Lending Club Notes Surprise

There are currently 388 notes in the Lending Club account. There are 380 currently issued and active. I fully expected some of the Lending Club notes to have gone bad by now, but they haven’t. One is in the late payment stage and is likely working its way down. A few have entered the grace period and then recovered. It does appear that the one that’s late will become a bad note in a few more months. This is all as expected.

What I did not expect was for someone to pay off a note shorty after acquiring the loan. Four people have this. I don’t understand this, so I looked at the loans. The 4 had interest rates ranging from 15% to 26%. Two of the loans had 2 monthly payments made and the other 2 had made 1 payment. All were taken out for debt consolidation, ranging from a $10,000 36 month loan to a $35,000 60 month loan. Presumably the debts were paid off and another source was found to pay off the Lending Club notes. All 4 had slightly improved credit ratings (as do about 2/3rds of the people taking out these loans). So they likely found a cheaper source of funds.

From my perspective there was little impact of the early payments.

Note	Amount	Interest	Paid Back	Annual Return
40482507	$25.00	15.99%	26.26	15.24%
39805695	$25.00	25.57%	26.44	24.55%
40523483	$25.00	14.99%	25.63	14.83%
40523483	$25.00	25.80%	25.40	24.85%

The returns I actually achieved were slightly below what I would have earned, but there isn’t any more risk with these notes. The funds have been re-invested in another notes. All things considered, I think Notes paid off early are a good thing for me.

I’ll be updating the test accounts weekly performances again this weekend. I’ll post when this occurs on Twitter @billlanke.