Normally I start off my quarterly Lending Club investment reports by stating “Every 3 months I write an update on my Lending Club investment, based on my patented LC investment strategy. And now that another quarter has passed, it’s time for an update.”
I suppose I can’t quite claim that now, since I sorta kinda never got around to doing a report in February. That’s probably not the smartest decision, considering the LC links are really the only place I make any money on this blog – and even that amount isn’t much. Luckily, here at BNL we don’t follow the silly old-fashioned idea that we let income (or potential income) drive our decision making on how we spend our time. I wasn’t motivated to write a report in February and so I didn’t. This morning I woke up motivated, and so now I’m writing.
Wouldn’t it be nice if we all lived by that philosophy?
I’ve now been investing with Lending Club for about 21 months. I started with a $10,000 investment, and my portfolio is up to $12,143. Using the Lending Club algorithm for calculating Net Annualized Return (NAR), I’m sitting at 12.59%. If you recall from my last update in November, this is down from 14.15% at that time. So it’s down about 1.5%, but I knew that was coming since I had one note that was already defaulted but not charged off, and quite a few that were late by more than 30 days.
Here’s a snapshot from my Lending Club dashboard today:
12.5% return is great, right about where I wanted to be, and well above my bare minimum goal of 10%. At 21 months into this experiment, I’m getting more and more confident that a double digit return is an achievable long term goal.
But before we break out the confetti and hire any marching bands, I wanted to do a little more analysis of my current returns and loan status. The best way I’ve found to do this is through Nickel Steamroller’s powerful Portfolio Analyzer tool to figure out my estimated future ROI. I loaded my portfolio into the tool, and it spat out these results:
- Average Age: 374 days
- Estimated ROI: 11.5%
So Nickel Steamroller is forecasting an additional drop of 1%, based on my 13 notes that are over 30 days late. I think this is reasonable, and the return would still be acceptable.
Many people have noted that finding loans through my Lendstats filter is getting more difficult. I agree. I dug into this a bit, and I learned that Lendstats was updating their database of notes only once a day, in the morning. I exchanged some emails with the site owner, and he indicated that he wasn’t as active with Lending Club anymore. Not to get presumptuous, but I didn’t want my income generating ability to be dependent on a tool that wasn’t actively managed by someone motivated to stay in the game. I know it takes a lot of work to run good sites like Lendstats, and if the return in value isn’t high enough (financial, or otherwise) then people lose interest. Not saying that’s necessarily happening with Lendstats, only that I don’t want to wait around to find out.
So I began looking at other filters out there and found a few good ones. Nickel Steamroller has a nice one, as does P2P-Picks and Peercube. But before I chose a new tool, I decided to look at the embedded filter on the Lending Club site itself. I’m glad I did, because I found the filter to be greatly improved compared to when I initially looked at it 21 months ago. Most of the same filters I used for my initial strategy are now in their embedded filter. As they should be…
I like the idea of having everything all in one place. It has a few advantages. First, it’s always sync’d with the latest available loans, so you won’t go clicking on a bunch of loans that are already 100% funded. Second, there should be no issues if/when Lending Club changes their file format. All the 3rd party tools import a .csv file, so if fields in their database are added or removed, then the tools tend to break (this happened to Lendstats earlier this year).
So, in the end, I’ve decided to use the Lending Club’s filter. The parameters I’m using are very similar to the initial strategy. Specifically:
- Delinquencies (2 yrs): 0-3
- Max Loan Amount: $35K
- Location: All, except California
- Max Debt/Income Ratio: 25%
- Home Ownership: Own, mortgage
- Exclude loans already invested in (nice feature no other tools currently have)
- Interest Rate: D, E, F, and G
- Minimum length of employment: 4 years
- Loan Purpose: Refinancing credit cards, debt consolidation, home improvement, wedding expenses, moving expenses, home down payment
This filter can then be saved in your LC account, so it’s as easy as logging in and opening your filter. This morning there are 6 loans that meet my criteria, so it takes about 5 total mouse clicks from beginning to end to reinvest $150 at $25/note. Easy peasy.
About 9 months ago I also started investing with Prosper.com. So far, the results have been great. I’m averaging over 17%, and have already cashed out $1200 while keeping my overall investment principle at $15K. There are also some really nice features with Prosper.com that Lending Club doesn’t have, and when I have some more time I’ll write a more thorough review. I’m not claiming that I’ll maintain 17% at Prosper, but my goal is once again to achieve better than 10% like with Lending Club.
I know a lot of people are using my original filter, but I rarely here anyone’s results. If you’re invested using my filters and you don’t mind sharing, I’m sure everyone would love to hear your results of ROI and time invested. So please feel free and encouraged to leave your results in the comments. Happy investing, ya’ll.
If you’d like to invest in Lending Club yourself, click below.
A few items for full disclosure:
1. If you sign up for LendingClub.com from this site, I get $25. This isn’t why I write these updates (I would write the same article regardless of this income), but I want to be open about it. If you’re one of the people that signed up after reading my results, I’d love to hear how you’re doing!
2. 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 initial investment is still only 1% of my overall investment portfolio, so this is still a relatively small personal investment.