What is Your Lending Club Performance?

What is Your Lending Club Performance?

It has been a while since I write about Lending Club. I haven’t written about peer-to-peer lending, because there hasn’t been much to write about except for the chance to win $2,500 from Lending Club. Otherwise, I am still an investor on both Prosper and Lending Club, and I continue to buy more notes when I can. However, I’ve seen a few blogs touting the high returns they are getting. This prompted me to write this post, and ask my readers how is your Lending Club investment portfolio performing?


A Brief Introduction To Lending Club

I wrote an introduction to peer-to-peer lending a while back. In a nutshell, a group of people gets together via websites like Lending Club. Those with money to invest, lend money directly to those who need money — e.g., lenders and borrowers, respectively. For this service, Lending Club charges both the lenders and borrowers small fees. In any case, the whole process is more cost effective than going through a traditional bank. For instance, you can get a personal loan for as low as 7.89% and invest for an average annualized return of 9.65%

My Lending Club Performance

Currently, my Lending Club net annualized return is 2.49% and I’m thrilled. I am happy because it used to be in the negative, but it has turned around and is currently performing better than even the best high interest savings accounts. And as far as I can tell, it continues to improve.

You won’t find too many articles about peer-to-peer lending risks. But you should be aware of them before you invest. My portfolio went into the negative for two reasons:

  1. Default risk – When I started, I went for some of the lower credit grade loans to grab higher interest rates. When the credit crisis hit the U.S., a few of these borrowers stopped paying their Lending Club bills. When borrowers stop paying, I lose money.
  2. Small portfolio risk – One way to minimize your default risk is to invest in a lot of loans. Right now, Lending Club default rate is about 3%. This means if I invest in 100 loans, the chances are 3 of them will default. When I started, I only had about 20 loans and two of them defaulted. This means I suffered 10% loss right off the bat.

What Is Your Lending Club Performance?

So how is your Lending Club investment doing? I hope you’re closer to the current average return rate of 9.65% than I am. If you have a weak portfolio like I used to, I suggest that you add some more money to your account so that you can properly diversify down these risks. If you haven’t tried Lending Club yet, now you know a bit more about the system and how to properly start your peer-to-peer lending career.

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29 thoughts on “What is Your Lending Club Performance?”

  1. I’m actually doing quite well at 8.34%. It went down to 7point something, but as you suggested, reinvesting and diversifying is the name of the game. So far, it has been very enjoyable and I plan to add more money in a regular basis (like a few hundred $$ monthly).

  2. I’m getting 12.39% right now on roughly $60000 spread through nearly 150 notes. I’ve only had one late note so far but the collections log says he’s promised to pay last months amount with this month’s, we’ll see how that goes. I’ve only been investing since may, however, so there is still plenty of time to see a default.

  3. And by $60000 I mean 6,000
    Out of curiosity, those of you with below average or near-average interest rates, are you using lendingmatch? As much as they promote that I still pick every note by hand because you get a higher quality set of loans than by just randomly picking based on grade alone.

  4. Prosper user here and prosper doesn’t just give me a return #, although my Acquisition average is 11.94%. They do give me a performance summary:

    Performance Summary
    Payments received: $816.51
    Principal paid off: – $689.78
    Payments in excess of principal: = $126.73
    Principal charge-offs: – $86.77
    Gain/loss to date: = $39.96

  5. I’m also a prosper user, I think I’m getting 7% over there but they just reopened to Florida last week. I’m in the process of closing out my prosper account right now, as the payments come in I cash out.
    While they were closed I switched to lending club and now I know how to look for loans that I feel their algorithm gives too high of an interest rate to and then invest in them.
    I had a really high default rate at prosper so I’m leaving even though I’m a big fan of some of their ideas. Bidding down the rate of a loan and letting friends/family loan money to give bidders more confidence is a great idea, as are the forums but at the end of the day I’m getting a better return from lending club and, if you know how to find them, you can get really good notes, too.

  6. Most of the time, I use LendingMatch. I am starting to see a trend here and learn how to find good loans. What type of loans work best for you guys — i.e., credit card consolidation, business loan, etc.?

  7. Pinyo,

    I always look for Credit Card Consolidation with no late payments. To me that means, “Can pay my minimum just looking to combine and hopefully at lower rate.”

    Since starting this routine I have yet to have one default (knock on wood).

  8. I look for loans making 13% or higher, 700 minimum on credit score, no late payments on the life on the credit history and at least a 7 year history.
    As for the type of loan, I avoid someone who wants to start a business, especially when it’s not in the field of business they’re already in, usually they’ll get in over their head. If an existing needs more capital for a big order or something then I’ll consider it.
    I’m also a fan of motorcycle loans and surprisingly loans for weddings and vacations have low default rates as well.
    No matter what, though, you will not get above average returns using lending match.

  9. Hi Pinyo,

    I have just under $25,000 invested at Lending Club and I’m currently making just over 12%. I have invested in 190 notes. I invest by hand in notes with 0 delinquencies and I ask a LOT of questions or look for others who have asked questions.

    When a note goes into its grace period (i.e. buyer hasn’t paid on time), I put it up for sale on the trading platform at a -10% valuation. I’ve lost $24 recently this way that isn’t accounted for in the 12% statistic above. Still, the vast majority of my notes are performing and I’m really happy with the passive income I’m making. It beats the heck out of ING Direct!


    • @Erica – Wow, that’s very impressive. My investment is much smaller compared to yours. I want to invest more, but my finances wouldn’t allow that level of commitment. By the way, thank you for your tips.

  10. I would not recommend dumping notes that enter grace period at a 10% loss, that would only be profitable if more than 1 in 10 notes that entered the grace period defaulted. I’m pretty sure that roughly half my notes have hit grace periods before because it takes about a week for a submitted payment to go through which means that they could have sent the money already and still be in the grace period, that’s why they don’t consider it late.

  11. Pinyo,
    Thanks for raising this issue. I have seen a lot of different numbers and this post and the comments has helped to sort through what are reasonable expectations. Personally, I have just started using Lending Club and only have a couple of notes. Just testing the waters.

  12. “I’m pretty sure that roughly half my notes have hit grace periods before because it takes about a week for a submitted payment to go through which means that they could have sent the money already and still be in the grace period”

    A note only enters the grace period if the first payment fails.


  13. I’m earning 15.5% over 11 notes of $50 each over the past seven months, and I haven’t had a single loan become late yet (knock on wood). I don’t use lendingmatch because it is not as picky as I am in my loan criteria.

  14. I set up two portfolios in Lending Club, one for me and one for my wife. We each put in $250 a month and compete to see who can get the best return. So far we have $2000 in (must have been four months already) and haven’t had any late payments. My average return is 13.1% and my wife’s is 13.47%.

  15. Good blog. This is one of very few sites I’ve found with LC user reviews.

    Would be interesting to hear experiences further into the investment time frame.

  16. My loans are approaching the one year mark, and so far 4 lates, no defaults, with an after fees return of about 11% spread over 250 loans. For those who have made their investments fairly recently, don’t become too complacent during your ‘speedboating’ period. You are likely to have a few lates, and a couple of defaults as your loans mature, but as long as you don’t invest too much in one loan, you should come out way ahead of bank returns.

  17. My current “official” rate is 12.74%. I say “official” because LC’s calculation doesn’t take into account anything that been sold on their secondary market. I sold off a few loans that looked like they were going south, at anywhere from 10 cents to 90 cents on the dollar. That brings my real return down to about 11.5%. Currently spread over 574 loans, with 2 past due over 30 days, and 1 on a payment plan. The oldest loans are approaching a year, with an average of about 6 months old. For what it’s worth, I pick every loan myself. I also sell off loans that show erratic or plummeting credit scores, usually right around a break-even price. Seems to be working so far.

  18. Just a heads up to potential and current investors in LC. I’ve had several borrowers file for Chapter 7 bankruptcy in the last couple of months. Rereading the original listings, there was no way I could’ve predicted this in any of the loans. They were mostly A and B level loans, so be careful out there. I am now limiting every loan to $25, and not investing twice in the same loan between both of my LC accounts.

  19. I’d be interested to hear from anyone who has sold their notes on Foliofn. What was the experience? If you have a diversified portfolio, are they all selected to mature on the same day so that all returns are posted to your account on the same day to be liquidated, if desired? I am thinking of investing and would welcome any input.

  20. I’ve sold a few notes on Foliofn. Pretty seamless integration with LendingClub’s site. You just click the notes you want to sell and set your price. You can reprice a note anytime you want as long as it hasn’t sold, obviously. Folio gives you the value of the note including accrued interest. Keep in mind you get hit with a 1% fee when you sell. I don’t think buyers pay any additional fee.

  21. I’m in 11 months now. Put $5k in last Dec. and another $5k in June. Return is shown as around 13% but I have 3 16-30 day lates that are not factored in yet. Supposedly months 12-18 are the worst. Anybody have experience through and past those months?

    • @Charlie – I had a rough patch with late and delinquent loans about 6-12 months into the program, but haven’t have any more since. The first year was negative because of these bad loans, but I am now doing better with P2P than other investments.

  22. I am closing in on two years experience with Lending Club. Although I am no longer adding dollars to these accounts, I thought I would update things at this point.

    In my taxable account, I hold just under 200 notes that average out at $57. I’ve had 15 loans paid off in full, I have no lates and two defaults that total $83. 88% of my loans are in the A, B or C categories. I sold $1150 worth of loans on the trading platform. My return, inclusive of fees and the two defaults is just a shade over 10%.

    In my IRA account, I hold just under 500 notes that average out at $60. I’ve had 33 loans paid off in full, 1 late (16-30 days), 4 lates (31-120 days) and 7 defaults that totaled $518. I’ve sold $885 worth of loans on the trading platform. My return, inclusive of fees and the seven defaults is 8.7%. In this account, 87% of my loans are in the A, B or C categories.

    My current strategy for both accounts is to bump up returns a bit by investing in the 60 month notes, which carry higher interest rates and lower expenses. I am also dipping my toes into the lower grade loans, but only if they meet my criteria of no delinquencies, good income stream and steady employment history. I no longer invest in loans for medical expenses, as this is the number one cause of bankruptcy in this country. I no longer invest in A’s since Lending Club reduced the interest rates on that tier. I’ve noticed a lot more A loans have not fully funded. I suspect most people have figured out that a 5 or 6% return on this type of investment isn’t worth the risks involved. Investing in Lending Club shouldn’t be compared to an online bank like ING, because the risks are much higher. A better comparison perhaps is to junk bonds, which also have a possibility of default, unlike bank accounts. This past year, I think many people did much better in the equities market than they did on Lending Club. That was certainly the case for me. Who knows what’s in store for 2011, though?

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