Lending Club investing update

Lending Club investing update

About 4 months ago I started a financial experiment investing with Lending Club. If you’re unfamiliar with Lending Club (as I imagine you are), go back and read my initial post in which I explain what Lending Club is and how it worked. At the time I hadn’t tried it myself, and was relying on the advice and experiences of other YMF readers. It was certainly a little nerve racking as I moved my money into the newly created account and watched it being dispersed and lent out to random strangers on the Internet. $25 at time my initial investment of $250 was loaned out. That first month was especially a nail biter as my $250 was no longer in my possession and I only had a promise from the borrower to pay it back, $.60-.90 at a time. Flash forward 4 months and I’m a full believer!

My results so far

Screen Shot 2015-07-11 at 5.16.35 PMI figured I’d start with the good news; 4 months in and my annualized rate of return is 10.54%. Not bad! To put that in perspective, a good (aka online) savings account will pay close to 1%. The US stock market has returned 9% on the NASDAQ and about 8% on the NYSE. All in all I’d say I’ve achieved a pretty good rate of return so far! I started with $250 and have put in an extra $15 or so, and with the payments I receive each month, I’ve currently got 11 notes outstanding. Each note
is issued in $25 increments and pays about $0.60-$.90 back each month taking it 3 or 5 years depending on the term.

My experiences so far

Of my current notes, I’ve 3 “A” grade notes (interest rate of 6-7%), 2 “B” notes (9% interest rate), 3 “C” notes (12-13%), 2 “D” notes (14-15%) and 1 “E” note (20%). I set it up to have as much of a balanced portfolio as I could. I’ll certainly make more interest off of my D and E notes but need some A and B notes in there to reduce the risk. So far everyone has paid their payments on time and I haven’t had any defaults yet! I’m still aware that statistically 10% of my notes will default and that it could be any of them. Lending Club allows a grace period of like 15 days after the payment due date and most payments post 5-10 days after their due date. So far so good from my perspective! I’ve got a buddy (shout out to Adam if you’re reading!) that started his own Lending Club account about a week or so before I did. Although he hasn’t had any defaults yet, he has had two notes pay in full before their first payment was due, meaning he got $0 in interest. I suppose that’s better than losing money! He also has had one borrower actually pass away, so we’ll have to see what becomes of that but I imagine that borrower’s life insurance would help cover the loan.Screen Shot 2015-07-15 at 6.43.31 PM

I know that statistics will have to play out in my scenario and that not all of my notes will be paid back in full. However results don’t lie and 4 months in I’ve enjoyed a 10.54% return!

My complaints so far

Although this is probably for the best, things just seem to move a little slower in Lending Club. From the time I opened the account to my first loan issuing, it was about a month. And then it was a whole additional month getting the payment. It probably took 2 solid months to get all my notes to issue, there were a number that didn’t get funded or that didn’t get issued. I guess I’d rather Lending Club feel really solid and do their homework on a borrower before lending my money out but it sure can take some time!

I must confess that I was pretty skeptical when I first heard about Lending Club. “So you’re telling me that you’ll take my hard earned money and lend it to people I’ve never met via the internet and that these loans won’t be backed by any collateral and that somehow they’ll pay me back?” My initial skepticism has disappeared and I’ve turned into a believer! So there it is, Lending Club is YMF approved as a way to invest your money. As with all investing, don’t put all your eggs in one basket and there are certainly no guarantees about returns, I’m just happy to report my experience with it!

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