than late, I guess

Future Lending Club Plans

I’ve got enough to make another $25 loan, so I’ll be doing that in the next few days. I also now have expected monthly payments of $152, so that means 6 new loans a month. That’s pretty cool, I sit back for a month and I get $150 I didn’t have before. No wonder this lending business is so popular.

Not too much to complain about here, let’s hope for some good luck in the next month!

11 Responses to Lending Club Returns at 15.87% in February 2012

  1. Evan says:

    “but better early than late, I guess”

    I haven’t been active with my lending portfolio (Work said I can’t do it anymore) but if I remember correctly late isn’t bad since you get fees. It is when they default that things get bad, right?

  2. Nice return. If you keep getting these type of returns, I may have to start looking into this. Although, I am still sure that I can get a better return from a blog. :)

  3. frugalportland says:

    What’s the criteria for participating in lending club?

  4. Can you talk a bit about how the default rate affect the rate of return? The 2 loans that defaulted, how much did they owe you?
    My rate is 13% right now and I’m pretty happy with that.

    • Daniel says:

      @retirebyforty, Well, two loans haven’t technically defaulted yet, but they haven’t been paid in 2 months and are going to collections. Getting any money back would help. My returns definitely dropped because of them, but not too terribly so far at least. Nickel Steamroller has some cool tools to find out your true rate of return.

  5. Louis Lamoureux says:

    Is this account about 6 months old?
    Lou

  6. Interesting post! It’s funny to hear from the lender’s perspective about someone paying off a loan early. I wonder if that’s how the banks feel when someone pre pays points? haha

  7. I know a few guys in the city that would be happy with this sort of return on investment at the moment!! Great job Daniel

  8. Squeezer says:

    Within the past few days I tossed $100 into both Prosper and Lending Club to get my feet wet. I didn’t want to start with a large investment and lose my shirt on some bad loans, so I figure $100 is a good start, because if by bad luck I get 4 charged off loans, I won’t be out much money. If I do well, I will continue to invest more funds.

  9. This is good information. I read about Lending Club years ago in Smart Money. I almost signed up, but chickened out at the last minute. Every now and again I read about someone who either lost a lot of money or has done really well. I’m glad to hear another story of the latter.

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