Lending Club Update: August 2013

Yes, I know it’s already September… But better late than never, right?

I’ve now been investing with Lending Club for 2 full years, so I’m highly confident now that my returns are stable and reproducible.  This is a big deal, because I was reluctant at first to jump into Lending Club with too much money, fearing it might start out strong and then come crashing down later.  I started with a $10,000 investment, and my portfolio is up to $12,609.  Using the Lending Club algorithm for calculating Net Annualized Return (NAR), I’m sitting at 12.54%, which is pretty much identical to my previous Lending Club update in May, where I reported 12.59%.  That’s what I mean by stability.

Here’s a snapshot from my Lending Club dashboard today:


The first thing you might notice is that I have a lot of money sitting as idle cash.  This isn’t because the notes aren’t out there or that my filter is too tight.  Rather, it’s because I’m lazy and forgetful.  In the past, I’ve always logged in 1-2 times each week, and reinvested my cash.  But until 2 days ago, I hadn’t logged in for over 3 months.  Now I’m just working to catch up, so I expect this could take a few days.  Fortunately, I’m seeing 5+ loans everyday so I don’t expect it to take too long.

12.5% return is great, right about where I wanted to be, and well above my bare minimum goal of 10%.  And, as I mentioned above, I’m highly confident now that I’ll continue to remain well above 10%.

As I’ve done in the past, I like also check my predicted returns based on Nickel Steamroller’s  Portfolio Analyzer tool to figure out my estimated future ROI.  So I loaded my portfolio into the tool, and it spat out the following results:

  • Average Age: 463 days (previously 374)
  • Estimated ROI: 11.29% (previously 11.5%)

So Nickel Steamroller is forecasting an additional drop of 1%, based on my existing late notes.  Still, 11.3% isn’t too bad.

Lending Club Reinvestments

Lending Club has been great.  The returns are good, the interface is easy to use, and the notes have been abundant enough to keep my money active.  If there’s one negative aspect to share, it’s that I haven’t found a way to automatically reinvest into notes based on my current filter.  This is in contrast to Prosper.com, which allowed me to set that up from the very beginning and has kept my money active at all times.

As I mentioned above, I have $1500 in cash sitting idle.  At 12% NAR, that’s roughly $15/month I’m not making.  Or, put another way, it would be wise for me to pay anywhere from $5-$15 per month for a service to do the work for me.  I’ve actually had multiple readers ask about this, and one reader even said he was prototyping a program to do this automatically. Unfortunately, that reader went incognito, so I never got to check it out (Reza, if you’re still out there, hit me up again!).

If anyone is aware of such a service, let me know in the comments and I’ll update this article.

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 a relatively small personal investment.  

63 Responses to Lending Club Update: August 2013

  1. No Waste says:

    Great returns.

    I’m curious as to how an improving economy will affect the peer to peer lending model.

    As banks loosen up, people on the border of credit-worthiness may be able to get better financing, and the pool at Prosper and Lending Tree may be left with too many high risk borrowers?

    • That’s possible, but I consider it unlikely. Right now, people with great credit still struggle to get an asset backed loan for houses and cars, where as LC is primarily non-asset backed loans – mostly debt consolidation. For example, a few months ago I tried getting a HELOC on my rental house that is 100% paid for, and was only offered up to $40K at 4.5%. And that’s on a house that appraises at $210K!

      I can’t see traditional banks jumping into the debt consolidation market any time soon. If anything, I see them working with companies like LC and Prosper and taking up all the loans through them (see Ken’s comment below).

  2. Ken says:

    I’ve noticed in the past few weeks that any notes that match my filter are snapped up in under 10 seconds from release. They’re often fully funded by only a few funders, so that leads me to believe large institutional investors are snapping up the higher interest loans. If I’m fast and lucky I can invest in 1 note every other day or so. I have a scheduled task to run a few seconds before release and since I work from home I’m always at my PC when they are released. It’s frustrating having a hard time just reinvesting $25 every few days.

    • Are you using the same filter as me, or is it more restricting? I ask because I can usually log in at any time and find 3-4 loans available.

      With that said, I’ve observed the same thing as you. I vaguely recall reading that earlier this year LC did open up to institutional investors who are allowed to buy up to 90% of the loan amount before us regular folks. Don’t quote me on this because I can’t find the source, but it would make sense since whenever I do search on my filter, all the loans are usually between 90%-99% funded already.

      But hey, maybe that means we’ve got ourselves some good filters if we’re competing with the big boys. :)

      • Ken says:

        If you see anything that you think I should change let me know and I’ll consider it. It seems the large investors that use the API beat us regular folks, and I’m always on the notes page when they are released. I usually see 2-3 at release but if I try to immediately buy any notes they’re already gone before I can click Add to Order. It’s very frustrating. And I’d like to sink another $1k or so into my account, but what’s the point if it takes me a few days to invest $25? My filter:

        Min Employment: 2yrs
        Months since record: 12mo
        Max Loan Amount: $25k
        Earliest Credit Line: 5yrs+
        Home Ownership: Mortgage or Own
        State: All But CA
        6mo Inquiries: 1 or less
        Public Records: Exclude
        Delinquencies: 0-3
        Months Since Last Del: 12mo+
        Max DTI: 25%
        Term: 36mo
        Loan Use: Refi, Consol
        Rate: D-G
        Exclude Relisted Loans: Exclude

      • You’re filter is definitely more restrictive than mine. The biggest difference, I suspect, is that I also invest in 60 month loans. This does decrease the “predicted” return, but then again sitting on idle cash because you can’t find loans will also reduce your returns. :)

        Here’s my filter compared to yours:

        Min Employment: 4yrs
        Months since record: (unfiltered)
        Max Loan Amount: $35k
        Earliest Credit Line: (unfiltered)
        Home Ownership: Mortgage or Own
        State: All But CA
        6mo Inquiries: (unfiltered)
        Public Records: Exclude
        Delinquencies: 0-3
        Months Since Last Del: (unfiltered)
        Max DTI: 25%
        Term: 36mo,60mo
        Loan Use: Refi, Consol, Home Impr
        Rate: D-G
        Exclude Relisted Loans: Exclude

      • I should also point out that I require 4 years of employment, compared to your 2. So in that one area, I am a bit more strict.

      • Ken says:

        I’ve relaxed a few of the options, but things like delinquency months and record months I wanted to keep. Since if it has been recently since they’ve got all these negative marks it leads me to believe that they’re spiraling downward and are making poor choices.

      • I hear ya. That’s probably one that I should consider tightening up as well. For now, I’m just keeping it as it is since I’m satisfied with the returns.

  3. Joe says:

    12% is great. Nice job and thanks for sharing.
    That’s a bit lower than your last report isn’t it?
    My ROI at prosper is stabilizing at around 9%. That’s not bad, but I’d like to get it up to around 10%. What’s your ROI at prosper?
    I can’t join Lending Club. :(

    • Prosper has actually been pretty good to me too. I suppose I should write up an article about it sometime, but here’s a snapshot showing a 14% return on all seasoned loans. I’m using a similar filter as LC.

      • Joe says:

        Have you made any changes to your lending filter? The last one I can find was written in 2011.
        Cash has been building up for me because not many loans pass my filters…

      • It’s changed a little since my first post in 2011. Check out my response to Ken above, you can see my current filter.

        Those changes were implemented about 6 months ago, when I switched my filter from Lendstats.com to the embedded filter in Lending Club (which sucked back in 2011, but is pretty good now).

  4. Chaim says:

    I use bluevestment.com

  5. Excellent idea! Thanks for sharing this with us. This concept is very new for me. Can you please explain is there any specific requirements to join Lending Club. Thanks mate!

    • There are no specific requirements that I know of, other than that you live in the US and have a social security number. However, there are quite a few states where P2P lending is currently still not allowed, so you’ll have to check that on the LC website.

      Speaking of the state restrictions, I read last week that New Hampshire recently legalized social lending, so anyone from NH that tried signing up should probably go check that out.

  6. Alex Kravets says:

    interest radar just rolled out a “beta” version of auto invest. they have two options, (1) you can be notified if a note matches filters you create and (2) an auto-invest option – (i have only used the notification option so far so i can’t vouch for how well the auto-invest works)

    bluevestment charges a percentage of total transactions, but interest radar has a flat annual subscription of $60. in addition to the auto invest they have some pretty good filter tools.


    • Thanks for the summary. Interest radar looks promising. I just signed up for the 30-day free trial, and I’m testing out the autoinvest option now. If I end up using it, I’ll write more later.

  7. […] Lending Club Update: August 2013 from Brave New Life – An update from this blogger who has been a Lending Club investor for two years now. […]

  8. Megan says:

    You seriously might want to think about whiting out your account number. Just a thought

  9. I have found the emergence of these peer to peer lending networks amazing – cutting out the middle man and allowing individuals to gauge risk vs return for themselves (as investors).

    I’m sort of in the “too lazy to make it worth my while” camp when it comes to actually investing in lending club or prosper. I think I would have to put $50,000 or so in to one of these programs to make it worth the effort to learn the system and squeeze out an extra 2-3% return above the 9-10% I expect from stocks (over the long term).

    Maybe I’m looking at it wrong and I should put in $100 or $500 and consider it a hobby instead of an investment.

  10. Lending club and peer-to-peer lending in general have come a long way and gauging by your portfolio and returns I’d say you are doing quite alright, I guess your filters do catch the riskier notes early on.
    Found anything that automatically reinvests the idle cash yet? I’d also be much interested.

  11. MJ says:

    Hi BNL,

    I have a question which is off topic but I’d really like to hear your opinion. I have some idle cash which and LC is not available in my state of residence.

    Where else do you think I can park my cash? Given that the stock market is so high at the moment, I am a little hesitant to increase my position in the stock market. What do you think?

    Thank you in advance.

  12. Tom says:

    I’m ready to initiate my first loans at lending club. My investment is available to loan tomorrow.
    I wish to emulate your loan conditions to start with. I am not clear how to import the loan filter conditions to lending club.
    Maybe it will be clearer when I can access funds and set loan conditions.
    I may be back to ask for more guidance.
    Thank You for your site. It’s a valuable resource.

  13. Great numbers on both micro loan sites. How protected are you if the entire company (Lending Club) goes bankrupt? Just so I can comapare it in riskiness to stocks.

  14. R P says:

    Recently(last few days), I can’t find hardly any loans. Last week I could find up to 20 a day. I automatically check every hour and I still barely find one or two loans a day. I am using the same filter that BNL has set up. Anyone else experiencing a massive decrease in available loans recently?

    • Ken says:

      Since notes are being snatched up by big investment groups now you should only be checking for notes when they’re released. New Notes are listed seven days a week at 6AM, 10AM, 2PM, and 6PM pacific time.

      • R P says:

        Have you been finding notes at those times? Even at those times I find 0 to 1 notes.

      • Ken says:

        @RP – Yes, I have. but, they only last for 10-20 seconds after they are released. A lot of investors are using automatic APIs that will search and invest in notes all automatically without user input, so within a few seconds of being released they are already fully invested in. I’m usually able to invest in 1-2 notes a day with my strict filters.

  15. veritas says:

    Thanks for the posts on LC – I found them extremely useful as I decided to make an investment. As I live in a state that does not allow purchases of loans on the “primary” market my choices were the secondary loan trading platform or establishing a Separately Managed Account with LC Advisors, an affiliate of LC. I went with the SMA which requires that the investor be an accredited investor (income / net worth requirements) and also investors have to pony up a substantial minimum investment amount. I told LC Advisors my loan filter criteria and their traders buy the loans for me (initial loans and the re-investments). I chose the SMA because I was willing to invest the minimum amount and I don’t have the time to put the money to work myself on the LC platform. The SMA charges a 1.1% management fee. It’s been a 2 months since funding my account and about 10% of my money is still in cash due to the tight loan supply. My filter criteria are basic and slanted towards the higher quality loans – 75% in B and the remainder in A and C grade. I expect to get an net annual return of 8 – 9 % which I am content with. I think for the most part the days of frothy returns in the high teens are over for investors funding new loans now. LC Advisors told me that pursuing a meaningful amount of lower quality (D, E, F…) loans would result in a very long funding process of at least 7+ months which I was not interested in. LC seems like a great way to diversify from the stock market while also earning solid returns. The real test will come a year from now when the inevitable defaults start to roll in or if there is a significant leg down in the economy. Thanks again for the info!

    • Ken says:

      I’ve noticed recently that after the big release of notes they will trickle notes in for the next 5-10 minutes or so. Or at least it was that way Monday morning. I’ll keep watching to try and find a pattern.

  16. Very impressive! Please give us update on September. Look forward for it.

  17. This post has inspired me to open a Peer to Peer lending account. I live in London and the closest P2P lending site is FundingCircle.co.uk. Thanks for everyone who provided the parameters for finding good notes. Great Site and thanks for sharing your success.

  18. DimeaDozen says:

    Use the secondary markets. While the filters aren’t great, you have the benefit of observing past performance for a loan on sale. I usually find now-current loans, with 6-8 months of good payment history. You can also check the history against the credit score movements, which are available on the secondary market for each loan. Beats trying to out-buy the institutional investors on the primary market; you will lose every time.

  19. Jon Maroni says:

    So based on your experience would you recommend Lending Club as a retirement investment? Your return is really excellent but what about the taxes involved? I’m curious about Lending Club but my sole investment focus is on retirement so if it doesn’t fit for that I probably won’t jump in. What do you think could some of these investments be part of your retirement portfolio?

    • I think that depends on your own risk tolerance, and how you have the rest of your money invested. I certainly won’t be putting a significant percentage of my overall portfolio in LC any time too soon since I’m still gathering data and assessing overall risk. But so far it pays out well and it’s fun to get >$100/month in interest paid out.

      • Jon Maroni says:

        Very cool, so if you have some money you want to speculate and experiment with that is what Lending Club is probably best for. Have you had any loans default?

      • Jon –
        If you check the image in the original post, you can see that I have 36 loans that have been charged off after defaulting. I have 2 more in the default process. But my strategy isn’t to avoid defaults, it’s to diversify across many loans and reduce (but not eliminate) defaults with strategic filtering. Basically, it’s a numbers game.

        I look at it like a batter in baseball. I try to only swing at strikes, but don’t expect every one to be a homerun, or even a base hit.

  20. Ken says:

    @Jon – Out of 286 notes (all $25 each) these are my stats. I mainly do D,E,F,G now but probably half were A,B,C graded and I’ve had all grades with late payments. I’ve done this since last Feb with no defaults, but I have one coming close.

    In Funding: 8
    Current: 261
    Grace Period: 3
    Paid Off: 12
    Late 16-30days: 0
    Late 31-120days: 2
    Default: 0

  21. Jeremy says:

    Have you tried Lending Club’s “Prime” auto-invest option? I’m wondering if its faster than logging in at 6am, 10am, etc and just hitting refresh until loans become avaialable.

    • I did test out the Prime service, but cancelled shortly after. It doesn’t allow all the filters I want, but more importantly I’ve noticed that loans are more available than they were 6 months ago. In fact, II’m back to logging in only 1-2 times per week and easily keeping all of my cash actively invested.

      Prime could be a good service for some, but I saw no good reason for me to give up the additional 1% return that the service charges.

      • Ken says:

        I’ve had three notes in the Late 31 – 120 Days for a while and one more note that clicked over to that category today. One of them says that the borrower has filed for Chapter 7 bankruptcy so I can likely consider that a total loss. Some others haven’t paid since August. I’ve received $512 in interest payments so far, and it would be a bummer to lose $75-$100 of it to defaults. I’ve tried selling the late notes on the 3rd party trading platform, but have had no takes even at $10 per note.

      • How much money do you have invested? Defaults are going to happen. Currently, I have $13K invested across almost 500 notes. 23 are late over 31 days, and 2 are in the default process. I’ve also had 48 “charged off” over the past 2+ years. But even after all that bad news, I’m still averaging 12.7% return. After those 2 defaults get charged off, I’ll drop closer to 12%, then it will creep up to 13% until more get charged off. That has been the pattern now for the past year and a half. So I don’t worry about charge-offs, they are just part of the game.

        Of course, I do feel bad for the people that default. Life’s not treating them well right now if they have to do that. I can honestly say I feel more bad for them, than for me who simply lost 25 bucks…

      • Ken says:

        Do you use the Adjusted NAR feature to figure out your actual rate or do you calculate it yourself? I took a screenshot with all my LC info, how do I post it here? Or should I just email it to you?

      • Ken –

        As of the last update I posted here, the “adjusted NAR” wasn’t a feature within LendingClub.com. Now that it’s there, I’ll probably publish both. I did also publish the nickel steamroller calculation as well, which I think is similar to the new adjusted NAR – we’ll see in my next overdue update.

        I’ll have to look at how adding HTML features to comments, so people can upload an image of their results as well. I’ll put it on my todo list. I’d take an email if you want to send it, but I don’t want to make a habit of it long term, since I try to make things as simple as possible for everyone.. Efficiency!

      • Ken says:

        Gotcha. I think you can also add BBcode which is a lot safer for your website. It’s what I use on my forum; you can do formatting, linking, and pic posting and much more people understand how to use it without knowing how to code in HTML.

        Anyways… I’ve been moving $100/week to my Lending Club account. I’m self employed and can only contribute 5k/year to my IRA and my main savings account is a worthless 0.9% APY. I always reinvest what I earn through LC so it is not generating any monthly income. I need to find some way to begin generating passive income. But I think first things first is to get out of renting and into a house if we can ever find one we like and can afford.

        Total account value: $7,187.58
        Interest Received: $520.97
        Total Pymts Rec’d: $2,068.52
        In Funding: 5
        Issued & Current: 318
        Grace Period: 4 (This was 0 a few days ago)
        Fully Paid: 19
        Late 31 – 120 Days: 3 (this was 4 last week, but the Ch.7 is still there so that’s likely a lost cause)
        No Defaults and No charge Offs

      • I added BBCode this morning. I’ll need to add user instructions somewhere when I get a chance, but the functionality is there now.

        Those results look good. What’s your adjusted NAR? Are you happy with it so far? My return continues to hover between 12.3% and 12.7%. I’ll have a default, and it will drop to 12.3, then slowly rise back up to 12.7 or so, before the next default kicks in. I’ll be happy the longer this continues.

      • Ken says:

        Thanks for adding the BBcode. You can google guides or even grab a snippet for sort of a key or legend that can be inserted above the comment box so people know what they can and cannot do.

        My NAR is 12.95%, but I’ve never had any defaults yet and I joined LC last Feb so it’s looking like I’ll have some defaults right at my 1 year anniversary. In the beginning I did mostly A loans, but then slowly moved to B and C loans and within the past few months I’ve only been doing D-G, though I’ve only ever been able to grab D and E grades along with 5 F notes.

        Some BBcode tests
        Bold Italic

  22. Ken says:

    You can delete those BBcode tests along with this one if you like. Will it resize a pic if it’s too large? Looks like 480-500px is as wide as will work for the comments section.

  23. OMar says:

    check out lendingrobot.com. they seem to do the same as interest radar with a nicer website and I think I read somewhere in their page that they only charge you a small commission fee if they are able to get you the higher yielding loans that most common folk lose to corporate investors.

    • I looked at lending robot awhile ago. However, shortly after I wrote this update I found Lending Club had way more notes again and it was no problem finding good loans. As long as that keeps up, there’s no need for me to pay 1% to a service to do the work for me. For now, it’s only a few minutes per week to keep my money active.

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