As promised here is another quarterly update. If this is your first time reading about this, please read my original Lending Club review for more details on loan selection, and how I am investing. According to Lending Club’s stats, I’m up 40 basis points in my NAR (Net Asset Return) from my previous update in July. I’ve also almost doubled the interest received. Since then I’ve added only $50 in new money to invest. I’m doing pretty well with the notes I’ve invested in so far. Though I suspect one note will more than likely default this quarter. This should lower my NAR by 1-2%. I’ve decided I will not invest in any borrower who has ever defaulted or been a late payer at anytime. Since these are unsecured notes I only have their honor they will pay the note back in full.
I’m noticing there are many more 5 year notes available than the 3 year notes. Based upon my filtering criteria, I’m barely seeing 10 notes available for me to invest. Unfortunately, the 2% premium for 2 additional years in my opinion isn’t worth the additional risk. Because it’s an unsecured note, I would rather invest in other short term investments like dividend stocks. I have a CD in my CD ladder coming due this month, and I plan on taking some of the proceeds and adding an additional $2,000 to Lending Club. Based upon the amount of quality 3 year loans available, I may have no choice but to purchase some 5 year notes. I will still keep them to a minimum.
In the past few months I’ve noticed more press about Lending Club and discussions about it as a serious investment product. Could it be that P2P lending will become mainstream? I think right now is a perfect time to invest in Lending Club loans because many bank rates on credit cards are much higher than the rates they offer. This means people are seriously paring down their debt and lowering their interest rates by using Lending Club. I suspect this trend will continue after all of the additional rules and regulations required for credit card providers become law this year. This means a niche Lending Club should be able to fill with lower lending rates.
4th Quarter Lending Club Goals
- Invest another $2,000 to max out my goal of $5,000 investing in Lending Club for 2010
- Reinvest any fully paid loans and any money returned from paid loans. Keep doing this until I get to three years into investing with Lending Club.
- Review FOLIOfn for any notes I might be able to buy at a discount; increasing my returns
- Add an additional 80 notes to my portfolio, getting close to the magical 200 notes within my account.
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