Lending Club Now A Mainstream Investment Option? 4 Years, $325 Million In Loans Issued, 50,000 Investors

We’ve been talking about Lending Club on this site for just over two years now. In that time I’ve been converted from a skeptic of the whole P2P lending genre to becoming a big proponent of it. I now think that it can be a great thing for both lenders and borrowers under the right circumstances.

Lending Club recently announced that they have now originated over $325 million in total loans and paid out over 22 million in interest to investors. They now have over 50,000 individual investors and 32,000 borrowers on the platform.

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They’ve gone from the new kid on the financial block to becoming the next big thing for people looking to get a more stable investment with good returns, or to find a lower rate on a consumer loan.   They are now, dare I say it, mainstream.

Check out my original Lending Club review

My Lending Club Investments Continue To Perform Well

My Lending Club investments have been showing good returns, with my net annualized return currently checking in at a nice 10.76%.  That number has been slowly going up as I continually add new loans, mixing in some higher risk loans with my low risk loans.

Lending Club Returns

  1. Net Annualized Return of 10.76%: Up from 10.53% in June, and 10.13% before that. That puts me in the 55th percentile. My returns are higher than 55% and lower than 45% of all investors. So that means I’ve already reached my goal of doing better than 1/2 of other investors. Now to make it better than 75% of other investors!
  2. Number of defaults remains at zero: Despite all odds I’m still showing zero defaults on my account, despite having given out over 100 loans so far. I’m actually surprised I haven’t had at least one or two. I do currently have one loan that is late, however. The funny thing is that once again the late loan is one of the Grade B loans, not one of the lower grade ones. Go figure.
  3. Fifteen loans have been paid off early: Eight were A grade loans, and the other three were C grade loans, three were grade B and one grade E. Looks like grade A loans, while they’re more likely to be paid back, may also be more likely to pay off early – reducing returns.
  4. My account balance still going up: I currently have $2,585.47 in my account, with $730+ of that ready to invest. I’ll be the first to admit that the last couple of months I haven’t added many loans as I’ve been distracted by other things. I’ll probably be trying to invest that money sitting in the account soon as I find loans that I like.
  5. I’m still diversified by investing across a large number of loans: I’ve got 111 loans, with no more than $25 in each loan. That way if I do have defaults, while my return may go down, my risk will be minimized. Lending Club noted earlier this month, that 100% of their investors who have invested 800 notes or more had positive returns. Not too shabby, not everyone in the stock market can say that!

Lending Club Positive Returns

Stock Market Fluctuations: Could It Lead To More People Trying P-2-P Lending?

The stock market has been doing some wild gyrations over the past month or two, and because of that a lot of people are questioning whether they should still be in the markets.  Even if they want to stay the course (as we are), they’re still looking for some alternative investments now that will be a little less volatile but still show a good return.

I think that Lending Club, Prosper and other P2P lending institutions may benefit from the stock market being so up and down.  Lending Club and Prosper have both had a bunch of good press lately, and seeing as how investing in Lending Club has been proven to be a relatively stable performer for those who have a diversified portfolio, I think a lot of people will be drawn to the relative security of a Lending Club portfolio.

Does that mean investing in Lending Club is a sure thing? Of course not.  But at least in my own situation I’ve seen that a properly diversified portfolio with handpicked loans will show good returns.  I’ve yet to see a down month, or a single default!  What stock market investor wouldn’t give his or her right leg to see that kind of stability!

Lending Club Gets $25 Million In New Funding

Lending Club continues to have good news after good news.  After reaching their 4th anniversary earlier this year they have now announced that they’ve secured another round of funding, and that their post funding valuation is now at $275 million, up from 80 million last year.  From WSJ.com

Lending Club, the peer-to-peer online loans marketplace, said it has raised a new $25 million round of funding that pegs the start-up at a $275 million post-money valuation, up from $80 million last year.

The financing comes as Lending Club has gathered momentum. The start-up, which matches lenders and borrowers online, has seen the loans it has originated grow 125% on a compound annualized rate while revenue has risen 180% year over year and is expected to reach $15 million to $20 million this year, according to Laplanche. Lending Club now has 50,000 individual investors and 32,000 borrowers on its platform, he said. Overall, Lending Club has surpassed $325 million in loan originations and its average loan size is $10,000, he added.

I think investors in Lending Club see the company’s potential, and are jumping in on the ground floor with this company as it continues to grow.

Lending Club T-Shirt Giveaway!lending club shirt giveaway

A few weeks ago Lending Club was nice enough to send me a swag pack after I won a contest on Twitter.  Included in the pack was a nice messenger bag (which I use every day now), some pens and a nice Lending Club T-shirt similar to the one you see to the right.

Problem is, the t-shirt doesn’t fit me as it’s a size large, and as a tall guy at 6’4″, I wear a slightly larger size.  My loss is your gain as this week I’m giving away my Lending Club T-shirt!

For your chance to win all you have to do is:

  • Leave a comment on this post telling me whether you think Lending Club is now mainstream, and whether more people will be using them now that the stock market has started showing such volatility.  Feel free to also tell us how it’s performing for you if you’re already signed up!
  • For a second chance at winning, sign up for Lending Club through this post, and then leave a comment telling me that you’ve done so!

I’ll be choosing a winner of the contest on Friday, August 19th at 12pm via Random.org. That’s it!

UPDATE: Imad is the winner!  Congrats!

sign up for lending club

Do you think that Lending Club has arrived as a legitimate investment option?  Do you think it will see an influx of dollars as people look for more stable investment options?  Tell us your thoughts in the comments!

Last Edited: 24th August 2011

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    Share Your Thoughts:

  1. says

    While I certainly agree that Lending Club has arrived as a legitimate investment option I think it is still to early to consider it mainstream. What peer to peer lending really needs is for the mainstream financial media to embrace it as well as financial planners. When both those things happen I think we can genuinely call it a mainstream investment (but we are probably a few years off realistically).

    As for the volatile stock market I have seen anecdotal evidence of investors shifting more more to p2p lending. I think the biggest impact of the stock market gyrations will not be the attractions of new investors, but existing investors who have been giving Lending Club or Prosper a go will increase their investments.

    A large t-shirt will do me nicely…..

  2. says

    I think it is definitely a viable alternative to placing money in a money market fund. I have heard many good things about the returns to investors. I might actually look into getting a loan so that I could consolidate some debt.

  3. Imad says

    I’ve been getting 14.5% steady since I started 3 years ago. I’ve diversified by giving $25 max to any loan in the highest three categories. I have over 1100 notes invested. I understand your strategy of picking and choosing but that is too time consuming for me. I invest in “bulk” as I? like to call it.

  4. Wiseguy says

    A financial adviser I talked to had not heard of P2P lending. I was rather surprised. So, based on awareness of its existence, I wouldn’t consider it mainstream just yet. Thankfully it’s growing quickly! It’s a more tangible investment than stocks, so I certainly hope people will start giving it more consideration.

    I’ve only been investing with Lending Club for about eight months, but so far my return is 14.2% over 43 notes with no late payments!

  5. says

    I think P2P lending is becoming more mainstream, but it’s not there yet. While 50,000 investors is pretty impressive, it pales in comparison to the millions who invest in stocks, bonds, commodities, mutual funds, and other ‘mainstream’ investments. As Peter suggests, when I see magazines like Money and Kiplinger’s include 5-10% holdings in P2P loans as part of their model portfolios or hear of financial advisers admonishing their clients for ‘not having enough money in P2P loans’, then I’ll call it mainstream. Until then, let’s call it up and coming.

    (Also, as a side note, being a Pennsylvania resident, I can’t actually invest in new lending accounts, but I can buy notes sold by others who can invest in new accounts, due to some legal issues. Until that sort of issue is resolved, I have a hard time considering Lending Club and similar P2P companies as mainstream; if substantial portions of the country (Pennsylvania is far from the only state with these rules) can’t invest, it seems a bit out of mainstream to me. Of course, since said rules have kept me from doing very well with my investments through Lending Club, I suppose I might be a bit biased about their mainstream nature.)

  6. Justin G says

    I think Lending Club can fill the void of uncertainy in the current stock market. Like anything, I don’t think it should be a person’s sole investment portfolio, but a compliment to an existing portfolio. Even though it has gained mass, I still don’t think it is common with the general public and remains popular with financial enthusiasts.

  7. Dan B says

    Where does this 50,000 investor number come from? I find it highly unlikely that it is even remotely accurate considering that the number given to the GAO thru March 31st, 2011 was 20,600………….Needless to say, they obviously didn’t more than double their investor numbers in the last 4 months.

      • Dan B says

        Perhaps the disparity is one of total investors since inception versus active investors.

        I disagree with the general tone of the responses here. I think p2p continues to be very obscure with both the general public & investors. Apart from the people who frequent blogs whose owners are p2p investors, I’ve yet to meet anyone who even knows of Prosper or Lending Club. I suppose that it depends on your definition of “mainstream”, but I think it’s a gross exaggeration to suggest that p2p may be approaching or heading towards being mainstream. Look at it this way………………Closed end funds have been around for over half a century.There are many hundreds of them around across all categories. Are they a mainstream investment? Ask 10 random people on the street what closed end funds are & you’ll get 10 blank stares. Ask 10 random investors & you’ll get either stares or wrong answers from 9 or more of them. We should revisit this p2p mainstream question in 10 years or so……………when perhaps there will be 20-30 outfits like LC or Prosper with half a million active investors. Then maybe we can start throwing terms like “mainstream” around.

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