It has been a while since I last invested in LendingClub. Now that I have a well-funded retirement account and some extra money to invest, I want to give peer-to-peer lending another try. For this experiment, I created a $1,000 investment account with LendingClub and I’ll be updating you on the progress on a regular basis.
If you don’t know what LendingClub is, it’s an online platform that allows people to come together and either lend or borrow money. As an investor, you can lend out as little as $25 per loan to different borrowers; and as a borrower, you can borrow up to $35,000 from the platform. For more information visit LendingClub and check out these articles:
I already have a LendingClub account, so it was an easy process for me to deposit $1,000 into the account. The deposit does take a few days to show up in my LC account (this is something they can certainly improve upon). Anyway, once the fund was available, I just use their Build a Portfolio tool (just click “Invest”).
On this page, I was presented with 3 options:
I made a few adjustments to the recommended porfolio just so that I can see how the rate changes:
At the end, my Build a Portfolio page looks something like this:
I completed the process and saved the porfolio as 2013 Portfolio A. One thing you will realized quickly is that not all loans will be funded, so you will have to go through this process a few times to invest all of your money.
This is what my intial order looked like when I placed the initial order:
After several attempts to get the porfolio fully invested, this is what it currently looks like:
I don’t expect the investment to yield 16.70% based on the Weighted Average Rate above because some loans will default (e.g., the borrower stop paying altogether). I think I’ll be happy with a rate of return around 6-9% and thrilled if I ended up with anything higher than 9%. I will update this article about a month from now.
Until then, please share your thoughts in the comment section below.
When do you see the returns on the loans? After they have been paid in full? For example: If you invested $1,000 with an return rate of 10%, you would make $100 after the loan has been paid off? I’m new to this, so trying to understand the rewards. Thank you for any insight that you can provide!
The loans are repaid monthly, so you get a little bit back at a time (principal and interest). Loans are usually paid off in 3 years or 5 years, but some borrowers do pay it back earlier (and some may not pay back what they owe). The rate is annualized, e.g., at the 10% annualized rate of return, you get $100 back each year.
Thanks for all the great information. How frequently are loan repayments made and your account credited, e.g., monthly at the end of the loan? (Obviously payments are not made if the borrower defaults.)
Thanks!
@Smitty – The borrower pays back the loan monthly. The set up is similar to a personal bank loan, where the borrower borrows a lump sum and pays back 36 or 60 equal payments monthly.
I’d love to try this out, but I’m afraid of the defaults. What protections do lenders have via this website?
-Sam (at http://www.frugaling.org)
@Sam – You have to factor in the defaults. But LC will also try to collect on your behalf when a borrower fails to pay. However, it is an unsecured loan so you’re out of luck if the borrow insists on not paying.