Lending Club Sadness

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inchicago
Posts: 134
Joined: Wed Jun 10, 2015 12:03 pm

Re: Lending Club Sadness

Post by inchicago »

The criteria I have been using on my Lending Club account has been:
1. C and D notes (although I bought a few E, G and F notes-not a good idea)
2. Must have job for at least 3 years.
3. Only those using it for debt consolidation or credit card payoff.
4. No delinquencies or public records on file.
5. I also look at their individual gross income.
6. Those that have their own home vs. renting.

I have had my account open for about 1.5 years and have a return of 9.55%.

3 are in the grace period right now-a C and 2 Ds
2 have been charged off-1 D and 1 E
5 have been late 31-120 days-1 D, 1 E, 2F and 1G

So this tells me to stick with mainly the C notes which is a good return. I had stopped contributing to this account for the last 3 months as I wasn't sure I wanted to continue investing here. I'll see how it goes. Right now, I just reinvest the money from the return on the notes.

Dragline
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Re: Lending Club Sadness

Post by Dragline »

I would expect those returns to be fairly stable at this point if you have over 100 notes.

But zero credit inquiries in the last six months is generally the most important criteria. I think its because if there is one, chances are the debtor applied for a loan somewhere else and was rejected.

Ydobon
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Joined: Fri Aug 29, 2014 9:15 am
Location: Scotland

Re: Lending Club Sadness

Post by Ydobon »

I take it LC loans aren't secured against assets?

I got fairly involved with P2P loans in the UK over the last year (£££££ invested) and everything seemed great at first, but then a steady trickle of late payments/defaults from some of the unsecured cohort. The amounts involved werent horrendous (something like 1% loss of capital if they never pay a penny again), but it was quite irritating.

I've since worked hard to rebalance into platforms with some sort of asset security. The rates aren't quite as spectacular (say 12% vs. 18% (if you're lucky) for unsecured), but delinquencies seem to be unheard of when someone has skin in the game.

Are P2P sites with asset security a thing in the US? We'll be able to shelter some of our P2P money from tax this year, a very exciting development for the UK :D

cmonkey
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Re: Lending Club Sadness

Post by cmonkey »

They are unsecured so you lose pretty much everything if one charges off. I have had 2 that recovered about 4-5 of the 22-24 I lost originally.

I don't think the two big player (LC and Prosper) offer secured loans at this poing but it wouldn't surprise me if they do down the road. I think LC is widely believed to be introducing official auto loans this year so that might be a form of secured.

I think P2P investing is really a 'glass half empty/glass half full' type of thing and your view of it really depends on what your perspective is. Math/stats don't lie, its a great investment. However if you focus on the small numbers that charge off that's all you see. Focus on the people that make their payments.

Dragline
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Re: Lending Club Sadness

Post by Dragline »

They are not secured -- at least not the two major players, Lending Club and Prosper. But there are more variations on p2p being developed all the time.

You need to go into these things eyes-wide-open and expect defaults, especially as the portfolio ages. And you can't really judge a portfolio until its 18-24 months old and contains a high number of loans (say 100+). A 1-2% loss is about the best you would do, even with the highest rated borrowers. Think of yourself as a bank running a credit card business.

12% is a fantastic return when you compare against alternatives. What platform do you use that offers secured investments?

Ydobon
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Location: Scotland

Re: Lending Club Sadness

Post by Ydobon »

There are a few in the UK. I use Saving Stream (property bridging finance etc.) and Money Thing (an odd mix of loans including car and mortgage finance and managed portfolios of what are basically collections of pawn shop tat). We also have a few providers with 'provision funds' (basically a self insurance buffer against defaults).

Some of the pawn shop tat loans are quite depressing - people being lent £15 against old mobile phones etc. :roll:

Property features quite heavily, but then again I'm already massively overexposed to that through my mortgage.

inchicago
Posts: 134
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Re: Lending Club Sadness

Post by inchicago »

Dragline wrote:I would expect those returns to be fairly stable at this point if you have over 100 notes.

But zero credit inquiries in the last six months is generally the most important criteria. I think its because if there is one, chances are the debtor applied for a loan somewhere else and was rejected.
I do have over 150 notes at this point and will continue watching out for this. My 9% is my best return on anything lately so I'm not really complaining. :)

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jennypenny
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Re: Lending Club Sadness

Post by jennypenny »

How much do these loans (and write-offs) complicate tax returns? Mine are already painful. Is the trouble is worth the ROI?

cmonkey
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Re: Lending Club Sadness

Post by cmonkey »

Dragline posted a bit in my journal a while back. From what it sounds I'd say it's worth the ROI but I haven't had to deal with charge off until this year.

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jennypenny
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Re: Lending Club Sadness

Post by jennypenny »

cmonkey wrote:Dragline posted a bit in my journal a while back. From what it sounds I'd say it's worth the ROI but I haven't had to deal with charge off until this year.
Thanks cmonkey. I must have missed that discussion the first time around.

jacob
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Re: Lending Club Sadness

Post by jacob »

jennypenny wrote:How much do these loans (and write-offs) complicate tax returns? Mine are already painful. Is the trouble is worth the ROI?
It seems that LC investors are doing quite a bit better than Prosper investors did during the Wild West years. Maybe it's a recession timing issue. Maybe it's because LC avoided the worst issues of Prosper.

If you have very few write-offs, your pain might not be large---especially not if you do your own taxes. If you pay someone else, know that they charge per form and write-offs generate a ton of forms!

Back then, charge-offs made tax returns supremely painful for me. My ROI was about 0% but that was around 2008.

Here's what I did ...
http://earlyretirementextreme.com/prosp ... tices.html
(That page got quite a bit of google search traffic back then.)

So me being well-diversified and having some 10% of 200 $50-loans defaulting, that's 20 separate statements+documentation to be filed. My tax return was 1/2" thick for a few years.

For junk-lending, I find it easier just to buy an ETF that specializes in such things. I figure that I'll forego some percentage point in the up-years in return for not dealing directly with the aftermath in the next recession.

cmonkey
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Re: Lending Club Sadness

Post by cmonkey »

I decided to plow through our taxes tonight and so I can update my experience about LC taxes. It is exactly as Dragline wrote out. However, if you use TurboTax they import everything for you. Everything! Right down to the ST and LT entries on Schedule D. It also imported all info for form 8949 and put descriptions in such as 'LC Corp Note ######' and included the date it was invested in and the date charged off. Very detailed, they did their APIs right.

So if you use TurboTax, its as simple as a few button clicks and entering your LC account information. It took 30 seconds.

Dragline
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Re: Lending Club Sadness

Post by Dragline »

Yeah, I think that's a new feature they rolled out this year. I had not seen it before.

jacob
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Re: Lending Club Sadness

Post by jacob »

Damn! That could have saved me a lot of grief between years 2008 and 2011 or so.

cmonkey
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Re: Lending Club Sadness

Post by cmonkey »

jacob wrote:Damn! That could have saved me a lot of grief between years 2008 and 2011 or so.

Well there ya go, no more barriers to jumping back in! :lol: Just 50-60K and add another notch to the bedpost of your expense covering income streams.

Dragline
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Re: Lending Club Sadness

Post by Dragline »

Shhhh -- his consistency hobgoblin may be gnawing on him a little. :P

reepicheep
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Re: Lending Club Sadness

Post by reepicheep »

I have a Roth IRA with LC and a taxable account; I'm slowly drawing down the taxable account so I don't have to worry about the taxes any more. I expect it'll be gone by the end of the year; there's around $600 in there now.

The IRA has been open since January 2013.
I've maxed it out each year since. In 2014 I rolled over a Roth IRA account I had in Vanguard that I'd contributed to in 2012.

Current account value: $26,273.13
Current account value after projected past-due notes*: $25,430.60
Current interest rate (combined return): 9.16%
Number of notes:
Not Yet Issued--38
Issued & Current--1,217
In Grace Period--9
Fully Paid--255
Late 16 - 30 Days--6
Late 31 - 120 Days--25
Default--2
Charged Off--79


Payments to Date--$19,777.75
Principal--$13,070.60
Interest--$6,706.36
Late Fees--$0.79


* I adjust the predicted values for notes that are over-due; I am more aggressive than LC in assuming that somebody who is late with payment will default. Therefore, my actual account value and interest rate are likely slightly higher than what is shown here, although I've also heard it's better to adjust the interest rate LC provides down about a % point due to some unknown-to-me malarkey with how they calculate the interest rate.

I'm pretty happy with it. All my other accounts are basically flat or negative this year.

steelerfan
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Joined: Wed Feb 27, 2013 3:33 pm

Re: Lending Club Sadness

Post by steelerfan »

Laplanche is stepping down. I am holding off on reinvesting any more for now.

steelerfan
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Re: Lending Club Sadness

Post by steelerfan »

I have noticed several loans getting retired early - like in the first month. Maybe this is the cherry picking that was sort of implied.

cmonkey
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Re: Lending Club Sadness

Post by cmonkey »

Too bad this news is overshadowing the solid earnings they had. The peer to peer space has been moving into more difficult waters last year and this year. It's still a good investment...but keep your eyes out.

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