Moneyinvesting

Fri Dec 12, 2014, 02:14 PM

Lending Club

Anyone here invest thru Lending Club as a Lender?

I was one of the first Prosper investors 7-8 years ago investing approx. $30K as an experiment. It was an exciting time and we lenders thought it was a fantastic business model. I was very active on the discussion forums and we were so optimistic (naive). But now we battle scarred veterans of P2P (person to person internet lending) remember that failure as Prosper 1.0. It was basically a disaster, out of the 624 loans I made 152 defaulted, about 1/4 but I managed to break even in the end due to the high interest rates my non-defaulting loans paid out. Many people were not as fortunate and lost a lot of money as Prosper's vetting was poor and we lenders did not have enough information about the credit histories of the borrowers. We didn't even have FICO scores.

Fast forward a few years and things have improved in the internet lending world. Prosper reorganized and has recovered and is currently on version Prosper 3.0 or maybe 4.0 I think (my description, not Prospers). P2P lending is here to stay and my belief is that it has a good future with a lot of room to grow competing with the banks.

A little over a year and a half ago I decided to give it another try and have been investing in Lending Club this time around. I am going larger with the experiment and plan to build my account up to $100K which should happen in about 4 months, then stop my contributions, let it ride and see what happens for the following 2 years before I commit a sizable portion of my investment portfolio. Also my loans are much smaller this time, most are the minimum $25 whereas with Prosper I was lending in amounts of $50 to $200. When a borrower walks away with my $25 its a lot less painful than when they walk away with my $200. I am trying different strategies and filters to see if a safe 6-8% after defaults (charge-offs) is indeed possible and if I can find a reliable "sweet spot". So far, 19 months into this experiment I am achieving a return of about 8.4%. I am tracking my lending using the Excel XIRR function which is more accurate than Lending Clubs investment return calculation as they don't seem to factor in the significant dead time money sits there in my account waiting for the loans I choose to be approved and issued. My return has been slowly declining over this 19 month time period since I began. Where will it bottom out? I don't know, hence my need for another couple years to find out. I am fairly confident it wont fall below 6%. If it stays above 6% I will consider Lending Club a safe and worthwhile investment.

https://www.lendingclub.com/

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Reply Lending Club (Original post)
Cu13 Dec 2014 OP
brantleydavis Oct 2016 #1
oflguy Oct 2016 #2
Bubba Oct 2016 #3
Post removed Feb 2017 #4

Response to Cu13 (Original post)

Mon Oct 24, 2016, 11:47 AM

1. Other Investment Options

In my opinion, both Prosper and Lending Club are very high risk propositions. They may have long term growth potential but they are also companies that could go belly up if they have the wrong management or start getting involved in very subprime loans.

If you are looking to get a more solid increase on your money you may want to consider an overall market fund or if you are into finances you can buy an ETF of banks, lenders or financial institutions.

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Response to Cu13 (Original post)

Mon Oct 24, 2016, 09:48 PM

2. A friend of mine "bought a mortgage"

The borrower was really jacking him around, not making the payments and playing a game of evasion with him. It looked like it was more trouble than it was worth.

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Response to Cu13 (Original post)

Tue Oct 25, 2016, 05:32 PM

3. I Know Nothing About

This type of investment. As an ignorant, uninformed outsider, I have two observations.

1. Must be nearly impossible to make any appreciable amount of money lending $25 at a time.

2. A person who needs to borrow $25 is probably a terrible credit risk.

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Response to Bubba (Reply #3)

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