LendingClub Experience?

[Anonymous]

Does anyone here have any direct experience with LendingClub.com? I understand the philosophy, the pros/cons, and risks associated with it. However, overall, it looks like a very lucrative opportunity to invest excess cash that I have sitting idle.

I'm curious to know more details than what I'm about to already find online. I see plenty of articles about how it works, some feedback on positive experiences, and charts showing a variety of metrics. However, I don't really see any specific details on how it would work exactly.

With that said, here's a mock scenario.

I invest $5,000. I setup an automatic investment plan at $25/per unit limiting my exposure to Grade A, B, C plans and individuals applying with a FICO score >725.

What I'd like to know is:

1. What happens daily/weekly/monthly? Do I see interest payments accruing, and then that interest is automatically reinvested, so I'm compounding my earnings?
2. I know there is a default rate, which is advertised at 3%, but is debatable based on how you slice the metrics. Any direct experience to share with defaults and how that affects you're overall earning potential when well diversified? (At 3%, I would assume for every $2500 I invest (100 units), I would expect to lose $75 (3 units), which is 3%. However, if I'm earning 10% interest overall ($250), I'm actually going to net $175. Does this sound accurate?

Any other details, experience, or stories you can share, would be much appreciated.

[Anonymous]

Check out the Financial Samurai blog. I know he has done a lot of P2P investing and has written several blog posts about it.

[Anonymous]

I am in a similar boat. I invested 1,000.00 almost 2 years ago and earned 200 bucks in interest so far. My statement has it at about 9% interest. I have about 5000 more in an online checking making nothing so I might move it over but am also interested in more data points from others who use it more than I do.

[Anonymous]

I'm in DC so can't invest in LC. But I did invest $20K in Prosper (the "other" P2P retail platform) in May. So far so good - I'm getting about 9% interest. In answer to your questions:

(1) yes, the Prosper account balance shows how much interest you've accrued to date, and will automatically reinvest (if you want). Payments trickle in throughout the month.

(2) Prosper calculates the expected Annualized rate of return for any single investment based on incorporating the expected default rate. Yields on Class D loans are often 14-18%, but the real return is more like 8-10% after taking defaults into account. I've not invested long enough to have any true defaults yet - I have one loan (out of 200) with a late payment, but I'm guessing some more will default during the first year.

[Anonymous]

I invested 2500 about 3 years ago, almost all my loans are paid off or will be paid off this month. I've received back ~2750.

The biggest hits are when people default early on into the loan. At least those can be tax write offs though. I also have one idiot who has consistently paid 1 month late so I've been getting hit with 18% "investor fees" every month for each payment on that account (it's usually 1% for on time payments). I don't like that they take that out my account. The borrower is supposed to have a late fee charged after 16 days late also "to compensate borrowers" but I've only seen a couple cents credited to my account when someone pays after being months overdue. Because of these issues I have not put more money in, I am taking money out as it comes in.

Here are some stats (unclear if this is inclusive or exclusive of fees paid):
Paid off loans (76):
Investment: $1900
Payments to date: $2193.50
Ongoing loans (17):
Investment: $425
Payments to date: $473.20
Defaulted loans (7):
Investment: $175
Payments to date: $91.31

Total Payments to date: $2758.01
Principal: $2335.76
Interest: $422.25

[Anonymous]

Anonymous wrote:I invested 2500 about 3 years ago, almost all my loans are paid off or will be paid off this month. I've received back ~2750.

The biggest hits are when people default early on into the loan. At least those can be tax write offs though. I also have one idiot who has consistently paid 1 month late so I've been getting hit with 18% "investor fees" every month for each payment on that account (it's usually 1% for on time payments). I don't like that they take that out my account. The borrower is supposed to have a late fee charged after 16 days late also "to compensate borrowers" but I've only seen a couple cents credited to my account when someone pays after being months overdue. Because of these issues I have not put more money in, I am taking money out as it comes in.

Here are some stats (unclear if this is inclusive or exclusive of fees paid):
Paid off loans (76):
Investment: $1900
Payments to date: $2193.50
Ongoing loans (17):
Investment: $425
Payments to date: $473.20
Defaulted loans (7):
Investment: $175
Payments to date: $91.31

Total Payments to date: $2758.01
Principal: $2335.76
Interest: $422.25

That still beats the pants off a savings account.

[Anonymous]

I am interested in this as well, but never pulled the trigger largely due to the fact that your returns are taxed as regular income. We pay enough taxes as it is so I am not sure I want this adding to the tax bill at our current tax rate. I was thinking about just taking what I would have thrown into Lending Club and depositing it into my Vanguard account so I can let my investments grow and only pay taxes on them when I sell assets in retirement and have a much lower tax rate.

What are your thoughts on the tax ramifications of P2P lending? I am still mulling it over.

[Anonymous]

Anonymous wrote:I invested 2500 about 3 years ago, almost all my loans are paid off or will be paid off this month. I've received back ~2750.

The biggest hits are when people default early on into the loan. At least those can be tax write offs though. I also have one idiot who has consistently paid 1 month late so I've been getting hit with 18% "investor fees" every month for each payment on that account (it's usually 1% for on time payments). I don't like that they take that out my account. The borrower is supposed to have a late fee charged after 16 days late also "to compensate borrowers" but I've only seen a couple cents credited to my account when someone pays after being months overdue. Because of these issues I have not put more money in, I am taking money out as it comes in.

Here are some stats (unclear if this is inclusive or exclusive of fees paid):
Paid off loans (76):
Investment: $1900
Payments to date: $2193.50
Ongoing loans (17):
Investment: $425
Payments to date: $473.20
Defaulted loans (7):
Investment: $175
Payments to date: $91.31

Total Payments to date: $2758.01
Principal: $2335.76
Interest: $422.25

Wait, I'm confused. If your total payments to date is $2758.01, then you would still have money invested in ongoing loans... meaning your total balance is actually higher, right? If I understand the model correctly, in your case, you started with $2500, but each payment/interest received you're reinvesting back into new loans, so you would have staggered loan start/end dates with payments eventually coming in at all times.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I invested 2500 about 3 years ago, almost all my loans are paid off or will be paid off this month. I've received back ~2750.

The biggest hits are when people default early on into the loan. At least those can be tax write offs though. I also have one idiot who has consistently paid 1 month late so I've been getting hit with 18% "investor fees" every month for each payment on that account (it's usually 1% for on time payments). I don't like that they take that out my account. The borrower is supposed to have a late fee charged after 16 days late also "to compensate borrowers" but I've only seen a couple cents credited to my account when someone pays after being months overdue. Because of these issues I have not put more money in, I am taking money out as it comes in.

Here are some stats (unclear if this is inclusive or exclusive of fees paid):
Paid off loans (76):
Investment: $1900
Payments to date: $2193.50
Ongoing loans (17):
Investment: $425
Payments to date: $473.20
Defaulted loans (7):
Investment: $175
Payments to date: $91.31

Total Payments to date: $2758.01
Principal: $2335.76
Interest: $422.25

Wait, I'm confused. If your total payments to date is $2758.01, then you would still have money invested in ongoing loans... meaning your total balance is actually higher, right? If I understand the model correctly, in your case, you started with $2500, but each payment/interest received you're reinvesting back into new loans, so you would have staggered loan start/end dates with payments eventually coming in at all times.

Out of all the loans, I have received the $2758. If the rest of the 17 decide to default tomorrow then my balance doesn't change. But that's not likely... So I'll probably end up closer to $2800 in payments. I chose my 100 original loans over the course of a month 3 yrs ago. I did not reinvest anything so most of those 17 ongoing loans mature this month. I do have 3 60 month loans that have 2 more years on them.

You get paid in cash and it sits in the account as such until you either transfer it back out of the account (what I did) or take the time to find a new loan to invest in. Keep in mind though that if paid on time, each loan pays ~ 0.80 a month so it takes a little while to get to the minimum investment amount (which I believe is $25) if you don't have that many.

And just because I only had 7 default loans doesn't mean all the rest paid on time. MANY of those other ones...probably a good 25% of them... were late at some point and it was nerve wracking wondering if they were just having a moment or were going to default too (especially at the beginning when you are most vulnerable). The other thing that sucks is early payoffs because you no longer earn interest on the amount of extra payment...a lot of my A loans did that and the interest rate was already low to begin with so I made hardly anything on those loans. I did best with B or C loans, though most of my defaults were also C loans so I'd probably stick to mostly B loans if I were to do it again.

[Anonymous]

I should also clarify that my loan payments were so small (0.80 on average) because I chose to invest the bare minimum of $25 into as many loans as possible to mitigate risk. So if you chose to invest a larger sum into each loan then you would be due a larger monthly payment from that borrower. Payments per month are also higher on higher rate loans and lower on 60 month loans (those pay about 0.55/mo). I broke even on my investment about 30 months in fwiw.