Lending Club Update And Returns – June 2012
by Hank Coleman
I have been a bit behind in updating my Lending Club
performance ever since I wrote about almost losing my shirt with defaulting loans thanks to my own greed. I was bound and determined to invest in risky peer-to-peer lending loans in order to earn a high rate of return, upwards of 18% or more. Now that I have decided to start only investing in A and B ultra safe P2P loans in my Lending Club portfolio, I wanted to show an update on how things are going now.
Here is what my Lending Club portfolio looked like when I was going for broke with 20% annual rates of return on small business loans through the site:
- 66 loans are current
- 22 loans have been paid off
- 0 loans are 16-30 days late
- 3 loans are 30-120 days late
- 14 loans have defaulted and/or been charged off
My net annualized return (NAR) is around 2.09%.
Now that is only part of the story of course. As I have mentioned before, I have started a new safer Lending Club portfolio full of only five A, twenty-seven B, and one C loans which have an average rate of return of 11.16%. Here is a breakdown of that specific portfolio:
- 31 loans are current or in funding
- 1 loans have been paid off
- 0 loans are 16-30 days late
- 0 loans are 30-120 days late
- 1 loans have defaulted and/or been charged off
I am still really enjoying investing through Lending Club especially now that I am only investing in conservative loans. This has been a good tactic since changing my strategy last year. I have been able to improve my returns over the past year by moving away from risky loans and investing solely in A and B grade loans.
What about your Lending Club investments? Are you staying conservative or going a little more risky for a higher return?
About Hank Coleman
Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and is currently pursuing his Certified Financial Planner credentials. Email him directly at Hank[at]MoneyQandA.com.
Hank Coleman has written 434 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.
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{ 14 comments… read them below or add one }
At the end of the day, 11% isn’t too bad.
Jason @ WSL recently posted..First Time Selling Your Home? Here’s 7 Things You Should Know
What is your NAR on the conservative portfolio? Also how do you report tthese on tax returns. I may have to try it out after I understand it better.
Lance@MoneyLife&More recently posted..Pay Yourself First
Thanks for the update Hank. I have been hearing a lot about Lending Club and it’s something I want to look for into.
Sean @ One Smart Dollar recently posted..Free $25 American Express Gift Cards
I would definitely recommend it as a way to further diversify a small portion of your total portfolio and squeeze out a few extra percentage points on your annual rate of return for your investments.
Hank Coleman recently posted..Infographic: Money Questions We All Ask
I’m not sure what P2P lending options are available here in Canada, but it sounds like something I should be looking into. I’m all for taking the big banks out of the lending process for some people and those returns look pretty good. I’m going to have to discuss this with an investment pro I’m meeting up with in a few hours.
Modest Money recently posted..Life’s BIG Financial Steps
I’m not sure either. I know that it is pretty restrictive even here in the US. Only about half of the states are allowed to invest in LC and Prosper.
Hank Coleman recently posted..Infographic: Money Questions We All Ask
Sounds like a very interesting way to invest your money. I remember Karl at CultofMoney once wrote about his investments in this as well.
Tackling Our Debt recently posted..Tips for Couples Traveling on a Tight Budget
I think that it a great way to further diversify a small portion of your total investments.
Hank Coleman recently posted..Infographic: Money Questions We All Ask
Ahh good old greed. It’s your best friend at the wrong time and your worst enemy everyday. It seems cool how you invest your money. I put my stepfather on to your blog because he is all about investing.
Jai Catalano recently posted..Comedian Jason Andors – NYC Headshot Session
Thanks for the kind words, Jai.
Hank Coleman recently posted..Infographic: Money Questions We All Ask
I keep meaning to look into Lending Club, so many people seem to love it. I really like your safer approach and 11% is still pretty nice.
Jen @ Master the Art of Saving recently posted..Things to Consider When Buying or Leasing a Car
Safer has definitely been a better route for me for sure.
Hank Coleman recently posted..Recent Articles Written Over The Past Few Weeks
Hank, I am glad you are sticking with your Lending Club investments. I think good returns are available for all risk levels but the key is to be very diversified. If someone is investing just in the riskier loans I would recommend having at least 100 notes and preferably more than that. Because, as you have discovered you will have defaults and you want each default to impact you as little as possible. Just as important is the need to filter very carefully, eliminating those loans that are more likely to default.
I have actually gone the other direction. I started off with mainly B and C grade loans but now I am doing mainly D-F with the occasional G-rated loan. But I am very well diversified with over 3,000 loans and my NAR continues to creep up.
Peter Renton recently posted..New P2P Lending Survey Provides Information for Borrowers
IMO, spreading investment across hundreds of loans and diversification across credit grades is the key to successful lending in peer to peer lending. I have been analyzing the historical loan datafile from Lending Club for past few months and my sense is being too conservative or too aggressive doesn’t pay well at Lending Club.
Anil Gupta recently posted..Lending Club Loan Length: Best 60 month spread with B4 Grade Loan