Comments on: A Closer Look at a Lending Club Default

By: Emily

Emily — Wed, 14 Dec 2011 01:33:16 +0000

I have one loan that was charged off in June. The customer contact log indicates that the borrowed contacted LC after the charge off and made arrangements to pay. The log also states that a payment was received in July, but I have yet to see my share of the payment disbursed and it is now December.

By: nickel

nickel — Thu, 19 Aug 2010 13:55:53 +0000

I don’t lend if the monthly payment is more than 10% of their stated monthly income, though I’ve also started capping the total dollar amount on loans that I’ll invest in. In general, if the total request is below $15k and the monthly payment is less than 10% of income, then I’ll take a closer look.

By: Financial Samurai

Financial Samurai — Thu, 12 Aug 2010 05:40:28 +0000

Good luck with lending club! I’d love to be able to invest like 50-100K in it, but I’m too nervous about default.

By: Jenny

Jenny — Wed, 04 Aug 2010 01:07:59 +0000

Madison,

I find this really interesting. I emailed you several months back noting that almost all of my A loans had dropped in their credit score. I’ve been doing good so far, but it will be interesting to see how things pan out. I too tend to look for loans under $10k. I think they are generally safer.

Jenny

By: SM

SM — Sat, 31 Jul 2010 21:08:24 +0000

I’m with LC for a year now and so far out of 30 loans I have 2 defaulted and 2 in recurring late payments with payment plans – which I won’t be surprised if they default too eventually. All four are B grade loans (I have half A and half B) – with seems to indicate B is not worth it, the rate premium seems not to compensate the risk. Though it may just be that I chose stupidly or just I am unlucky
Both failed loans were in default after 4-5 months of payments.

By: Jon

Jon — Fri, 30 Jul 2010 20:49:58 +0000

Although I love the concept of lending without a costly bank in the middle, my one try at Lending Club was a total failure. Top rated loan (at the time Lending club boasted that none of them went in default). Borrower defaulted after a few months. Similar credit score graph as you show. But why would you expect anything else from someone defaulting on a small loan?

These loans are totally unsecured.

What surprised me was how long the loan sat in “late payment” status before Lending Club declared it a failed loan.

Maybe if this type of investment matures over time, the offering company will leverage their huge diversity and offer some sort of (partial) principle guarantee.

I would love to use this type of investment for cash flow. Invest enough at one time to give me monthly cash to cover my expenses (with some buffer), but since you don’t know how many loans will default, you can’t depend on any cash flow.

By: Dawn

Dawn — Fri, 30 Jul 2010 16:53:48 +0000

As someone who has taken out loans and is now investing in lending tree, I wouldn’t take out a loan over 5k, rarely 3k. The payments weren’t good for my budget.
Because of that, I won’t give money over 3k unless it is for schooling to increase their income.
Those are my personal rules.. so far so good.

By: Sarah

Sarah — Thu, 29 Jul 2010 19:33:03 +0000

I have one charge off out of 27 loans. I lost $45. I was feeling pretty taken advantaged of so appreciate your comments about the person’s credit score. I checked on my loan’s and it went from 673 to less than 500 so they are in bad shape. Worse shape than me losing $45. I guess they needed the money. The original loan was for $8k and classified as a C2 loan.

I also try to look for low dollar amounts as hopefully the person would be able to make a low monthly payment. I also look for debt consolidation loans as I figure they would have to pay the money anyways. Maybe a better chance of them paying it back.

By: Madison

Madison — Thu, 29 Jul 2010 15:19:23 +0000

Peter, I know, isn’t that graph worth 1000 words? I really feel bad for them.

By: Peter

Peter — Thu, 29 Jul 2010 15:00:52 +0000

I haven’t had any of my loans on Lending Club go bad yet, but like Jill I also have set a 10k limit to the loans I take part in. I figure the lower the amount, the easier to pay it back. So far it has worked pretty well.

That is quite a drop for that person’s credit score though. Wow is all i can say.