Peer To Peer Lending Update: March 2014

It’s been 6 months since my last Peer-To-Peer investment update, so I figured it’s time to drop another quick summary on the site. I’ll be changing things up a bit this time, and providing an update for both of my P2P investments: Lending Club and Prosper.

Lending Club

Here are my historical returns with Lending Club…

And here are the details…

Date NAR Current Loans Fully Paid Lane < 1 month Late 30-90 Days Default Charged Off
August 1, 2011 Initial Investment
May 1, 2012 15.34% 311 17 1 6 0 3
August 1, 2012 14.32% 354 24 0 9 0 8
November 1, 2012 14.15% 376 35 0 13 1 11
February 1, 2013 13.37% 390 47 2 13 1 19
May 1, 2013 12.59% 403 60 3 13 0 27
August 1, 2013 12.54% 413 80 4 12 2 36
November 1, 2013 12.755% 450 104 4 17 2 45
February 1, 2014 12.97% 486 128 3 21 3 53

 

While I still see a high charge-off rate, the annualized returns seem to be settling in at slightly above 12%.  My “late 30+ days” category is higher than it’s ever been, but my NAR is also trending up so I imagine that after a few of those late payments get charged off, I’ll return back to around 12.5%.  I’m very happy with this return after 2.5 years of investing.

One other update on Lending Club… If you’ve followed the success of LC over the past few years, you may have heard that finding good notes were getting more and more difficult.  This definitely was the case 6-9 months ago  However, this no longer seems to be the case.  This morning, as usual, I logged in to find about 10 notes that met my strict constraints.  I’m having no issues keeping my money active.

Prosper

When I started investing with Prosper, I had my doubts.  You see, Prosper was around well before Lending Club, and this meant that they went through many of the growing pains early on that plowed the way for Lending Club and other similar platforms.  So if you look around the web at Prosper reviews, you’ll find a LOT of negative reviews from people that tried it out around 2008-2009. Many people lost money, and few had good experiences.

So far, I’ve been extremely happy with my Prosper results.  I started about a year after Lending Club, so my net annualized returns are still settling in. I wouldn’t assume my current NAR is something I can count on long term, and you can clearly see from the chart that they are still trending down.  Fortunately, the curve seems to be flattening.

Date NAR Current Loans Fully Paid Late < 1 month Late 30-90 Days Default Charged Off
August 1, 2012 Initial Investment
May 1, 2013 18.1% 275 12 12 12 0 1
August 1, 2013 16.67% 298 45 15 21 0 15
November 1, 2013 15.8% 311 67 17 17 0 31
February 1, 2014 15.37% 316 97 13 12 1 50

 

Further Updates

If you’ve read my previous LC and Prosper investment updates, you may notice that I’ve greatly simplified this report.  I did this because I really don’t enjoy writing the reports, which fed my laziness about keeping up with the quarterly updates.  Going forward, I plan on updating these charts quarterly.

With that said, if there’s any information you see missing that you’d like to see then just let me know in the comments.

Shameless Promotion

If you like my investment results and want to try out LC or Prosper for yourself, then feel free to click on the banners below.  You should know that I get a small payment if you sign up.  (The purpose of this article is to show my honest results, but I’m not so cool that I’ll pass up free money either).

lc

 

Disclosure:

While my personal results have been very good so far, there is still significant risk in this investment – as with any investment.  Keep in mind that my $10K and $15K initial LC and Prosper investments are still less than 2% of my overall investment portfolio, so this is a relatively small personal investment.  

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32 Responses to Peer To Peer Lending Update: March 2014

  1. Garrett says:

    I love seeing these updates, but it makes me very sad that I’m unable to participate in LC or Prosper due to Kentucky state law that only allows accredited investors (net worth >$1M or $300k+ combined income for the past 2 years) to use these programs.

    In spite of your great returns, I think that you’re wise to keep this as a small percentage of your portfolio. Thanks for the update!

    • In the comments section of a previous post, someone mentioned that LC was preparing to go public, and that after this they might be open for investments in all states. I was able to verify the IPO preparation, but I didn’t see anything about that step having an affect on states like Kentucky who currently don’t allow investing, or only to accredited investors.

      Anyways, there’s something to potentially look forward to.

      • After the IPO and thanks to the ‘Blue Sky Laws’, Lending Club will be available to investors in all 50 states. Additionally, they gain from not having to deal with regulators in each individual state.
        writing2reality recently posted..Simple Filters for Investing in Lending Club and ProsperMy Profile

      • Thanks W2R. Here’s some more info:

        It’s called the Blue-Sky exemption.

        http://en.wikipedia.org/wiki/Blue_sky_law

        By virtue of a Securities and Exchange Commission (SEC) order in January 1998 that designates NYSE Arca Tier I listed securities as covered securities for the purposes of Section 18(a) of the Securities Act of 1933, Tier I listings are afforded Blue Sky exemption from state securities laws in all 50 states (SEC Release No. 3-7494, January 2, 1998). Under the SEC’s order, Section 18(a) preempts any state registration and fee requirements that would otherwise apply to Tier I listings.

        Courtesy of a guy names Bryce here

    • I can totally echo your sentiment Garrett! I love reading the updates about LC and Prosper but the excitement about them completely faded as soon as I discovered that UK investors are not allowed to sign up (kinda obvious that would be the case in hindsight!).

      We have some equivalents over here but the rates are around the 5% mark. Lloyds TSB (bank) have just introduced a current account where between 2 persons you can save up to £8000 in there, you have to jump through a few hoops but I’m sure this will be easier than logging on the social lending websites and looking for notes every so often, so I know where I’d rather put my money right now!
      theFIREstarter recently posted..Two Spendy weekends and a Flat ValuationMy Profile

  2. I’ve been wanting to dabble in P2P lending because of the success reported on this blog and over at MMM, but like you mentioned, I was nervous I was too late to still make such a good return. Glad to hear the LC is back on the upswing! Also, I think it’s fine to post affiliate links to products you genuinely enjoy and in full disclosure.
    Camille @ Challenge Mantra recently posted..Marvelous Weekend + Camille meets whole30My Profile

  3. Dave says:

    I joined LC about 2 months ago, and was concerned about my ability to stay on top of the notes and invest according to my strategy. I choose to use their PRIME service, and its’ been working out for me. All but $700 of my 15k investment has been invested thus far, and my initial rate of return is over 18%. I expect this to settle into the 12% range like BNL, but I’m glad to be participating in this new investment vehicle.

    My point of this comment . . try PRIME if you want to set it and forget it. Anyone know of a downside to PRIME . . i.e the cost?

    • Dave,

      From what I could tell (and maybe this has changed over the past few months) PRIME didn’t allow you to use all of the potential filter constraints that you can use when you just set up the manual filter. In other words, I limit my loans to certain activities (debt consolidation, etc), but PRIME seemed to only filter on the credit ratings.

      So then when you mix in the PRIME fee per note, plus a potential reduced return from losing filtering, I chose to do it manually. For me, all I have to do is log in 1-2 times a week, click on “Browse Notes” then “open” under “Filter Notes.” I then choose my filter, select all notes, and hit the invest button. It takes about 30 seconds, so I chose to skip PRIME. But I do think PRIME is a good service for the set-it-and-forget-it folks.

  4. thomas says:

    I was curious if anyone knows why some of the loans you can fund has a red line under them.

  5. Great update BNL! Always love to see how other long-time investors are doing with their accounts. It is interesting, in a good way, to see your LC NAR trending back up.

    Two other bits of information I’d be interested in seeing is your Adjusted NAR for Lending Club, and your internal rate of return (IRR) for the two accounts. I usually use Excel’s XIRR function to calculate the IRR for my accounts.
    writing2reality recently posted..Building a No-Cost Dividend Growth Portfolio with Loyal3My Profile

    • My adjusted NAR on LC is 10.45%. I don’t have historical data, but I can start tracking that in the future. I guess it should be less volatile over time than the non-adjusted NAR. If I recall, it was about 10.5% when that feature was first introduced by LC.

      How do you calculate IRR? Don’t you need detailed historical data? If so, do you pull that from LC?

  6. Ken says:

    Even with all the notes being released lately, I’m still only able to find notes right when they’re released. Even waiting a minute yields no notes. I don’t think my filters are too restrictive, but perhaps they may be. I’ve got a few hundred dollars sitting idle trying to find notes with them, and I’ve stopped my weekly $100 deposit into LC till I can buy up more notes. But, as long as I’m at the PC when notes are released I can usually grab 1-2 notes per release and around 3-4 per day provided I’m there at release time.

    • I had 41 notes to choose from when I just checked at a random time this afternoon. It sounds like you have much more constraining filters set up. Have you played with these to see which item is the most constraining for you? You could take that constraint, then run it through lendstats.com analysis to see how it has historically affected performance. It may be worth losing a half percent or so, just so you can keep money active.

      • Ken says:

        Have you changed your filters since you last posted them? If not I’ll hunt them down. Lendstats seems to be dead right now, so I’ll take a look at the site tomorrow if it’s back up then.

      • I haven’t changed anything substantial. I think there were a few things that were slightly modified when I moved away from lendstats and started using the LC embedded filter, due to technical restrictions.

        Here’s the initial filter I’m still basically following:
        http://www.bravenewlife.com/08/lending-club-investment-strategy/

      • Ken says:

        How do you use Lendstats to determine which filter option would raise/drop ROI? Is there a baseline?

      • If you go to the front page and click on “Lending Club Stats” then you get a report of all loans ever processed through LC. You can then enter your own filter criteria, and see those historical results. Then you can play with each criteria to see how it affects the results.

        This was a few years ago now, but I remember that one criteria I had (and I don’t remember what it was) increased my loans by ~0.1%, but only had half as many loans available. So I chose to remove it. Other criteria sometimes increased by >1%, and yet didn’t greatly reduce the overall number of loans that were available.

      • Ken says:

        That’s how I thought it worked, but when I entered anything into the textboxes I kept getting divide by 0 errors in the script.

  7. Nick says:

    Can I lie about where I live? I currently can not invest due to my current location? I want to put some extra money in this as I max 401k, and 2 IRA’s (Wife and Mine).

    THoughts?

    • I don’t think you could lie, nor would I recommend it. It’s been a few years now, but I’m pretty sure I had to supply evidence of where I lived, among other things.

  8. iowaguy says:

    Glad to see others doing really well with LC. A lot of people seem negative on it, but I have been with LC since 2010 and have been ver pleased. With over 1,000 currentnotes I’m averaging 8.4%. If the stock market averaged that each year without the huge swings I would take it. All other investment vehicles should be exhausted first before investing in P2P.

  9. dan23 says:

    In response to your above question on how to calculate IRR: Calculate IRR in Excel or other spreadsheet program.
    1. Put in each deposit (when you add money to lending club) next to the deposit date as a positive number in chronological order (2 columns)
    2. Put in the current balance with today’s date as a negative number at the end (you can use the adjusted balance)
    3. =xirr(highlight the dollars column, highlight the dates column,0)

  10. Ken says:

    So due to Lendstats being down or not working I looked for an alternative and found it in http://www.Nickelsteamroller.com. One thing I noticed is that you can cut your loss to under 0.50% and ROI up to 18%+ by doing the 60-month notes. Loss goes up to around 2% and ROI down to 14% or so with only 36 month notes.

    Do you have any 60-month notes in your portfolio? I’m thinking of creating another LC account for only 60-month notes.

    • Did you filter by end dates as well? I’m wondering if a lot of those 60 month notes are newer, therefore have lower default rates for now. I think LC only started allowing 60 month loans a year or two ago, so if that’s the case then those results you got probably aren’t valid yet.

      Not sure about nickel steamroller, but lendstats allowed you to filter by loans that were x months old, so you could filter out immature loans.

      • Ken says:

        I don’t think NSR allows you to filter by note age, but it does show the average age and it’s usually around 7 months old. 7 months isn’t very indicative of a 60 month loan unfortunately. I looked at my filters and I had them going from only Jan 1st 2013 to today, so I’ll have to go and change them to go back further.

  11. Reggie says:

    I have never commented but wanted to to say I enjoy your website. Coming from a low income background and being the first person in my family to be in college for my masters I look for websites like yours to help me gain knowledge in my pursuit of wealth building. I have been able to make modest investments but will continue to take educated risk from expertise gained from websites like yours. Hopeful motivation to keep it up, thanks.

  12. I’m definitely interested in investing a portion of my portfolio using these sites. At this point I’ve only browsed the websites and need to learn a bit more before opening an account. Thanks for the updates on this, it’s very interesting.

  13. Jin says:

    I have emergency fund (25k) sitting in savings acct earning very little interest.

    What do you think about using this for P2P lending? My only concern is liquidity but seems there’s trading platform that I can sell my notes if required. Only need emergency fund if I get laid off. I have money set aside for car repair and other smaller emergency.

    • Please don’t consider this financial advice, because i can’t give good advice in this forum. I’ll just say this….

      Lending Club and other P2P platforms are not very liquid, and have considerable volatility in the returns. Mine have been good so far, but that’s far from guaranteed. So while I like LC as a part of my long term investment portfolio, I see some flaws in using it as a home for an emergency fund.

      You’re right that you can sell existing notes on a separate trading platform, and I’ve heard good things about selling there. But I haven’t used it myself, so I can’t speak intelligently on whether it’s a good complement to using LC with money you may unexpectedly need in the future.

      In my opinion, there’s really no perfect place for keeping an emergency fund. Cash loses out to inflation, while most investments have short and long-term volatility, and range in liquidity. I wish I had a better answer for you…

  14. BobToday says:

    I do some P2P lending myself on another platform, but the number differ a lot. In your schemes I see much higher returns, but also quite some defaults.

    Might be time for me to invest a small amount via Lending Club and Prosper as well. I am going to look into it, and when I do, I will click your banners :)
    BobToday recently posted..Back soon: enjoining a short holidayMy Profile

  15. PrivateRyan says:

    An article in today’s WSJ pointed out the misaligned incentives at Lending Club in an article titled “Lending Club’s Same Old Scene”. I, like you was enamored by the high return with a near guarantee of repayment if the initial investment was large enough, but isn’t this always the sales pitch of wall street fads that blow up (think high yield debt in the 1980s, tech stocks 1990s, mortgage pass-through securities in the 2000s). I would love to think that a silicon valley born financial institution could sidestep the issues wall street continually makes for itself, but for some reason I still see a tragic end to this story.

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