Is Lending Club No Longer a Good Investment?

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Please note: Lending Club is no longer accepting new investors for its notes platform and will retire its notes on December 31, 2020.

Below is our review of Lending Club as it was in 2011.

There seems to be a great debate going on the web regarding investing in Lending Club. As an investor of Lending Club notes, you have a chance to ask questions to the borrower.

Asking questions is somewhat unique in the investment world. You normally don't get to ask direct questions to the board, or on the quarterly conference call before buying a stock like Apple (APPL). The issue was the questions on Lending Club were open ended. As of last week, Lending Club changed their question and answer section to only allow a set of predetermined questions. Keep in mind the Q&A section was not removed altogether.

The official reason was because of privacy concerns. Investors were asking too many probing questions, and the borrowers gave away too many details possibly revealing who they were. From their blog:

Starting tomorrow, investors will only be able to ask questions from a predefined set that was created based on the most frequently asked questions logs over the last 2 years and reviewed and edited by our compliance team. As an investor, feel free to submit additional questions that you would like to see added to list to feedback@lendingclub.com.

As always, your comments are welcome as we continue to make improvements to our platform.

When I saw the change last week, I didn't think much of it. In the almost two years of investing with Lending Club (see my initial review of Lending Club) notes, I never asked a borrower a single question. I felt most already asked the proper questions, or based upon quantitative information didn't think the note was a good investment. When I did look at the questions and answers section, I would use it to help tip me in one direction or another. For the most part I would quickly scan this section. Most of my time is spent filtering out unwanted notes because Lending Club's search filter is too limited.

Based upon Matt's post on Steadfast Finances, and the Social Lending comments, it seems many fellow Lending Club investors have reacted negatively to the change.

It's a Big Stink About Nothing

I personally prefer quantitative and fundamental analysis of my investments, than get my emotions involved. If I do get my emotions involved, it because the analysis is mixed. Which also means it's a risker investment. In addition, with the amount of loans you should be investing (over 200), how much time is required to do this work? It's not scalable, or at least the time to return ratio is low. If you spend this time, will your net return be any higher? Every investment requires an amount of initial, and reoccurring time. You should maximize your return, while minimize your time. Asking questions for each investment is a very time consuming, and I don't believe you will see a positive return from the effort.

Keep in mind a good portion of Lending Club investors use automated methods to invest. They never even see the Q&A section. I'm not suggesting Lending Club investors should go down this path. I will continue to use my aggressive filters, and manual review every note. I do believe this yields a higher return, and so far my returns have proved this.

From the two defaulted notes I have so far, both completely passed the “sniff test” if you looked at their Q&A section. One of them in fact only made two payments before defaulting, and more than likely was a scammer. I understand two examples does not make a statistical trend.

My point is someone can be very good liar, and a Lending Club investor would never catch this in the question and answer process. One of the comments from Matt at Steadfast Finances was how do you know they aren't lying about their income? Since last year, almost all of my loans are to Lending Club borrowers who's income has been verified. Since these loans are unsecured I make sure every borrower has over 10 years of credit history, never defaulted, and never late on a payment. These in my opinion are better quantitative indicators a borrower will not default. After all, that's the only net result we care about right?

I not criticizing the investors who no longer invest with Lending Club. That's fine with me, there are other traditional and alternative investments available. They are free to determine what's the best place to put their money for investing.

Sure I have some Lending Club complaints. Peer to peer lending is not perfect, and does have areas that need improvement. Not only do I think Lending Club should be verifying income for almost all loans, but require an initial comment from the borrower for the loan purpose.

My position is this change with comments shouldn't affect performance. Most investments with a marketplace (ie NASDAQ, NYSE, etc.) you do not ask direct questions before making an investment. You should be getting transparency, and Lending Club provides quite a bit of quantitative detail about each investment. It is possible Lending Club could make some improvements in the transparency. Though there are very valid concerns to what degree without revealing the identity of the borrower. I myself will continue to invest with Lending Club, and my positive opinion about Lending Club hasn't changed.

Larry Ludwig

Larry Ludwig was the founder and editor in chief of Investor Junkie. He graduated from Clemson University with a bachelor of science in computers and a minor in business. Back in the ’90s, I helped create some of the first financial websites for firms like Chase, T. Rowe Price, and ING Bank, and later went on to work for Nomura Securities. He’s had a passion for investing since he was 20 years old and has owned multiple businesses for over 20 years. He currently resides in Long Island, New York, with his wife and three children.

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66 Comments

  1. Lending Club is a terrible investment. I purchased 100 notes mid 2017. I was prepared for some to default, but what is hurting me most is how many loans were repaid in full very early. So I have some loans defaulting and some being repaid so quickly I am not earning any interest on them, leading to a net loss. Every time I check I have more notes drop into the overdue category. My “NAR” is dropping every month and I expect it to continue to do so. I expect to lose money when all is said and done. Stay away, put your money in an index fund.

  2. Lendingclub is terrible. The default rates are skyrocketing! I used to have double digit returns when I started 4 years ago. I calculated as of last year, 5% of my notes defaulted. Today I calculated and it was a whopping 9%! No wonder why my returns are down in HALF!
    My once amazing portfolio with 10% returns has slowly and gradually been reduced to 5.7%!
    Actually, according to my calculations my earnings for the past 12 months was only 1.6% profit!!!!!!
    At this rate I will be in the red. I have to wait years for all the loans to pay off, assuming they do get paid off!
    Yes I can sell off the notes in the folio trading platform, but do you know how many notes are listed?
    HALF A MILLION!!! And it’s so tedious to sell hundreds! Nobody buys unless you drop the price in half!

    I’ve stopped my “automatic investing” last month and started to cash out.
    Gonna hop on over to Realty Mogul with their impressive returns.

    Lending Club is a great concept but unless you really punish those borrowers by garnishing their wages or putting liens on their cars and homes, there’s no accountability and anybody can just borrow and not pay back and wait a few months for their loan to discharge and they can do this again in a few years!!! >=[

  3. Larry,
    You have some good points. I have a few questions.

    How are the returns paid to the investors?
    If you invest on a monthly basis with lets say $5000 per month, are the returns paid separately?
    How do you get your principal back after 3 or 5 years?

    Thanks,
    Tom

    1. Returns are paid no different than any other loan via an amortization schedule. It includes principal and interest. The closer to the end of the loan the more principal is paid and the less interest.

  4. Lending Club appears to be getting worse and worse for investors.

    Interest rates are decreasing across the board combined with less information being given to investors.

    I have my return % display set to mark down their face value by 60% for grace period, 80% for 16-30 days and 100% for everything else. I have about 50,000 invested in 800+ loans via putting money in minutes after loans were available but haven’t added any money in about 6 months. Since then I’ve seen my account balance basically stagnate even though Lending Club shows me I’m getting a 10% return somehow (probably figures in a period longer than the 6-months where there was some sort of return).

    Combined with the fact that you pay the short term gains taxrate on the interest no matter what and at best you get a capital loss when a loan goes into default means the 6-9% Lending Club claims investors average is probably closer to something like 3-5% after the unfavorable tax treatment.

  5. I am also frustrated that the city is no longer shown. I will be filtering out a few extra states to account for this. No explanation on the site with this last round of changes.

  6. I purchase all my loans on the lending platform. I noticed recently that LC no longer discloses the location of the borrower. This concerns me. Before this change I avoided investing in loans from economically depressed areas of the country, for example Atlantic City. Does anyone know why this change was made? What are your thoughts about it?

  7. In response to some of the stated concerns about LC’s business model and what happens if they go bankrupt, straight from their website:
    “Lending Club is a financially sound, well-funded, established company led by a seasoned management team. Notwithstanding, to protect investors and borrowers we have taken steps to ensure continuity in the unlikely case Lending Club stops servicing the loans for any reason. Specifically, we have entered into a backup servicing and successor agreement with Portfolio Financial Servicing Co. (www.pfsc.com) that would ensure the servicing of all issued loans.”

  8. I’d give a warning to any new investors considering putting money into Lending Club. Lately, they’ve been sending out notices to many of the people who have borrowed. Here’s how that works:

    1. Borrower requests loan. Investor assumes they will get interest over the life of the loan and pay a 1% fee to Lending Club as the loan is paid back.
    2. Borrower’s credit score improves when they use loan to pay down credit cards. Seeing this, Lending Club contacts the borrower and encourages them to take out a new Lending Club loan at a lower rate (because of their improved credit score).
    3. Borrower does this and pays back first loan in lump sum. Investors get shafted, as they pay the entire 1% fee on the principle without getting the interest on the full life of the loan.
    4. Investor must now take the lump sum and find another loan to try and invest in.

    In short, investors pay far more than a “1% fee” in practice, and Lending Club does little to respect their investors.

    This high turnover also makes it frustrating investing at Lending Club. It takes a lot of work to find good notes to invest in, and then Lending Club encourages the borrowers to re-fi and take out new loans to pay off their first.

    1. Mike,

      The only legit argument you have in that list is #3. (#1 is really #3 also) After all, what stops a borrower from calling their loan and getting a better rate somewhere else? I would certainly do this inside or outside of Lending Club, if the rate was better.

      So keep in mind they can go to other places and maybe get a better rate than Lending Club. This at least keeps them within the Lending Club system. I don’t know if they are doing this to everyone or statically ones who might prepay and go somewhere else.

    2. Mike, I can see you are really passionate about this because you have posted this comment in several places now, including my own blog. It is true that Lending Club takes the full 1% on the prepayment and you will not get the stated interest rate when this happens. And I concede that Lending Club does need to fix the problem of investors losing money when there is an immediate prepayment on a 36-month loan with an interest rate of less than 12%. Investors can lose up to 0.1% of their principal in these situations but they happen so rarely it just doesn’t bother me.

      But to say Lending Club investors are getting shafted is a stretch. It sounds like p2p lending is not for you. Just look at Lending Club’s growth – tens of thousands of investors don’t agree with you. I understand the situation you are talking about completely and I am ok with it. I will put up with a few prepayments that might take 50-75 basis points off my total return so that I can still earn a double digit return. Happy borrowers that continue to make payments, early or otherwise. is what I am looking for.

      1. Peter,

        Thanks for commenting and making me aware this is the same post on multiple sites.

        Mike,

        I’ll let this one slide, but per the terms and conditions of my site, I delete the same comment posted everywhere (otherwise known as spam commenting). While a legit concern, it’s not the proper way of doing it.

  9. As both a person who has subscribed to a loan through lending club, and now a current investor, I do believe that this is the wave of the future for lending. Brick and mortar banks, with their traditional lending practices, is quite the outdated model.

    Strangely enough, all the new laws that are about “Fairness in Lending” have degenerated the whole lending system. Did you know you cannot discriminate against a borrower whose sole income is public assistance? What happened to common sense? I do believe the Q and A section is somewhat pivotal to a loan application. It’s the basic gut instinct. Have you not, within a few minutes of talking to a person, been able to tell that they were a screwball? It’s basically the same as a job interview, except you are interviewing for a loan.

    The only thing I don’t like is the impersonalism of typed speech. If you want my honest opinion, every loan applicant should have to make a video of why they need the loan. Then you can face to face see them, and judge whether they deserve it or not. Why protect the their individuality? Their privacy? If they are asking for money, I see nothing wrong with them doing us the same favor a bank would require.

    Just my opinion.

  10. Scam is the default word for the uninformed across virtually all subjects. Once you read that word you can pretty much be assured that nothing that follows will make much sense.

  11. Given the European monetary situation, the U.S. [and Europe’s] political stalemate, and the consequential threat of a deep global recession, I believe that stocks and bond investments are much more volatile and considerably more risky than at any time that I have observed in the past 5 decades. In this light, Lending Club is a reasonable investment on par with these other investments. And, although I agree that lenders should consider the investment on the high-risk side, I’m not convinced that it is much riskier than the stock and bond market-AT THIS TIME. Good judgement and diversification amongst many borrowers will likely make an investment [at NMT 5% of total portfolio] in Lending Club reasonably profitable for the risk taken. Furthermore, Lending Club provides the investor with an alternative investment which does not correlate with the daily market twists and turns. Consequently, such an investment may provide some stability to a well-diversified portfolio.

    However, one should consider what might happen to loans, if a deep global recession occurs– or, in contrast, if the economy markedly improves. Many well-intended borrowers might default if a deep recession hits. Losses would likely be significantly larger. But, then again, what would an investment in the stock or bond market do in such an economic downturn?
    On the other hand, if the economy improves markedly, Lending Club investments, might prove to be less profitable and more risky than equities. At this point, the lack of liquidity in this investment could prevent the investor from shifting to safer, more profitalbe opportunities.

    All told, I believe the investor would be wise to cosider a lending club investment as a moderate-term somewhat risky bond, where invested money will be tied up for 3 or 5 years. One should be very cautious about constantly re-investing the ROI.

    Furthermore, the investment is only as good as Lending Club’s business model. Is the business profitable at this time? [I doubt it.]. Is there a chance that it might go bankrupt, leaving the lenders to depend on a court to sort out how much will be paid back to lenders and how much will go to creditors? Is there a chance that this is all a giant fraud….ala Madoff?

    It’s the latter concerns, which makes me wonder if my money is wisely invested in this business. I recognize that the Lending Club has been written up in the Harvard Business Review, NY Times, etc. as a great business model. But, over decades, people begged to be part of the Madoff “club”…..So I continue to wonder.

    Anyone have insights on the business itself?

  12. I’m with you on this one – I use basic filters myself and have experienced over 15% returns, with only 2 accounts in late status (no defaults yet) and over 150 notes – I’ve been investing there about a year and a half now. I still think its a great investment choice – especially if you are using a Roth IRA vehicle. I started small, but decided to go for it after my initial testing period and rolled over an old 401k that was returning – negative returns at the time. If its such a bad and risky investment, then tell me others that provide the same returns and convenience (without being impossible to learn or education yourself about) as I’d like to look into them as well!

    1. Hi Ariel,

      Thanks for your comment. Lending Club is/can be risky compared to other fixed income investments. The issue if LC goes bankrupt and do they price the notes properly. These IMHO are the two major ones.

  13. Sounds like lending club is outside of my risk appetite, but since I didn’t know about it I am going to go take a peek!

  14. The quantitative stats given are often wrong. Often their revolving balance is much higher than what is listed, and/or they have loans other than credit card debt, or income doesn’t include their spouse’s income, etc. That’s why I do due diligence and believe it’s valuable the be able to ask for color on specific issues.

    I would like to see more flexibility in the questions asked, and also require borrowers to fill out some small loan description and basic information by hand since the stats pulled from the credit report so often turn out to be wrong (especially debts outstanding).

    Thanks for the post

  15. Speak for yourself Mike. A few of us lenders have had epiphanies & are no longer sheep. Though we still invest here we no longer find it necessary to partake of the cuisine that apparently you’re still dining on. 🙂

  16. You may be misinterpreting the situation, optionsdude. The limited number of questions potential lenders can ask is a possible advantage to borrowers. Plus, if you decide not to answer a question, only the person who asked it knows that you haven’t responded. The rest of us are in the dark, like mushrooms being fed a steady supply of you know what.

  17. I was hoping to get involved with peer-to-peer lending as a borrower to refinance some higher interest credit card debt in the near future. It sounds like these changes may make it more difficult for me now.

  18. If LC is going to be successful, they have to satisfy borrowers, lenders, and eventually, their stockholders if/when they go public. That is a fine line to walk. Their current direction seems to be going toward pleasing borrowers more than lenders, and I don’t see that pendulum swinging back in the other direction anytime soon. Though I won’t have any new money on the table, I’ll be following events on the LC blogs, and I hope remaining investors obtain satisfactory ROI given the level of risk these loans entail.

  19. Excellent points, Ken. My LC funds represent less than 2% of my overall portfolio, which is mostly in stocks. I’m getting to the age where I should have some bond exposure, but I couldn’t rationalize investing in bonds in this interest rate environment, so I have been dabbling in LC. New money is being deployed in the stock market, with higher returns (along with higher volatility) than I am receiving in LC. I don’t believe most LC investors are being sufficiently rewarded for the degree of risk they are taking on with these loans.

    1. Thank you Mike.
      I would have no problem with Lending Club if everyone understood the risks as well as you clearly do. I hope I’m wrong in believing that most people do not have the same understanding.

  20. What a great debate!
    I personally think people who invest in the Lending Club either understand the great risk they are taking OR are ignornant of the risk they are taking in return for high yields. Make no mistake about it, these are HIGH RISK LOANS.
    These loans will provide a higher rate of return to compensate for the risk as long as the economy is relatively good. If the economy turns down there is going to be a massacre in these unsecured loans. The only money that should be put into lending club is money that might be allocated to Junk Bonds in a diversified portfolio. This should be a very small part of a diversified portfolio or nothing at all.
    I would not invest in Junk Bonds in this enviroment so I would not touch these loans. ANYONE who is investing in lending club and calling it “savings” is living in a dream world. If you are taking a calculated risk in “junk” that is a small part of a diversified portfolio, that is a diversification choice. If you are putting your “savings” in lending club you are allowing greed to lure you into bad choices.
    Make wise decisions!

    1. @Ken…….Let me make sure I get this……….you think that “people who invest in the Lending Club either understand the great risk they are taking OR are ignornant of the risk they are taking in return for high yield” ??

      Wow, that’s pretty interesting because I think that pedestrians who run across the freeway either understand the great risk they are taking OR are ignorant of the risk they are taking in return for taking a shortcut across the freeway. Make no mistake about it, it’s a HIGH RISK MOVE too.

      How do I sign up to get your investment advice again ?? 🙂

      1. @Dan I think your pedestrian example is a great one. Some people might run across the freeway understanding the risk (i.e. to help a stranded motorist). Other people might run across the freeway ignornant of the high risk (i.e. kids taking a short cut). The point is it’s a very high risk move and people should understand the risk before making such a move. Thank you for helping me make my point better than I did.
        You can find my investment articles at http://www.arborinvestmentplanner.com/

    2. “Make no mistake about it, these are HIGH RISK LOANS … Junk Bonds in a diversified portfolio”

      Excellent point Ken. This is why investors like me often refer to Lending Club investments as CDOs or SIVs, or more specifically, securitized promissory notes (SPNs). Too bad you can’t sell them as a pool in $500 or $1000 blocks to speed up the FolioFN process.

  21. You mentioned that you invest solely in borrowers who have had their incomes verified. In a conversation I had with Jeff Mignault of LC today, he mentioned that returns on these notes trail those where the income isn’t verified. Believe it or not!

          1. Why wouldn’t they publish it? If he’s telling you then it’s public information. If it’s public information then it can be published.

          2. You’re way too smart to believe that LC would ever consider publishing all of its statistical information. I didn’t say they wouldn’t publish it, only that I didn’t know. But I’m not holding my breath.

    1. I recall a tweet from Rob Garcia saying the same thing. Didn’t see any numbers or see any stats proving the case, but I’d like to see the unadulterated data along with the conclusions.

      1. Here is the blog post about the verified versus non-verified income returns. It doesn’t actually give returns, just default rates:
        http://blogs.reuters.com/felix-salmon/2011/02/07/lending-clubs-loss-rate-numbers/

        Lending Club doesn’t carry all the info over from their active loans file into their main loans file. There are probably a dozen fields like this that would be useful to have in the main file, so we could do independent analysis on it. Maybe one day….

        1. Nice link, Peter. Jeff expressed similar concerns about treating their top tier potential borrowers well for fear of them dropping out of the process if they felt that their privacy was being invaded, or if they just didn’t feel like answering so many questions posed by us pesky lenders. Seems to me that LC needs to remember that without lenders, it doesn’t matter how many prime borrowers they have on the platform. One statistic that puzzled me was the statement that 60% of loans have verified income. When I asked Jeff for an estimate, he said around 30% were verified, and that seems closer to the reality on the platform. I would guess it is even lower than that. But if you believe the stats, then this is all much ado about nothing.

          1. @Mike………..No, 60% of borrowers go through income OR employment verification. It’s in the prospectus under the section on “Risks”.
            Matt may not believe me but I’ve used some of the time I’ve saved from not reading the Q&A to read something that’s actually important. I encourage others to do the same. 🙂

  22. Good point…

    “I think we are both in agreement that Lending Club’s application and it’s collection process could be better.”

    If the quantitative metrics (DTI, RCB, ReadyForZero data) were improved, I wouldn’t feel so strongly about the Q&A section. As well as forcing the borrower to write a loan description (which many fail to do).

    1. If you got an unsecured loan at a local bank, they may ask you informal questions to help determine your credit risk. They are also subject to federal regulations (to prevent discrimination and alike). So it’s pretty limited.

      Though credit cards applications (which are are really unsecured loans) don’t do any of this. Fill out a form and submit it.

      I see Lending Club no different. Lending Club doesn’t have it down to the science credit card companies do… yet. I assume and hope they will keep improving on this process.

      This is the secret sauce that makes credit card companies so profitable.

  23. We obviously have a gentleman’s disagreement, but couple quick points:

    1) As an Apple shareholder, you can certainly ask your questions via the investor relations department. Because folks like us might (at max) hold a few 1000 shares, they will almost certainly ignore them during a shareholders meeting. Moreover, Apple gets more microscopic press coverage than any company on Wall Street, so if there is dirt to be had, analysts and financial reporters have asked the question, published it, and hashed it out on finTV 10x or more.

    2) This identity protection argument is cream puff protection at best. With the information in the loan application, investors stand a good chance of IDing the borrower without the Q&A. We’re expressly forbidden to do so for very good reasons and anyone who does deserves to be kicked out, but protecting the borrower from himself/herself at the expense of the investor (who funds the business model) seems silly to me. My opinion only.

    3) I’ve had zero scalable issues. My quant filters are so tough, 300 to 500 loan apps are narrowed to less than 25 loan applications (sometimes less). Of those, I only reviewed the 10%+ NAR. It was all about finding the unpolished diamonds, polishing 4 or 5 each week, and building up the account slowly.

    All this said, I feel terrible for calling it quits and I’ve probably pissed off dozens of people. But due to the longevity of these investments, such rapid and unanticipated changes makes me somewhat suspect. It’s for unanticipated reasons like this, I waded in slowly rather than going all in.

    1. Apple isn’t the best example, they are one of the most watched companies in the world. It’s more related to you base your investment decisions on their filed SEC statements, than directly contacting the company.

      Lending Club does have a vested interest in the loans since they have a decent chunk of their own money invested in notes. I think we are both in agreement that Lending Club’s application and it’s collection process could be better.

      IMHO I think these are the areas in which would improve performance, not the Q&A section.

  24. Great article! I was looking into lending club (signed up) but decided against it. I feel the better is much safer in a regular investment and my loss potential is much lower. I guess peer to peer lending isn’t for everyone.

    -Ravi Gupta

  25. Great article IJ and I couldn’t agree more. I have around $100K total invested between Lending Club and Prosper and this move has had no impact on me whatsoever. I am a pure quantitative investor, in that I just use the credit data for deciding which loans to invest.

    I don’t want to rely on what someone says (who may or may not be telling the truth) for my investment decisions. I prefer to look at their credit data which is more objective and base investment decisions on that.

    At the same time I understand the furore this change has caused for people who were relying on a robust Q&A section before making a loan decision. I know Matt with Steadfast Finances has used this feature to produce above average returns. But the problem I had with that approach is that it doesn’t scale well. I reinvest money every week in dozens of notes and if I had to rely on reading every Q&A it would take me many hours a week to make new investments. With my method, I can spend just half an hour and invest in 40+ new notes each week.

    1. Hi Peter,

      I believe Matt’s current higher return is based upon two things:
      – Still early in the investment lifecycle. He will definitely see a higher amount of defaults within the next year. (and might be longer because of the 5 year notes he invests in)
      – Invests primarily in 5 year notes. Unlike me who does not have one 5 year note.

      He will revert closer to the average, which I haven’t seen any stats on 5 year notes but I suspect is around 10-11%.

      As I’ve stated previously, I believe the 5 year notes are too long of a term for unsecured notes. Too much risk and not enough return (only 2%ish higher)

      In theory you can invest after 3 years the freed money in another 3 year note. If you run the numbers the net yield is a much higher return compared to one 5 year note.

      1. I don’t understand how reinvesting after 3 years will yeild higher than a 5 year? I’m pretty new to investing, so maybe there is something that I’m missing, but if you make 8% on a 3 year, and 10% on a 5 year, no matter how fast you reinvest, the 5 year will still be ahead. Could you please elaborate more on that?

        1. Hi Brent,

          Great question. The logic is as follows. A 5 year note approximately yields 2% higher than a 3 year note. The issue is does that additional 2% per year worth the additional risk of:
          – default by the borrower through the life of that loan
          – interest rate increases (outside of LC)
          – money tied up for that term

          I would rather invest in shorter 3 year notes, and take the money freed up during the life of that note to buy other notes for also 3 year terms. You are getting your principal faster with a three year note.

          Keep in mind any Lending Club loan is unsecured debt. So the everything is based upon faith the borrower will pay it back in full. IMHO that is too longe of a term for unsecured debt, and I would only be willing to do this with much higher than 2% per annum.

          Time will tell if my theory is correct.

        2. Basically what I’m saying is I believe 3 year notes in real term yields will be lower than 5 year notes. What a note’s set rate and real return rate are two different things.

          1. It comes down to this. Five year loans have a higher rate because they have a higher risk due to the longer repayment period. Right now, on Lending Club 5-year notes are returning 7.92% according to Lendstats whereas 3-year notes are returning 6.45% since 5-year notes were introduced in May 2010. But the oldest 5-year notes still have over three years until maturity and we don’t know yet what the return comparison will be when these loans start to mature in 2015.

    2. Can you please give me some tips on the different filters you have set? Just started investing with Lending Club.

  26. Great article and I agree with you on this. I qualify them down based off the filters and the Q&A’s (when I read them) are all pretty similar and a lot of these are covered in the lendingclub approved questions. It does make me wonder what else they might do later on without asking for feedback from the users. These are long term investments and I would hate to see the whole site change up on us.

    I have been toying with the idea of putting together a web or PC app (with a programmer buddy) that would allow you to download the notes .csv file, filter them down to your specific criteria, and then go drill down into them on the site. What do you guys think?

  27. I just want to see you guys put like $10,000+++ in the accounts, so it’s actually more meaningful to the portfolio. A couple thousand doesn’t cut it. It’s just entertainment otherwise and you can just make money doing affiliate sales I guess.

    1. Hey Sam,

      My major factor for me it takes about one month to allocate $1k. This is because of my filters and how picky I am with my investments. I am currently at $6,238.44.

      I think P2P lending is a slow in (and exit for that matter) process to yield better returns.

        1. Aggreed, I can only put ~$500 to work a month based on the filter I use.

          I could increase my $$ to $50/note but that would cut the diversification in half.

    2. Challenge accepted. My account has $81,000 and I’ve been doing it for three years. I am averaging %11.50 interest (after defaults and all that over the three year span.) I can’t seem to stay long above %11.50.

      1. How you doing these days. I’ve been on the platform for roughly 7 years and decided a few years ago to let what is left ride and exit the platform. I’m going to finish roughly 5% which appears to be the mean; although LC won’t publish anything beyond 36 months on the platform (I wonder why…). 1/3 of my choices defaulted and it is very clear Lending Club has no bite or care to pursue deadbeats as it isn’t their money at risk, but happy to take 50% of anybody they can manage to get to pay something on a defaulted loan. A big scam all the way around IMO. No bank or credit card company could operate on a 5% return on investment, but easy when it isn’t your money you’re playing with.

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