The Amateur Financier » Lending Club

Lending Club Follow Up

Roger, the Amateur Financier — Wed, 23 Sep 2009 00:00:03 +0000

It’s been a while since I wrote anything on Lending Club. At first I had trouble, since Lending Club doesn’t enable Pennsylvania residents to directly purchase loans . Luckily, I was able to purchase a few notes through their loan exchange system. Now, six months since I started to dip my toes into the Lending Club pool, where do things stand with my investments?

Well, not too bad, overall. One of the loans I purchased has gone more than thirty days without making a payment, which likely means that I won’t get all (or any) of my money back from that particular loan. I was considering selling it when it was first declining, but I was confident that it would work out (at least at first), and then I was (and still am) interested in how much I will get when Lending Club attempts to get the money that is owed. So far, I’m still credited as owning the remaining value of the loan, so I want to know how much I will actually get back.

My current Lending Club portfolio

The other three loans I own are going fine, and should continue to generate income in the near future. The borrowers are paying on time, and as long as that continues, I’ll be happy. Plus, since half of the money I was using for my Lending Club investments came from Lending Club itself, the one loan failure still leaves me with one ‘freebie’ loan as well as the two I bought with my own money. Not a bad return on invested capital.

Lending Club in Review

So, what do I think of my first six months with Lending Club? Overall, I like it. The interface is simple, the loans are a good investment, and they provide nice diversification from my stock mutual funds. The concept is a very good one, lending money to people who need it, making a decent return on your money in the process.

As my finances allow, I’m going to add to my Lending Club portfolio. I’m going to focus on higher quality loans, in the hopes that, by being less risky with my investments, I can avoid having the loans go without being paid back. (The loan that went without being paid back was ranked E, on a scale of A as the best and G as the worst.) By being smarter with my allocation, I’m sure that Lending Club will grow in usefulness as part of my investment portfolio.

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Lending Club Revisited

Roger, the Amateur Financier — Fri, 27 Mar 2009 14:00:00 +0000

When we last saw our intrepid hero, he was minutes away from completing an investment in Lending Club. Unfortunately, he was stopped at the gate, unable to buy Notes (the name for the Lending Club investments, parts of loans to other people) directly from Lending Club as a result of living in the state of Pennsylvania. What will our intrepid hero do now?

Luckily, Lending Club offers a second method of acquiring Notes, purchasing them off the original investors on a secondary market at the Note Trading Platform. (I still haven’t heard a good reason why I can buy second-hand Notes, but not new Notes. But, that’s an issue for a different blog entry.) Since I still had the (free) $50 from the Lending Club promotion, I decided to check it out:

Foliofn Trading Platform

The trading desk did not look much different from the mutual fund sites I’ve used to seeing. You can go in, click on individual notes and see the status of the loan repayment. You can see the starting price for the Notes, the current selling prices, and the expected yield on the Note, if held to maturity. You can also see if the borrower’s credit score has changed during loan period or whether he/she/they are late on any payments.

In a way, it’s similar to how the stock market really works. After the initial public offering (akin here to the creation of Notes and purchase through the main Lending Club system), the price that a stock can be sold for is determined by an number of factors affecting the business and the broader economy. Good information leads to high prices, bad news drives prices downward.

With some browsing, I settled on a C1 grade note yielding 11.78% and an E1 note yielding 15.68%:

My C1 Note

My E1 Note

The combination of these two Notes should give me a decent yield, but not have too much risk of default. If these investments go well, I’ll probably be adding more money to my Lending Club accounts. If not, I’ll just have to write off the $50 as a learning experience (and take some solace in that it wasn’t actually my money).

I’ll have to give regular updates on the progress of my Notes, and when I’ve seen how this investment with Lending Club pans out, I’ll have to give it my final review.

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Lending Club Adventures

Roger, the Amateur Financier — Thu, 12 Mar 2009 14:00:00 +0000

As I’ve been reading more personal finance blogs, I’ve been coming across the concept of peer to peer (or P2P) lending. One place in particular that’s come up multiple times is Lending Club.

I’ve heard about Lending Club before, but finally decided to take the plunge when I read Stephanie’s review of Lending Club on Poorer than You (which, as a side note, is one of the coolest named blogs out there). So, after getting a recommendation link from her, I set out on my merry adventure.

After filling out a few online forms, I was enjoying adjusting the little slider to determine how much risk to take. I came up with a fairly conservative, but still quite profitable arrangement, as shown below:

So, there I was, feeling good about taking this step. I’ve heard good things about Lending Club, not only from Stephanie but from The Writer’s Coin and Rocket Finance. Besides, I had gotten $50 from Lending Club, so it’s not like I even had any of my own money on the line.

However; I hit a little snafu…

Apparently, Notes are not currently being sold directly to residents of Pennsylvania. And I happen to be a resident of Pennsylvania, at least when I last checked. As such, I’m not actually allowed to purchase the notes directly. I even went as far as writing to the help desk at Lending Club, which verified that yes, I’m out of luck at the moment.

Interestingly enough, though, there’s apparently no rules about buying Notes from other members on their Note Trading platform. (Which perplexes me somewhat; I’d think that if I was not qualified to buy an investment from what is essentially a brokerage house, I should not be able to buy them from other members. It’s the same investments, after all; the difference is about the same as buying stocks at an initial public offering versus buying them on a stock exchange.) I’m still trying to study up on the Note Trading platform, and hopefully I’ll find some good investments via that method. Prepare for more updates in the near future!

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