Early experiences with Lending Club

I’ve previously indicated some concern about my account with Lending Club. First, a little background is in order.  I opened a small test account with both Lending Club and Prosper (another peer to peer lending platform) in late 2014 as part of a series of test accounts of alternative investments. Based on my experiences, I closed these accounts and opened an IRA with Lending Club in January, 2015.

The IRA is with Self Directed IRA Services (SDIRA). Money is deposited in this account and transferred to Lending Club for investment (and vice versa for withdrawals). I deposited $10,000 in the account when I opened it. In June, 2015, I added another $40,000. This $50,000 investment was left unchanged until December 2016 when I began a withdrawal process.

I do track my account daily using the numbers provided by Lending Club. Once a week I roll these values into a weekly worksheet. I now have 2 years of data on my full account. This is the initial data that I will review.

Because I anticipated having many notes at $25 each, I decided not to personally select new notes and instead turned on Lending Club’s Automated Investing. This feature allows you to specify criteria for selecting new notes including a distribution between the loan grades (hence interest rates). As new notes become available, appropriate ones are added to your account. You can see the impact on the number of notes in my account.

At the end of 2016 I stopped the automated investing and began accumulating cash in my account (because it was not being re-invested). That’s when the number of notes leveled off at just above 3600.

My initial experience with this account in 2015 was quite positive. The number of notes increased steadily as did the account balance (a number generated by Lending Club and prominently displayed when you log in). By late September, the account had grown $934 with and I estimated the annual return of 7.4% (although Lending Club was showing a net annual return rate of 16.2%. There were just over 2,000 notes and the first 2 had been written off.

The main surprise was that 53 had already been fully paid off. I did not anticipate that borrowers would be paying off their loans that soon. But their repayments and the interest that was being earned was being plowed into new notes. All was good. My next blog post will show what changed and caused concerns. Follow me on Twitter, @billlanke, and I’ll let you know when it is posted.