Year end review 2017

I don’t remember what my attitude toward Lending Club was at the beginning of 2017.  I must have had some concerns which prompted me to start some analysis in midyear. I restarted my blog posting in July to share my experiences and analysis.

Looking back, I wanted to find ways to salvage my account. So, I started with different approaches to acquiring notes. My first effort was to purchase some notes off the secondary market FOLIOfn. These were notes that had always paid on time and were set to be completed before the end of 2017 (these later became Test Case 1). The last of these were finished earlier this month. I purchased 139 notes and 133 were fully paid off. But surprisingly 6 were charged off. I invested a total of $1,704.50 and got back $1,723.70 for a profit of $19.20. This was a meager return of 1.1%. This was for a partial year, so generously annualizing to about 2.5% still doesn’t make this approach worthwhile.

I did have some other ideas over the summer and decided to test these approaches. I divided these into test cases and began documenting the results on this blog.  

By September I decided to liquidate all notes that would not pay out until 2021. This would allow me to let my account play out by 2020.  This wasn’t easy and took several months to accomplish. To insure I was completely done by the end of 2020 I’m currently liquidating notes ending in the last few months of that year.

Here are the updated test case results.

Description	Current	Other	Fully Paid	Charged Off	Index
Test 1 End in 2017	0%	1%	95%	4%	96.0
Test 2 End in 12 months	73%	0%	28%	0%	97.3
Test 3 LC Picks	92%	3%	5%	0%	98.8
Test 4 Zip Grade	95%	5%	0%	0%	98.8
Test 5 By Percent	90%	5%	5%	0%	95.2
Test 6 By Funded	95%	3%	3%	0%	99.3
Test 7 Random	93%	0%	8%	0%	98.2
Test 8 FOLIOfn Zip Grade	89%	0%	11%	0%	100.0

None of the test cases have had any charged off. Test cases 4 and 5 each have 2 that look problematic, while test case 6 has 1. Overall, it’s way too early to draw any conclusions. I’ll be updating this chart periodically.

I haven’t decided what to do with this blog in 2018. Lending Club updates will likely be few and far between. I might start sharing my analysis on one or both of my current passions, cryptocurrencies (Bitcoins) and wagering on sports. If anyone cares, let me know. You can follow me on Twitter, @billlanke.

Lending Club December update

Here is the early December update on the status of the test cases.

Description	Current	Other	Fully Paid	Charged Off	Index
Test 1 End in 2017	2%	1%	93%	4%	96.0
Test 2 End in 12 months	75%	0%	25%	0%	97.3
Test 3 LC Picks	90%	5%	5%	0%	98.8
Test 4 Zip Grade	95%	5%	0%	0%	99.4
Test 5 By Percent	90%	5%	5%	0%	95.6
Test 6 By Funded	93%	5%	3%	0%	99.5
Test 7 Random	95%	0%	5%	0%	98.6
Test 8 FOLIOfn Zip Grade	89%	0%	11%	0%	100.0

Test case 1 are notes that I purchased early in 2017 from the secondary market FOLIOfn. They were selected randomly with the two criteria that they had to end in 2017 and were selling at a slight discount.  Most have been paid off by now, although 6 were charged off. There must have been some bad circumstances for someone to default on a loan after paying for several years. There are still 4 outstanding (1 in the grace period). These should close out this month and I’ll be able to estimate the return on this approach.

Test case 2 has the same type of notes as test case 1 except that they don’t pay off until mid-2018. Some have been paid of and none have defaulted. The index of these notes is slightly higher than test case 1. (Recall the index is an attempt to measure the flow of payments received versus the ideal situation. Early paid offs and defaults lower this number.)

Test case 3 are notes recommended by LC Picks, a 3^rd party service. They are doing reasonably well, although 1 is in the grace period and another 1-30 days late.

Test case 4 were selected using the borrowers zip code area and the loan grade as described in an earlier posting. These are performing well with only 1 in the grace period.

Test cases 5-7 were new notes purchased on the day they became first available within and hour or two of their posting. Test case 5 were notes chosen with a high percent of their funding completed, test case 6 were notes selected by a high amount invested, and test case 7 were randomly picked during the same time period. All have had a couple paid off and no defaults. But the random group is the only one with currently no potential problems.  One note was apparently fraud, none of the first 3 payments were made. A second made 1 of the first 3 payments. Obviously, defaults will occur.

Test case 8 (buying notes from FOLIOfn that met my zip/grade criteria) is working well. But I could find so few of these, I decided to quit looking.

Maybe I’ll update the table at the end of the year. Follow me on Twitter, @billlanke, to know when I do this.