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.
Recent Activity
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.
Performance
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.
When I continue to see returns like this it makes me want to get started with Lending Club. While I have had a lot of success in the stock market the last few years I need to get myself into something else as well.
I took a long, hard look at Lending Club a half of a year ago, but decided I didn’t have the money to invest in it yet. I’m hoping to start within the next year. I think the idea is great and the returns aren’t bad either. Plus, it’s an additional way to diversify yourself. Thanks for the update!
Once I have some money freed up from all my debt payments, I hope to hop on the Lending Club bandwagon! Great returns!
I tried investing in Lending Club and Prosper, but I’ve had a couple of loans get charged off which ruined it for me. if a loan goes into collections or gets charged off, there’s nothing that can be done to the debtor to force them to pay. There’s no remorse for not paying, so there is no incentive for them to pay. All they get is another collection on their credit report.
@Squeezer, That’s why you need to diversify and only lend out in $25 increments. If you lend to 200 this way, you are likely to get average (or better, if you have a good system) returns.
Awesome, sounds like great returns! It almost seems too good to be true.