I logged into my Lending Club account this week to see how my loans are doing. So far my net annualized return on investment is 8.44%!
My Lending Club Account
My loans are all current, which is much better than the loan I had at Prosper, which was charged-off last week because the person filed bankruptcy.
Although, in all fairness, that loan was at 15.5% because the it was a credit grade D. I was pretty greedy when I first started out in peer to peer lending.
I learned my lesson, and at Lending Club I’ve carefully selected loans with a grade A. The interest rate is lower (7.68% – 9.63%) but there’s a much greater probability that they will pay! And so far they all have!
Open a Lending Club Account
If you’re interested in opening a Lending Club account, here is a Lending Club Step-By-Step Guide to get you started. Minimum investments, interest rates, and requirements are detailed in my Lending Club Review.
Net Annualized Return on Investment
Lending Club uses the net annualized return method to show the performance only on the money you have received payments on to date, accounting for the service charge and defaulted loans. It doesn’t compare neatly to stock market returns, but it does give you a good indicator of the return you are getting on your money.
Here’s the formula for the math junkies out there:
Your Lending Club Account
How is your Lending Club account doing? Log in and check your net annualized return on investment (which should show on the first page when you log in). I’d love to hear how readers are doing!
- What is your net annualized return on investment?
- Are all your loans current?
- What investment grade loans did you select?
- Did you select the loans yourself or use the portfolio builder?
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I’m at 12.15%. All of my loans are current (11) and one was paid off early. I created my own portfolio and it’s structured like this:
A (36%)
B (8%)
C (28%)
D (20%)
E (8%)
The note that was paid off early was also a D. I’m still relatively early into the terms so the fact that they are all current isn’t a huge surprise, but I expect one of the 12 notes I took out will eventually default.
But when choosing where to invest the funds I paid more attention to how much they were asking to borrow and for what purpose than just the credit grade alone. I’d like to think that this helped me pick the safest of the risky loans to minimize defaults. Only time will tell, but so far, so good.
May 20th, 2009 at 8:52 am
I just barely started. But my 4 notes, all A, are offering me a net annualized return of 8.83%. So, it’s probably time to branch out a little bit and do a little more. Like Jeremy, though, I look at the reason for borrowing. I like to help people who are getting loans for business needs.
May 20th, 2009 at 10:08 am
@ Jeremy and Miranda: I love reading about what they want to do with the money, too. I probably spend too much time on that part.
I helped fund a kitchen renovation with one of the loans, and I often wonder how it turned out!
May 20th, 2009 at 10:11 am
What made you choose Lending Club over Prosper? I have yet to make the big leap but would consider now seeing more feedback.
May 20th, 2009 at 2:04 pm
I just signed up for Lending Club, but have had a very good track record with Prosper over 2+ years. Granted, I only have five loans, but they range from A to D, and in over 2 years I’ve only had a late payment once.
I’d say reading the borrower’s statement was very important, since you can often sniff out the shady ones that way. One thing to watch for: repeat/serial loan listings from the same borrower with wildly different stated purposes. Also, I don’t know about Lending Club, but Prosper would let you ask the borrower questions about their finances and monthly budget. As a rule, I loaned only to those who answered and could show that they had budgeted enough to repay the loan.
May 20th, 2009 at 6:43 pm
My Lending Club Account is getting 10.18% net annualized return. All four loans are current, and one borrower is paying extra every month, which is nice to have a little more $$ to invest again. I know that means I don’t get to earn interest off him/her, but I’m happy to see their progress in paying it off early. Makes me think I invested in a really good person who has their stuff together. This is why P2P Lending is better than banks. I really, really care about investing in good people who have their acts together. Not just people who can do math. (i.e. I don’t want to finance your Sea-doo because you’re overfinanced on your truck).
May 20th, 2009 at 11:23 pm
I’m at 9.4%!
No lates so far, and my notes are pretty old (nearly halfway through the 3 year repayment process).
May 20th, 2009 at 11:29 pm
After 1.5 years and over 200 loans, I’m at 7.34%. This is because I had a few defaults (about 10 of my loans). But gosh! what a great return after defaults and fees. I’ am now investing again after they reopened and I’m never coming back to Prosper. Quality of borrowers is better, and there is no drama with Lending Club (no quiet periods, no out-of-control defaults, and only good credit borrowers, etc).
May 21st, 2009 at 8:04 am
I’ve only been doing Lending Club for 3 months but so far I’m at 11.47%. I have about 20 loans or so. I’m hoping none of my higher rate loans default, but some probably will. Generally, if I invest in a D, E, or F I read the reason they need the money, and usually only go in on small sums less than $5k. I keep a pretty balance portfolio across all the percentages with enough A’s to balance out my higher risk investments.
I’m trying to get my portfolio to a point where I’m getting paid atleast $25/month so I can reinvest in other loans.
May 22nd, 2009 at 7:36 am
I just started my account at Lending Club and saw the $25 credit to my account. I’m sort of on the sidelines right now but will invest conservatively.
Can anyone tell me what exactly happens when a borrower defaults at Lending Club? What if they file Bankruptcy?
Thanks!
May 23rd, 2009 at 10:10 pm
Brian, They have a collection agency try and collect once the delinquency goes to long. Also, once someone files bankruptcy the debt is discharged. Your out of luck.
May 27th, 2009 at 1:12 pm
My loans at Lending Club are currently earning a Net Annualized Return on Investment of 8.75%. I haven’t had any late or missed payments since I made the loans about a year ago. This is a small sample size though, as I only have a few loans (residents of my state are not currently able to fund new loans via LC).
June 2nd, 2009 at 8:29 am
I’ve only dabbled in social lending. To spread my risk out a bit, I balanced investments in Lending Club borrowers between a medium-risk borrower with a low-risk borrower. Both loans are being paid and are in good standing, yielding an approximate net annualized return on investment of roughly 11%. Not bad for a rookie.
June 2nd, 2009 at 12:03 pm
I’m currently at 12.58% – no defaults yet (knock on wood), and one borrower paid off their entire loan after two months (he had said in the description that he hoped to pay it off much sooner than three years, so that was vaguely expected, just not quite so soon).
My spread is:
1. A (25%)
2. B (5%)
3. C (20%)
4. D (35%)
1. E (10%)
2. F (5%)
3. G (0%)
I value A’s as “low risk” and try to keep them at 1/4 of my loans. The rest I try to bell curve (totally ignoring G’s).
When looking to invest, I sort loans by amount left to fund. This lets me minimize the amount of time I’m in the “funding” stage (thus getting me into the interest garnering phase sooner) and also tends to show me loans other people think will pay off. I still read the reasons for the loans and if something sounds fishy or I just plain don’t like the loan for whatever reason, I don’t go for it.
June 3rd, 2009 at 9:34 am