Category Archives: P2P Lending

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!

Lending Club Returns at 15.85% in January 2012

After 4 months of using Lending Club, I’m giving my first report of my progress. My goal is to achieve a greater than 13% ROI, and so far, I’m well ahead of that goal.

I aim to reduce delinquencies by using smart criteria for picking loans, and it appears to have paid off.

15.85% Interest Rate

I couldn’t be happier about this, and I’m so encouraged that I actually sold a few of my 11-12% loans so that I could have the cash to invest in loans with higher interest rates.

Here’s a quick snapshot of my loans:

Issued & Current – 169 loans for $5,028
Fully Paid – 4 loans for $100
Late 31 – 120 Days – 1 loan for $24

As you can see, almost all of my loans are in good standing, with only one being late. That loan had a missed payment in December, but I’m hoping it gets back on track as the payment is currently ‘processing.’ Of course, I am prepared for the worst. Let’s assume that he goes into default: that is still only 1 of 174 loans, about 0.58% default rate, far better than the 3% average for Lending Club.

Of course, having loans paid off early hurts my performance, but since that first bump, I’ve been a little more careful not to pick borrowers who are too good.

Future Lending Club Plans

I’m going to be investing the $125 I have in available cash this week so that it’s not sitting there earning nothing. My goal is not to have idle cash sitting around for more than a week, and since I can invest in a loan for as little as $25, I’ve been lagging in January.

Overall, I’m extremely pleased with my performance and I hope to keep up the good work!

Paying Off Loans Too Early Hurts My Lending Club Returns

As you have probably gathered by now, I am in a committed relationship with Lending Club. We’ve been together for a little over two months now. I give it my money and they give me fantastic interest rates. While it’s only been two months (so I won’t have any defaults yet), I think I’m doing better than average. I’m at a 15.47% Net Annualized Return, which I’m pretty happy with. To top it off I haven’t had any skipped payments, so at the moment (knock on wood), all my loans are performing perfectly. Clearly, my loan selection criteria are working so far.

Borrowers Are Paying Off Loans Too Fast

Since I don’t have any defaults to worry about just yet, there is something else that is affecting my portfolio negatively. I’ve picked a few people who are too responsible. While most people pay off their loans on their scheduled dates, these three people in my portfolio paid off their loans far too quickly. In fact, they paid it almost immediately.

Why Paying Off Loans Early Is Bad

Maybe these people just needed a short-term loan and were willing to pay a few dollars of interest to get it. It doesn’t really matter to me, but it has affected my returns in two significant ways. Let me show you how:

The first way it affects me is that the amount of time the money sits idly in my account is longer. Instead of funding a different loan, I am funding this one. Either way there’s about a week between when I invest in the loan and when the loan officially starts, but with other loans, I’m ok waiting a week with my money tied up because they’ll be paying me interest for the next few years. When people pay back their loans in full within a month, it means that I wasted that extra week and now I’m going to have to start the process over again.

The second way it affects me is a bit easier to understand. Lending Club charges a 1% service fee on each payment from the borrower. On a $25 loan, that amounts to a about 25-32 cents over the life of the loan depending on the interest rate. For loans that are paid off in the first month, the 1% is 25 cents, which means that I’ll only make about 3-4 cents on the entire loan. That’s equivalent to 1.8% annualized in interest. That sucks, my goal is to make 13% or more on these loans!

Each loan essentially costs 25 cents (1% fee of my $25.00 that I invest in each loan) and 1 week of idle money. In most scenarios that extra week is a very small percentage of the whole loan. In these few cases, it’s 20-30% (or more) of the entire loan period.

I was the return for my investment to be as high as possible. But when they pay back quickly, I only make about 3-4 cents, which definitely isn’t worth it!

If you see loans that people promise to pay off early, stay away! These are definitely loans that should be avoided!