Lending Club Update – May 2012

I began my Lending Club experiment in March, 2009 with $50 to see how I would fare in the peer-to-peer lending world. I have been thrilled with the results and have continued to slowly build my account.

As of now, I am earning a net annualized return of 10.10%. With savings accounts below 1%, this has turned into a great way to earn a better return, though there is also more risk.

I have made $46.63 in interest since I started with Lending Club, which is a great return given the size of my portfolio. I have invested in 24 notes in $25 increments and six of them have been fully repaid. One did go past due, but it was paid back into good standing by the borrower.

I have 17 outstanding notes with an outstanding principle of $301.43, one note in funding at $25, and $17.38 in cash. Every time my cash goes over $25, I pick a new loan right away.

Ever since I came up with the social lending snowball strategy, I have been considering adding $25 per month to my account to grow it even faster. I have not, as of yet, implemented the strategy, but it is in my long term plans for my investment strategy.

My biggest request of Lending Club would be to have an ability to do a direct deposit from my paycheck or an ACH from my checking account. At this point, you have to initiate the transfer from your Lending Club account, you can’t push money there from another source.

Overall, I have been thrilled with Lending Club so far and plan to grow that account while also giving Prosper a try. If you have tried peer-to-peer lending, I would love to hear about your experiences in the comments.

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  1. James says

    I started in December of 09 with roughly $500.  Combined with their sign-up bonus at the time I started with $575.  So far I’ve invested in 62 notes, each at $25, rolling payments back into new notes every time I have $25 listed as Available Cash.  Of those notes, 15 have been fully paid, 45 are issued/current, 1 is 30-120 days late, and 1 is charged off (“Chapter 13 bankruptcy, economically infeasible to recover” according to Lending Club).  I am currently sitting at 9.98%.

    I too have considered a social lending snowball, but haven’t gotten around to it yet.

    My biggest complaint with Lending Club is their transition from open questions to canned questions for borrowers.  Back in the day, one could type in questions to ask borrowers, and if they didn’t give enough detail in their reply, you could respond with a follow-up.  Now all you can do is select from canned questions, and if the borrower doesn’t answer to your satisfaction, there’s no way to follow-up.  If a borrower isn’t forthcoming with a good answer the first time around, I just skip on that loan and look for another opportunity.

    Lending Club really needs a way to allow for follow-up to poorly answered questions.  Unfortunately, I don’t think they have much in the way of incentive to do so, since institutional investing doesn’t even look at the questions/answers.

    • says

      I remember that change and agree that it was not an improvement. If I am not comfortable with a listing, I just move on to the next one. Without that open question option, you can’t always find out everything you want.

      Have you tried Prosper?

  2. says

    Crowdlending in general and Lendingclub in particular is radically changing the way people (and businesses) think about consumer credit. Up till now, this huge industry (2.5 T $) was dominated by the big banks and CC companies, raking in an easy 10%+ p.a. return every single decade. It is and has been a cash cow, and for good reason. The asset class is of good quality with a tremendous track record of superior returns, low volatility, short duration, etc. With Web 2.0 developments and technology, players like Lendingclub and Prosper have been able to disintermediate the business, and started a revolution that is just getting ready to gain speed. My Lendingclub investment portfolio has been returning in the 9-11% range for the last 2.5 years, and as we speak, new models are being developed that will enable even better return characteristics via other platforms. This development should be welcomed, supported and is one of these great new things that technology continues to bring us.

    • says

      Thanks for that well written and thought out comment. I agree with everything you say. When I first found Lending Club, I wrote a post about how to make money like a bank. It is great to cut out the middle man.

  3. Mike says

    Thanks for your update. Comparing  your LC returns with a savings account really isn’t a fair comparison, since your savings account is guaranteed/insured by the FDIC. A more accurate measure might be a junk bond fund index, where your principal is at some risk. I hope your good returns continue! 

    • says

      Very true Mike. I don’t think there is any real investment option that you can get a fair comparison to P2P lending. Maybe investing in a REIT has a similar risk profile if you have a very diversified portfolio.

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