Lending Club Acquiring Notes

Notes pass through several states at Lending Club. When you initially bid on them, they are “In Funding” and the amount of the loan is moved from “Available Cash” to “Committed Cash”. Once enough investors have agreed to fund the note it moves to “In Review”. During this stage the loan offer can be declined. My experience is that a fairly high number are declined in this stage. If declined, the cash balances are adjusted appropriately. If not declined, they move to “Issuing”. Finally, they are moved to “Issued & Current” and you can expect to receive your first payment in about a month.

I turned on automatic investing when my account was initially funded. I specified parameters that would invest about half the funds equally over all grades of notes. This results in the system looking for notes meeting my criteria multiple times per day.  Almost immediately an order was filled covering 117 notes. These presumably were already available when I turned automatic investing on.  Over the following days more orders were filled until the funds were used as I had specified.

I then adjusted the settings to focus on mid-grade loans and to use the entire $10,000. After a few more weeks there were 400 $25 notes in the account in various stages. When loans were declined, automatic investing used the cash and entered offers on other notes. This would insure that you were fully invested. Presumably as payments were received automatic investing would use these funds to grow the number of notes you hold.

I paused automatic investing before this could happen to try the secondary market where you can buy or sell existing notes. This is done by a third party, Folio Investing. I purchased 4 notes. Each had an initial investment of over $25. Each had unusually high discounts of around 6%. For example, I purchased a $100 note for $84.23. Its remaining principle at the time of purchase was $89.18 and if paid in full will return $119.97. The borrower had made 9 payments, all on time and had 51 remaining. The interest rate is 14.49%. Trading notes is pretty interesting and is going to require more analysis.

As I mentioned in a previous post, payments have been added to the account. At the end of February, the account was $10071.13, up $71.13. This morning it stands at $10080.24. The account summary also lists $66.44 in “payments” ($50.31 in principal and $16.12 in interest). As I mentioned before, it takes about 5 days after a payment due date before your account is credited. We do have some payments made in late February and early March which are presumably the ones reflected in “payments”. Quite frankly, I don’t understand the timing here and hopefully will sort it out soon.

What we haven’t seen are any late payments or notes being written off. That will happen, but not for a while. I’ll be posting my weekly update this weekend. Follow me on Twitter, @billlanke and I’ll let you know when I post it.