Beating Broke

Personal Finance from the Broke Perspective

Lending Club Returns Update 3Q13

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Another quarter has come and gone.  We’re bracing ourselves for the coming winter.  It’s also time for a check-up on my Lending Club account, and the returns I’ve gotten.  In my 2Q13 update , my account was showing a return of 14.08%.  Keep reading to find out if I’ve managed to maintain that rate.

No More Defaults

One of the other things that I wrote about in last quarters update was that my portfolio finally suffered it’s first defaulted loan.  In this quarter, I had a few loans that went into the late categories, but ended up coming back to normal.  I’m still a little surprised that I haven’t had more defaults.  I’m glad that I’ve been lucky enough to only have the one default since January, 2010.

Active Passive Income

Beating Broke Lending Club UpdateThe closer you get to true passive income, the less work you have to put into it.  Lending Club portfolios are not true passive income.  I’ve discussed it before, and it bears reiteration.  They are awful close though.  In all, I spend about 20 minutes a month to reinvest the payments and interest that have come in.  It’s not all at once, usually.  With the $9-$10 in interest that my portfolio is earning each month, that’s a pretty good wage.  Maybe it’s an active passive income stream.  Oxymoron for the win!

Lending Club Return Rate

Now, for what everyone has been waiting for.  (Or scrolled down really quickly for)  Without any further defaults, and staying on top of reinvesting the funds as they come in, I’ve been happy this quarter with my return.  As of 10/4/13, my current Lending Club returns rate displayed is 14.69%!  It’s bounced back nicely from the default.  I’ve been investing the funds a little more aggressively over this quarter which helps explain some of that.  At this point, my reasoning is that I’ve been investing with Lending Club since 2010 and have only had one default.  The risk is still there, I think, but I don’t think it’s quite as bad as some would like to make it sound.

Where will my rate be at the end of the year?  I’m hoping it will remain steady.  I’ll be maintaining the same Lending Club investing filter, and hope that doing so will maintain the low default rate I’ve been lucky enough to have.

How is your Lending Club portfolio doing?

Lending Club Update 4Q2012

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Now that the year has ended, and the new one has begun, it’s time for another Lending Club Update.  (Here’s the link to the 3Q2012 update if you care to read it.)

A couple of significant things happened in the final quarter of 2012.  My account maintained sustainability and I stopped contributing to the account (temporarily). I’ll go over each in turn, but the first is a milestone that I have been waiting for, while the second was something that just needed to happen because of my personal financial situation.

Lending Club Account Sustainability.

What defines sustainability?  For me, I’ve defined it as receiving in excess of $25 a month in principle and interest payments.  My account first reached that goal in June of 2012, and has maintained it since.  In August of 2012, it came close to dropping below that threshold, but managed to stay above.  It seems to have settled in at about $30 towards the end of the quarter, so hopefully as that money is reinvested, that number will continue to increase.

Beating Broke Lending Club Update

The entire quarter saw the interest payments that I received rise to a little over $9 a month.  I won’t likely get rich off of that, but it’s also not an insignificant amount on an account that has a total just under $800.  The Net Annualized Return (NAR) that’s being displayed on the account homepage is up .4% to 14.48%, a number I’m happy with.  There’s some argument over whether you should really use the NAR as a gauge of the account performance or not.  I won’t pretend to understand most of it. 🙂  What I do understand though is that having exact figures is less important to me for this experiment than it is to have a standard metric to measure my results by.  So long as the method of calculation remains the same, it should give me a general idea of how the account is doing.  (I’m open to learning more about how some of this is calculated.  Drop links in the comments!)

Contributions Stopped.

I stopped my contributions to the account in November.  If you’ve been reading along with the site, you’ll know that we ended up having some financial difficulties at the end of October.  As a result, much of the money that I was using to fund the account ended up getting transferred to my personal account to help dig ourselves out of that rut.  It isn’t any reflection on Lending Club, but a reflection on my finances and the need to help keep the ship afloat.  We’ve mostly righted the ship, now, so I’ll likely start putting some money back into this account sometime in the first or second quarter of 2013.

My Lending Club Portfolio

My portfolio remains strong.  I still haven’t had any defaults.  *knock on wood* While this experiment of sorts (it’s gone beyond that, I think) started in July of 2011, I’ve had my account at Lending Club since January of 2010.  That’s a pretty long stretch to go without a default of any sort.  You might recall that I sold a loan that had gone delinquent in the 2Q/3Q 2012 area.  I also had a second loan that had gone late, but it eventually was made current.  Currently, my portfolio has 42 loans in it.  All of them are current.  It also has 13 loans that have been paid in full.  Of those, perhaps about half have been paid off in advance.  That’s both good and bad.  I like that they’ve paid them off in advance because it seems to show that the borrowers are perhaps getting their finances together.  It’s bad, because I lose out on some income from interest when they pay them off early.  One of the risks of this income stream.

I’m still not able to directly invest in loans, and still have to invest through the FolioFN platform.  It’s still not ideal.  But, until my state (North Dakota) pulls their head out, and starts allowing it, that’s what I’m stuck with.  I’m not holding my breath.  I’m not going to complain too much, as I do seem to have found a pretty good method for selecting my Lending Club notes, and it seems to be working.

How are your investments starting off the new year?  How’s your Lending Club (or Prosper) account doing?

Lending Club 2Q2012 Update

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Another three months have passed which means it’s time for another update on my Lending Club account.  If you’ve been following my LC updates, you know what this is all about.  If not, you can catch up by starting with the Calculating a Real Rate of Return on Lending Club post, followed by the first Lending Club Return Update and then Lending Club 1Q2012 Update.  If you’re interested in opening your own Lending Club Account, you can do so here.

Now that we’re all on the same page, let’s take a look at what happened this last quarter.

First Lending Club Delinquency

The biggest thing, I think, to note for this update is that I finally had my first (and second) delinquencies on loans.  The first, I sold.  I was lucky enough to be able to sell it for break-even on the remaining principle.  I lose out on the interest that it would have paid through to maturity, but if it went into collections, I likely would have lost more than that.  I should have paid a bit more attention, but I believe the first was a C grade loan.  The second, which just went into late status at the end of June, is a D grade loan.  I’m holding on to this one.  My reasoning behind holding on to it is three-fold.  First, and more importantly, is that the loan is showing as late, but it is also showing that the borrower has entered into a payment plan.  While that isn’t ideal, it does show a desire to pay it in full and avoid the collections process.  I’m giving the borrower the benefit of the doubt that they’ll be able to pay the loan off.  Second, the remaining balance on the loan, including interest, is $6.06.  If I lose that, it won’t break my portfolio, or my rate of return to any significant degree.  Third, and finally, I’m keeping it as a part of the experiment.  I’m curious to see how the process works, and how it will end up.  How it does end up will likely help me make decisions on what to do with any further late loans in the future.

Lending Club Returns Remain Above 13%

After it’s all said and done, the one late loan in the bunch could end up dropping the rate below 13%, but it hasn’t been written off yet.  If, however, it remains in a late, but paid, status, my rate is doing pretty well.  As of 7/4, my account is showing a NAR (Net Annualized Return) of 13.58%.

“My Net Annualized Return is at 13.58% on @lendingclub – @BeatingBroke”  <– Click to Tweet This

I’m still amazed by that rate of return.  Yes, I do realize that I’m likely having some luck so far.  Another factor might include the size of my portfolio.  It’s climbing, but it’s just barely over $500 total.  As the portfolio size grows, the likelihood of a written off loan grows with it.  The flip side of that, of course, is that the larger the portfolio gets, the more diversified I’ll be, and the less one written off loan will affect my rate.  One nice part of the size of the portfolio is that it’s nearing a self-sustainability mark.  Currently, the total monthly payments coming in is $23.67.  With that coming in each month, I could easily stop contributing to the account, and merely use the payments as the renewing funds for investment.  I don’t plan on doing that, but I certainly could.

Lending Club Account Dashboard
Lending Club Account Dashboard

Adjusted Lending Club Risk Ratios

Previously, I spoke about having adjusted the loans I was buying to be almost all C and D grade loans.  While I am not abandoning that idea, I’m adjusting it slightly to try and keep it slightly more balanced.  What I don’t want to happen is to find myself with ALL D grade loans.  The lower grade loans, while paying less in interest, are a lower risk.  I’m now trying to keep the portfolio to a pretty nice bell curve that centers somewhere between C and D.  One thing to keep in mind here is that it’s somewhat hard to find the A and B grade loans that have any return at all when you have to purchase the loans through the FolioFN trading platform, which tends to push the curve towards the D side anyways.

That’s it for this quarter’s update.  With a little luck, and some shrewd investing, I hope that next quarter’s update will be just as good!

Want to open your Lending Club account? Click here.

Do these updates add any value for you?  What would you like to see change in them?  What do you like?  And, what has your experience been like with Lending Club?