My Lending Club account continues to show improvement month over month as my returns are now up to 11.61%. I've been extremely happy with my returns since starting with the site, and as my strategies evolve, my returns have continued increasing. I'd highly recommend adding Lending Club to any person's diversified portfolio of investments.
This past week Lending Club announced on their blog that they were improving the downloadable file that is available for investors to prospect and view available notes in the system. They've added additional information to the file, as well as removing some that was no longer needed.
We strive to provide a comprehensive set of information to assist you in your investment analysis and be responsive to your feedback to continuously improve your experience with our platform. Recently, we’ve received requests to augment and improve our Browse Notes downloadable file, which led us to create the new version we have now made available.
The additional data includes loan details and status, third-party reported credit attributes, and information reported by the borrower. This detailed information can be downloaded by logged in users from any page of our Browse Notes section by clicking on the “Download All” link on the bottom right corner of the page.
So the downloadable “browse notes” file will now have even more details available for lenders to peruse. Most of the new additions have to do with the borrowers credit history including number of accounts opened in the past 24 months, months since most recent delinquency, number of mortgage accounts and more. Check out the blog post linked above for a more detailed look at what has been added.
Interested in my original Lending Club Review? check it out below.
Returns Now At 11.61%
A week or two ago I started looking at my Lending Club account for 2011 tax purposes. Trying to figure out your taxes when it comes to Lending club can be extremely confusing as the reporting processes can vary depending on how much you're investing in each loan, how your interest income will be reported, etc. If you're as confused as i was when I started looking at it, check out my post on Lending Club and taxes.
A couple of months ago I had my first charged off loan. It was disappointing to see my perfect record of no charged off loans go down the tubes, but it wasn't completely unexpected. With as long as I've been investing with Lending Club I would have expected at least 1 or 2 charged off loans a while ago. Here's a look at my account to date:
- Net Annualized Return of 11.61%: Up from 11.44% in February, 11.23% in December, 10.93% in September, 10.76% in August and 10.53% before that. It is showing steady progress over time.
- Number of defaults.. one for now: A few months ago now I had my first charged off loan, a Grade B loan. It's interesting that the loans I've had either go late or get charged off have been the higher grade loans. The lower grade ones have so far been on time for the most part. I did have another late loan earlier this month, but that borrower has gotten back on track. Let's hope they stay that way.
- Twenty four loans have been paid off early: Nine were A grade loans, seven were grade B loans, five were C grade, two grade E and one F. Looks like grade A and B loans are more likely to get paid back early, reducing returns. Another reason why I've started investing in more higher grade loans.
- My account balance increasing, re-investing returns: I currently have $2,723.64 in my account, with $246.49 of that ready to invest. I'll be looking to invest that dormant cash shortly here.
- I’m still diversified by investing across a large number of loans: I've had 157 loans, with no more than $25 in each loan. In other words, I'm diversified across a large number of loans, lessening my risk from any one loan going into default or getting charged off.
NOTE: Did you know that 100% of investors who have invested in 800 notes or more had positive returns. Not too shabby, not everyone in the stock market can say that!
What's Your Actual ROI?
When you're looking at the numbers on the Lending Club and Prosper sites, it has been pointed out time and again that their numbers are overly rosy view of what your actual return on investment will be. The ways that they calculate the ROI isn't really standardized, and they don't take into account how old your loans are, possible future default rates, or other things that may become a factor. The numbers they show are just something you have to take or leave.
A site that I discovered a while ago that gives what I think is a better picture of the actual ROI you can expect is Nickel Steamroller's Lending Club portfolio analyzer. Basically the analysis tool with give you an estimated ROI after you download all your notes from your Lending Club account and upload the .csv file. It will go through you notes and give sell recommendations, show duplicate notes and highlight notes that are below Lending Club’s average return (so you can sell them on the secondary platform). It will even give you a fun little map showing where your loans are (see mine above).
In looking at my returns on the analyzer, my actual return according to the site will be closer to 10.64%. Still nothing to sneeze at.
Evolving Lending Club Strategy
Here's the basic strategy I've been using with Lending Club over the past couple of years. I've fudged on this a bit in the past few months due to the fact I'm buying more low grade loans, but it still holds mostly true.
- Less than $10,000: I believe I’ll still be sticking with mostly loans below $10,000. Lower amounts mean higher likelihood of payback of the loan.
- Zero delinquencies: Again, I may fudge slightly on this one, but I still want it to be very few or zero delinquencies.
- Debt to income ratio below 20-25%: I like to invest in loans where the borrowers have a lower DTI ratio, and preferably have higher incomes. I’ll try to keep this as is.
- Good employment history: I like loans with a decent employment history of at least 2 years, and a decent income.
So that's what I'm doing with my Lending Club portfolio right now, and how I'm investing.
Are you currently investing in Lending Club? How are your returns looking? Tell us in the comments!