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rated:
I have looked at existing threads on lending club and all of them have been 1 to 2 years old so thought of opening a new thread. It is exactly one year ago I opened my account with lending club. I have been conservative thus far only looking at A,B, or C grade investments. I started off decently well with returns around 10% for the first 3 months and then defaults started happening. I currently have 154 total notes, out of which 2 were charged off and 3 late. My current rate of return shows a meager 4.33%, which is a big drop from 10% considering only 3% of the notes (5 out of 150) that are in trouble. What are some of your lending club strategies? Do you sell notes that are late? I learned from another thread that it is not worth the time. I have never tried but wanted to get your thoughts. What % of your notes defaulted? I am assuming the default % has to be more with more risky investments (D grade and beyond). With a 4.33% return, I am not sure if being conservative is really helping.

Total Notes:          154
Not yet issued:         4
Issued and current:125
In Grace Period:        0
Fully Paid:               20
Late 16 to 30 days:    0
Late 31 to 120 days:  3
Default:                     0
Charged Off:              2

Member Summary
Most Recent Posts
I'm no expert, but seriously?  Low returns. My returns are great. On what do you base your assumption?

snnistle (Jun. 09, 2017 @ 7:11p) |

I have a similar strategy, but not quite as restrictive. What is your Adjusted Net Annualized Return and Weighted Averag... (more)

Thantoz (Jun. 09, 2017 @ 8:25p) |

I messed with Lending Club many years ago. 
I stopped investing when they took away the free-text inputs of the loan appl... (more)

Joe328 (Jun. 09, 2017 @ 8:33p) |

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rated:
https://forum.lendacademy.com/index.php would have a more active discussion on this topic.

4.33% doesn't sound particularly bad for A/B/C notes only. Using an automated service like Lendingrobot may help you boost your returns by investing more aggressively. I've been using them for about a year now and have no complaints so far.

I generally sell notes 90+ days since the last payment for an 88-90% discount. I do these in batches when I remember/feel like it, and it only takes a few minutes to set up the sale. Not sure if I'd bother with the volume of notes you have in your account, though.

rated:
My strategy is to no longer invest the gains and move the money to index funds. The default rate is starting to increase rapidly and when you couple that with the unfavorable tax treatment, it doesn't make sense for me anymore.

It will take a while to whittle down a 5 figure account, though.

rated:
My yearly ror 3.2 (I have it set to count any late notes as defaulted)

My Notes AT-A-GLANCE 1968

Not Yet Issued ?
2
Issued & Current ?
804
In Grace Period ?
19
Fully Paid ?
676
Late 16 - 30 Days ?
10
Late 31 - 120 Days ?
51
Default ?
1
Charged Off ?
405

rated:
tennis8363 said:   My strategy is to no longer invest the gains and move the money to index funds. The default rate is starting tin increase rapidly and when you couple that with the unfavorable tax treatment, it doesn't make sense for me anymore.

It will take a while to whittle down a 5 figure account, though.

  Agree. The lendingclub returns have not been doing as well as prosper either. But LendingClub has been older.

rated:
Any instrument that returns more than 3-4% guaranteed (sort of ) will attract tremendous amount of money thus lowering the yield

I think lending club yields were much higher in the beginning but then lots of people jumped into the wagon

rated:
I invested with Prosper for awhile. Got plenty of defaults over time. I'd have to double check, but I think my returns were in the 5% range accounting for defaults.

What did help my default rate was personally screening all investments rather than auto-investing based on criteria. I was getting defaults on a lot of dumb stuff like "Need $10,000 to create an subscription service eLearning website". If the loan didn't make sense to me I no longer invested in it. Also I only invest in 3 year term loans (rather than 5), less time for them to default.

I've been letting loans pay off (or default) and moving to index funds. I didn't find the return worth the headache.

rated:
I agree, there are ways to increase your return but they are time consuming:

1) Personally screen all notes. Look for spelling, grammar, content, and if there is a chance of a person paying back the loan. Person making 16K per year borrowing 30, etc.
Issue with this is, there are computers scouring for the best notes.

2) Post all notes on the folio exchange at a high mark up. Lower markup every few days (not going down to par) and then relist notes when they expire/

3) Buy badly priced notes that people list on the exchange.

rated:
I use a script to automatically invest in D-G rated loans for borrowers with 650+ credit ratings located in certain states, with a few other criteria (such as loan size, purpose, etc.). I sell all loans older than 12 months, regardless of payment history, for a discount in line with the performance of the loan. My annual returns are north of 13%.

rated:
drewz05 said:   I use a script to automatically invest in D-G rated loans for borrowers with 650+ credit ratings located in certain states, with a few other criteria (such as loan size, purpose, etc.). I sell all loans older than 12 months, regardless of payment history, for a discount in line with the performance of the loan. My annual returns are north of 13%.
  wow you must be an outlier
all the forums I am reading, people are happy if they can get 5% or above  

rated:
GreyRabbit said:   I agree, there are ways to increase your return but they are time consuming:

1) Personally screen all notes. Look for spelling, grammar, content, and if there is a chance of a person paying back the loan. Person making 16K per year borrowing 30k


So I proceeded to get a lending club loan for 20k, and all I had to put for purpose was "Refinance Credit Card Debt". Is there a requirement at lending club that makes you write a letter to state the purpose of the loan?

Another thing you might want to be careful when lending here is that I applied, got the money within 3 days after it got funded, but took 2 months to get the full funding. The credit pull that shows this new loan wasn't placed on the credit report until about 1-2 months after funding, about 3-4 months after the initial soft pull.

In that time, it showed me as a great customer with little debt, and all the credit cards started sending 0% offers, which I jumped on. I can easily see some LC customers over-extending in the 2 months it took to get the hard pull and account posted on the credit reports. I was able to get 0% cash deposited by Citi in my checking account, and then got a personal loan from Amex for 15k to pay the rest of my high interest cards.

I would venture to guess most of the people defaulting within the first year did something similar.

ETA: now that all accounts show up, my score is lower and the offers are in the 5-10% BT with higher fees and shorter terms, what should have been before.

rated:
My Notes AT-A-GLANCE 247

Not Yet Issued ?
0
Issued & Current ?
60
In Grace Period ?
0
Fully Paid ?
153
Late 16 - 30 Days ?
0
Late 31 - 120 Days ?
0
Default ?
0
Charged Off ?
34

a crappy 3.22%

rated:
Have been drawing down taxable account and reinvesting a small portion in a\b notes as after tax return on riskier notes has been negative lately. IRA account reinvest in 36 month notes until all 60 month notes have 36 months or less then can decide how to get out entirely in a year or so. Have moved most of lending club funds to p2p realty loan sites(eg peerstreet fundthatflip) and have been receive ~7% without any defaults in last 2 years although rates have dropped from 11 to 6-7%

rated:
Wow.. surprised how many people suck at this:

My Notes AT-A-GLANCE 1846
Not Yet Issued ?0
Issued & Current ?1,566
In Grace Period ?20
Fully Paid ?197
Late 16 - 30 Days ?12
Late 31 - 120 Days ?25
Default ?3
Charged Off ?23

Net Annualized Return 17.67%
Adjusted Net Annualized Return 13.06% (it's been saying about this for 6 months, however my actual net has been 17-19% as above so my payees tend to get caught up more often)

I'm almost a year in, and do most of my notes via the trading platform manually (does not take long, I spend about 30 minutes/week buying $1-2K of new loans. Maybe I buy a lot of drewz loans as almost none of mine are less than a year into their term. lol

rated:
tennis8363 said:   My strategy is to no longer invest the gains and move the money to index funds. The default rate is starting to increase rapidly and when you couple that with the unfavorable tax treatment, it doesn't make sense for me anymore.

It will take a while to whittle down a 5 figure account, though.

  Why do you think the tax treatment is unfavorable? I actually thought it was great since i get all those capital losses every year with the defaults. It has been very useful. 
Do you mean compared to Index Funds?  If so, doesn't the diversification that a lending club account provides compensate you for the less favorable treatment?
Also I am curious what you are invested in.  My default rates (using capital losses as a reference) have gone up since inception but when factoring in the larger amount of capital and and the fact that they are 36 month loans (so default rates would increase as they get older)  I didn't think it was a cause of concern.  My default rate actually went down from 2015 to 2016.  Am I missing something?  In the back of my mind I have been a little concerned in general about the account so I really would like your feedback as well as other members of the forum.

rated:
ilikebtmoney said:   Wow.. surprised how many people suck at this:

I'm almost a year in, and do most of my notes via the trading platform manually (does not take long, I spend about 30 minutes/week buying $1-2K of new loans. Maybe I buy a lot of drewz loans as almost none of mine are less than a year into their term. lol

  Come back and talk to use in another year or two.  

rated:
JD94 said:   
tennis8363 said:   My strategy is to no longer invest the gains and move the money to index funds. The default rate is starting to increase rapidly and when you couple that with the unfavorable tax treatment, it doesn't make sense for me anymore.

It will take a while to whittle down a 5 figure account, though.

  Why do you think the tax treatment is unfavorable? I actually thought it was great since i get all those capital losses every year with the defaults. It has been very useful. 
Do you mean compared to Index Funds?  If so, doesn't the diversification that a lending club account provides compensate you for the less favorable treatment?
Also I am curious what you are invested in.  My default rates (using capital losses as a reference) have gone up since inception but when factoring in the larger amount of capital and and the fact that they are 36 month loans (so default rates would increase as they get older)  I didn't think it was a cause of concern.  My default rate actually went down from 2015 to 2016.  Am I missing something?  In the back of my mind I have been a little concerned in general about the account so I really would like your feedback as well as other members of the forum.

  A few comments:

Taxes: Gains from Lending Club are taxed at ordinary income rates. Even when the funds are re-invested, they are taxed as ordinary income. I consider this account in line with my taxable investing (for retirement) and when I sell the index funds I am now putting the money in index funds (see below), they will be taxed at a lower Long Term Cap Gains tax rate.

I am in the Boglehead school of thought and use large, low cost Vanguard Index funds and that is where I am moving the money to. As far as diversification, I have plenty with some sector funds and
REITS throughout my portfolio. I also have some crappy stock that I should have sold after the IPO spike... happens to go by the ticker of LC

If I were to do it all over again, I would probably do LC within an IRA to avoid the high taxes.

One thing for sure, don't EVER let LC to auto investments unless you have very tight filters on what it will invest in.

Overall, I just felt the risk wasn't worth the way this is taxed and the high level of defaults.
 

rated:
I started investing in P2P Loans (both Lending Club and Prosper) back in 2011 for about 2 years.  I agree that the best returns seem to be when you manually invest in each loan.  I wanted the highest returns, so I only invested in C or lower graded loans.  I invested before the institutional investors started putting more money into P2P lending.  Prior to the institutional investors, it was easier to find attractive looking loans.  But once they started buying all the loans, good loans were a lot harder to come by.  Because of this as well as putting more of my money towards investment properties, I stopped investing.  My first loan in Lending Club was bought on 4/15/2011 and my last loan was 1/31/2013.  I only have a few outstanding loans left, but I'm at 10.25% annualized return and 11.01 on Prosper.  So not too bad of a return.  

 

rated:
I invest manually.  I have certain criteria, that I know some will not agree with, but I have my reasons:

  • I will not invest in certain notes because of the purpose, because I believe they are higher risk.
  • I compare amount of loan to revolving credit balance.
  • I compare monthly payment to gross income, and will only invest if it is below a certain percentage.
  • I look at job title and will not invest if the job does not seem permenant or stable.
  • I have a minimum time they must have been at their current employment.
  • I look at home ownership.  I typically avoid renters and will not invest with someone with a new mortgage.
  • I will not invest with anyone that has any delinquincies on their record.
  • Revolving credit line utilization must be below a certain percentage.
  • I invest in very few loans that are below 10% interest rate.
  • I will not invest more than $25/note.
  • 26% of my investments are D and E lonas, and all are current.
  • I avoid certain states.

rated:
Another data point - for Prosper this time:

6.81% at Prosper

Total active notes: 526 View
Current: 484 View
Past due (1-30 days): 21 View
Past due (31+ days): 21 View
Payoff in progress: 0 View
Total charged-off notes: 23 View
Total notes paid in full: 151 View
Total notes sold: 35 View

From what I've seen, both on LendingClub and Prosper, you start out with high RoRs and then it slowly creeps down.

rated:
snnistle said:   I invest manually.  I have certain criteria, that I know some will not agree with, but I have my reasons:

  • I will not invest in certain notes because of the purpose, because I believe they are higher risk.
  • I compare amount of loan to revolving credit balance.
  • I compare monthly payment to gross income, and will only invest if it is below a certain percentage.
  • I look at job title and will not invest if the job does not seem permenant or stable.
  • I have a minimum time they must have been at their current employment.
  • I look at home ownership.  I typically avoid renters and will not invest with someone with a new mortgage.
  • I will not invest with anyone that has any delinquincies on their record.
  • Revolving credit line utilization must be below a certain percentage.
  • I invest in very few loans that are below 10% interest rate.
  • I will not invest more than $25/note.
  • 26% of my investments are D and E lonas, and all are current.
  • I avoid certain states.


  With such a diligent list, how often do you find notes? I've used automatic filters that were less stringent and I would barely buy any notes.

rated:
snnistle said:   I invest manually.  I have certain criteria, that I know some will not agree with, but I have my reasons:

  • I will not invest in certain notes because of the purpose, because I believe they are higher risk.
  • I compare amount of loan to revolving credit balance.
  • I compare monthly payment to gross income, and will only invest if it is below a certain percentage.
  • I look at job title and will not invest if the job does not seem permenant or stable.
  • I have a minimum time they must have been at their current employment.
  • I look at home ownership.  I typically avoid renters and will not invest with someone with a new mortgage.
  • I will not invest with anyone that has any delinquincies on their record.
  • Revolving credit line utilization must be below a certain percentage.
  • I invest in very few loans that are below 10% interest rate.
  • I will not invest more than $25/note.
  • 26% of my investments are D and E lonas, and all are current.
  • I avoid certain states.


  your return must be really low  

rated:
snnistle said:   I invest manually.  I have certain criteria, that I know some will not agree with, but I have my reasons:

  • I will not invest in certain notes because of the purpose, because I believe they are higher risk.
  • I compare amount of loan to revolving credit balance.
  • I compare monthly payment to gross income, and will only invest if it is below a certain percentage.
  • I look at job title and will not invest if the job does not seem permenant or stable.
  • I have a minimum time they must have been at their current employment.
  • I look at home ownership.  I typically avoid renters and will not invest with someone with a new mortgage.
  • I will not invest with anyone that has any delinquincies on their record.
  • Revolving credit line utilization must be below a certain percentage.
  • I invest in very few loans that are below 10% interest rate.
  • I will not invest more than $25/note.
  • 26% of my investments are D and E lonas, and all are current.
  • I avoid certain states.


  
that's a lot of work, for low risk. My *minimum* purchase is 18% APR on the note, if you're investing primarily in D&E which is where mine are mostly held as well, your interest rate is far too low. My E is the largest holding by a lot, D second.

rated:
tennis8363  thanks for the reply.  I agree that index funds are more tax efficient but with the LC capital loss you get a reduced tax rate (in my case reduced by 64%-I am including the capital loss carry forward in my calculations) .   This brings a 25% tax rate down to 9%.   Plus you get IMHO a unique way to diversify.  In the end index funds will still (assuming the investment is not churned alot)  get a lower tax rate (plus a higher rate of return) because of the tax deferral so I do see why one may prefer it.  FYI I invest with the automated system and conservatively.  My roi in 2016 was 6% which (if I am calculating correctly) is the equivalent of 9.84% when you factor in the reduced tax rate.

Fellow forum lurkers I have no background/education in investing so if my assumptions or calculations are incorrect please let me know.

BTW tennis8363 I was psyched to buy the LC stock but I misread the buy date and was on vacation at the time so I missed out.  Good thing because I am sure I would have held on to it and been in the same boat as you.

rated:
Seems like you'd be better off investing in a well-managed bank or consumer lender rather than having a part-time job as a credit analyst. Although I see the appeal of it being a pure play on consumer lending rather than bank overhead.

rated:
ilikebtmoney said:   
snnistle said:   

  • I invest in very few loans that are below 10% interest rate.
  • 26% of my investments are D and E lonas, and all are current.


  
that's a lot of work, for low risk. My *minimum* purchase is 18% APR on the note, if you're investing primarily in D&E which is where mine are mostly held as well, your interest rate is far too low. My E is the largest holding by a lot, D second.

  So, no, its not a lot of work. With filers and a quick glance at the details, its pretty easy.  And, I don't know why you think my interest rate is far too low, unless you didn't understand what I wrote. I have a small number of notes with interest below 10%, and the vast majority are substantially higher. 

rated:
fleetwoodmac said:   
snnistle said:   
 

  your return must be really low  

  I'm no expert, but seriously?  Low returns. My returns are great. On what do you base your assumption?

rated:
snnistle said:   I invest manually.  I have certain criteria, that I know some will not agree with, but I have my reasons:

  • I will not invest in certain notes because of the purpose, because I believe they are higher risk.
  • I compare amount of loan to revolving credit balance.
  • I compare monthly payment to gross income, and will only invest if it is below a certain percentage.
  • I look at job title and will not invest if the job does not seem permenant or stable.
  • I have a minimum time they must have been at their current employment.
  • I look at home ownership.  I typically avoid renters and will not invest with someone with a new mortgage.
  • I will not invest with anyone that has any delinquincies on their record.
  • Revolving credit line utilization must be below a certain percentage.
  • I invest in very few loans that are below 10% interest rate.
  • I will not invest more than $25/note.
  • 26% of my investments are D and E lonas, and all are current.
  • I avoid certain states.


  I have a similar strategy, but not quite as restrictive. What is your Adjusted Net Annualized Return and Weighted Average Age of Portfolio?

One additional rule I have is not lending to people that make too much money. I just came across a listing for a guy who wants to borrow $10,000 @ 15%. He also says he makes $22,000 a month. Doesn't that sound fishy?

rated:
I messed with Lending Club many years ago. 
I stopped investing when they took away the free-text inputs of the loan applicant -- for initial application and to reply to investor questions. I guess people were mistakenly giving away their identity.
It's amazing how much correlation there was between crappy grammar/spelling and a bad loan. 
I picked E or higher/riskier rated loans only with people who had a solid story, proper grammar, and answered questions promptly and rationally (as well as other certain criteria). I had no defaults during my 2 year run and ~$35,000 invested. (Sold all my loans on their secondary market quite easily and most for a gain)

My favorite was a physician/med student who was 1 year away from finishing his residency. He asked for a 3 year loan of $20,000 @ 19% so he could purchase an engagement ring and go on a trip with his soon-to-be-bride. My spidey sense said he was legit.
I invested $3,000 on the spot. He made every payment on time for a year straight. On the 13th month, I listed the note on the secondary market for a large premium. It sold quickly. 
I assumed once he finished his residency and got real physician pay, he wouldn't hold onto a 19% loan for an additional 2 years. Was I right? Who knows, but the gains were locked in.

Anyhow, returned to LC for their IPO offering. In and out in a couple hours.

Haven't looked back since. Too much risk for me now.

Maybe if they return the free-text box   

 

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