I have answered
several of my questions about Lending Club, but now must face the serious one
on how to continue. At the moment, I have rejected the approach of selling my
notes and closing the account. Instead, I will allow the account to continue
until 2021 when all notes are completed. Meanwhile, I continue to accrue cash
in my account as payments are made and loans paid off. I have been withdrawing
this and can continue. Or, I could invest in more notes that expire before
2021. I am unlikely to use automated investing to do this because of the luck
factor. So, what to do?
One of the
graphs I generated during my analysis was the timing of when notes are charged
off. The following two graphs show the month finally charged off for both 36 and
60 month loans.
The results are
not unexpected and show the highest rate of charge offs occur relatively early
in the life of the loan. The rate falls in the later stages.
This leads one
to think that if you bought loans that were near the end of their life cycle,
you would expect those loans to experience less charge offs than younger ones,
and hence be more profitable. To test this hypothesis, I purchased 143 notes in
the secondary market (in January and February) that are set to complete payments before the end of 2017.
Some have (and more will) be charged off, but it appears this rate will be
about half the normal rate. It’s not possible to tell if this is a profitable
approach until all have finished in a few months.
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