Lending Club – May 2011 Investment Performance Update
I thought I’d take a moment to share how my own Lending Club portfolio is doing. I make use of a strategy that I call the “common sense” approach to Lending Club investing. The strategy that I use is algorithmic in nature and does not rely on reading through individual loan listings. I’ve selected criteria to filter out loans that common sense would suggest are likely to default.
Up until May 12th, I had approximately $6,700 invested in 260 different Lending Club Loans. My Net Annualized Return (NAR) is 12.93%. I added an additional $2,000 to my Lending Club account this week which I have placed in loans that meet the criteria for my strategy. Previously I only invested $25 per note, but have bumped that up to $50 per note because I’m making a larger than normal monthly investment into Lending Club. I typically place $500 per month into my Lending Club account and am still taking advantage of an automatic transfer bonus (1.5%) that Lending Club had several months ago. Unfortunately, the company isn’t promoting the transfer bonus right now.
I’ve been putting $500 a month into Lending Club loans for about a year now, in addition to my other investments which include a paid-for home, a 401K plan through my small business and a Roth IRA that I no longer qualify to contribute to. I’ve been very happy with the results that I’ve seen so far and am hoping to significantly increase the balance of my Lending Club account over the next year. Ultimately, I’d like to have $50,000 invested in my Lending Club account, which would generate a nice passive income stream of $6,000 per year (assuming I can keep a reasonably good rate of return).
Out of the 260 notes that I have invested, 258 of them are current. I have two notes that are distressed. One of them is a “B” loan where the borrower made his or her first two payments, made a partial payment in March and missed their April payment. I still have some hope for this loan as the loan details say that the borrower has negotiated a payment plan with Lending Club. You can see the original loan listing here. The other delinquent note I have is a “D” loan issued in September that I feel less good about. The borrower missed their January, March and April payments and has been sending intermittent check payments to Lending Club. You can see that loan listing here. I’ll let you know next month if either of these two delinquent loans return to good standing.
I’ve been very happy with the default rate so far, but the loans that I have are relatively new (the oldest notes I have are about one year old). I do anticipate that additional loans will become delinquent, lowering my NAR, but would still be very happy with a slightly lower rate of return.
You can also read my June 2011 Performance Update