This update marks now two years since I’ve been investing in Lending Club notes. Since my last update, my NAR has decreased to 11.32% from 11.35%. Since then I’ve had an additional note default. I now have exactly 300 notes in my portfolio, which is up from 222 notes. I now have over $6,000 invested with Lending Club.
I started monitoring my progress in December 2009 via this blog. I’ve decided for this post to show a graph history of my performance. As you can see my performance hasn’t varied too much over the years. This shows when investing in Lending Club returns can be steady, but obviously not the same as a fixed rate CD. For performance before January 2010, assume my performance was similar. Though I didn’t have that many notes invested.
In the past year, I’ve seen three defaults. This explains the initial decrease and then a slight decline over time. I’ve tried to keep up with investing in riskier loans that Lending Club does not price properly. The butter zone for Lending Club notes that I like seem to be around 11 – 13%. So far my investing strategy has worked out well. Based upon other investors, what I’m seeing is to be expected. The peak time to default is around mid-point of a 36 month loan. We’ll have a better perspective next July of my Lending Club performance. That will then be a full 3 years into using Lending Club, and my initial notes will start maturing.
Any of your notes pay early? Is that included in your/lending club’s calculations? If someone paid off in 1.5 year it has to kill your return, no (although that is a lot better than the default in 1.5 years lol)
@Evan in the “Notes at a Glance” section in the screenshot above there are 21 notes that have been paid in full. I wouldn’t say paid off notes “kill your return”, as they don’t usually get paid off really early in the loan’s life, which is when you collect the most interest on a note. If anything, paid off notes stall your return for about a month if you’re active about re-investing idle cash (you won’t see the first payment on a new note for at least a month). Sometimes a paid-off note (if paid off late in the note’s life, when interest payments shrink) can boost your return since you’ll re-invest the principal payment into a fresh note that collects more interest from the start.
Jay is correct.
Let me be the first to congratulate you on your WAY ABOVE average returns…………..& way BELOW average number of defaults/chargeoffs. And if memory serves me correctly, you’re doing all this with 3 year loans only. I don’t care what Lending Club’s percentile rankings say,…………..compared to others with 2 full years under their belt your numbers have got to put you in the top 10% of your category. I’m impressed!
Thanks Dan B. Yes what Lending club stats not tally is length of time investing.
I started with Lending Club 21 months ago, I’ve had mixed results so far and I have been trying to take some of the lessons on your blog to reduce my exposure to defaults. Right now I have I’ve invested in 159 notes of which 127 are issued/current to the tune of ~$3,000. Early on I was not very picky about which notes I invested in, typically just choosing the LC recommended notes, and I think I am feeling the effects now. I’ve had 8 defaults/charge offs total plus I currently have 8 more notes late. All in all that means that I am running at a 5% default rate with the chance of that running up to 10%… I’m still running a positive overall return of about 8%, which I can’t complain about. Obviously I know that my returns are not guaranteed, I do however feel generally frustrated with the LC recommendations, and that I’m so far not matching their expected default rates… Do you have any recommendations for what to do with late loans? Should I hold on to them or try to sell?