I’ve now been investing with Lending Club for a about 9 months, so I feel my results are finally starting to become more legitimate. My last update was in February, and I’ll try to continue to provide a quarterly report of my performance. I originally wrote about my strategy (which was using a filter on lendstats.com to find the most optimal notes to invest in) and I am targeting a 14%-15% overall return on investment. So far, things are looking good. If you haven’t read the lending club investment strategy post, I recommend you go back and read that before you read this update.
The Funding Process
In order to increase my overall ROI with Lending Club, I set up a pretty strict filter on lendstats.com. I only invest in high return loans, and filter out high risk characteristics such as loans for education or loans to people that have not held long term employment. Historically, the data has shown that these loans are more likely to default. In my February update I mentioned that I had switched from $25/loan to $50/loan to get all my money invested, but since then I’ve returned back to $25/loan. The reason is because I now have all of my money invested, so each week I take my free cash from loan payments and I reinvest that into new loans. It’s sort of a LendingClub version of a DRIP program.
In order to keep all my money active in loans, I spent about 5 minutes per week to look for loans and click a bunch of buttons to confirm the loans.
In order to purchase new loans, all I need to do is click on this link. Then I scroll down to the bottom and click on the links under “Active Listings.” That brings up the loan at Lending Club, and I click the “Invest” button. It’s pretty quick and easy, and actually I kind of enjoy the process because it cheers me up to see all the new cash I have waiting to be reinvested.
In February, I was reporting 14.34% net annualized returns, with reasons to believe it may go up, and also reasons to believe that number may drop. In May, I have seen that number rise to over 15%, but I still see reasons to believe it might go down. However, I’m becoming more optimistic that 14-15% is achievable, and I now have very high confidence I will achieve my goal of 12% ROI long term.
Here are the numbers:
I’ve made a total of 343 loans with an account that I initially opened with $10,000. I’m currently returning 15.34% with 3 notes charged off (defaulted). This is very good news, but there is also some bad news. Currently I have 8 loans that are late over 30 days, and Lending Club reports about 50% of loans in this category will ultimately be defaulted. I also am 8-9 months into most of my investments, so I’m starting to reach the critical zone on these loans where the default rate is highest. Usually, once someone makes it over 1-1.5 years, they will be less likely to default because they’ve made it over the hump and would not want to default so late into the loan where most of it is paid off.
Here’s a picture of my Lending Club dashboard:
Feel free to ask any specific questions about my Lending Club experience in the comments below.
Also, I’m considering a similar $10K experiment with Prosper.com. I’d love to hear if anyone can share recent experiences they’ve had with Prosper (I know a lot of people had bad experiences 3-4 years ago with Prosper, but I haven’t seen a lot of bad stories in the past 2 years).
A few items for full disclosure:
1. If you sign up for LendingClub.com from this site, I get $25. It’s not the purpose for writing the update (I would write the same article regardless of this income), but I want to be open about it. So far I’ve made $275 in commissions this year. If you’re one of the people that signed up after reading my results, I’d love to hear about your results!
2. While my personal results are currently good, there is still significant risk in this investment – as with any investment. Keep in mind that my $10K investment is still only 1% of my overall investment portfolio, so this is still a relatively small personal investment. I may go up to 2%, but probably not more.
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