Investing With Lending Club (Nov '13 Update)

by Michael on Dec 17, 2013 · 4 comments

Lending Club Logo

Guess what? It’s time for another Lending Club update. As a reminder, I started this account with an initial deposit of $1,500 back in July and have been contributing $1k/month since then.

At the end of November, I had $4,942.17 in outstanding notes, another $600 (12 notes worth) committed to loans that were in the process of being funded, and about $60 of cash on hand.

During November, I continued to receive payments from borrowers that I backed with my early investments. As that money accrued, I invested it in more $50 notes, just as I do with any new money that I deposit.

Looking inside my portfolio, I had 103 active notes, which included mostly Grade C notes (73), with a handful of Grade D (27) and E (3) notes. This reflects my overall strategy, which is to target somewhat riskier notes to achieve higher returns.

Related: See an overview of how I choose loans prior to investing…

The average interest rate of these notes was 16.23%, which is undoubtedly an overstatement since it ignores the likelihood of defaults over time. The effective rate will undoubtedly wind up being lower.

As for my actual returns, Lending Club had my NAR pegged just above 16.5%.

Lending Club Returns

I did see two notes slip into the grace period during November, temporarily taking my adjusted returns into the mid-14% range, but both got back on track and my adjusted NAR bounced back to match my NAR accordingly.

As for real-world returns, my own calculations have me with a 14.62% annualized return, which is a bit lower than my stated NAR. This is primarily due to the effects of idle cash in my portfolio, which Lending Club ignores when estimating returns.

All in all, I couldn’t be happier. Yes, some (hopefully) small fraction of my loans will eventually go late and some will ultimately be charged off. But, for now at least, I remain on track to meet my goal of 10-12% annual returns

If you’re interested in playing along, you can get started here.

1 Tie the Money Knot December 17, 2013 at 11:44 am

That’s fantastic. Great way to diversify, and certainly better than lending money to the bank.

2 Jim December 18, 2013 at 12:11 pm

I enjoy your blog, particularly your updates on your experience with The Lending Club. My question is that if you started this account in July with $2,500 and added $1,000 each month, you should have a total of over $6,500 in the account by November. You say that at the end of November, you had $4,942.17 in outstanding notes, another $600 (12 notes worth) committed to loans that were in the process of being funded, and about $60 of cash on hand. So you put in a total of $6,500 and now have a total of $5,602.17. What happened to the rest of the money?

3 Michael December 18, 2013 at 12:32 pm

Hi Jim. Ooops, that’s a typo. If you go back and look at my earlier posts, you’ll see that I had an initial deposit of $1,500. It appears that I mis-typed this as $2,500 back in my September update and have carried that typo over in subsequent updates.

I’ll make the correction here and elsewhere.

P.S. At least I know that there are people out there who are reading closely! 🙂

4 Jim December 18, 2013 at 11:51 pm

Yes, I am reading closely because I have always thought that the only two ways to save/invest for retirement were securities (stocks, bonds, funds, etc.) and real estate. I have no experience in making small loans, so I am following your progress in Lending Club to see the outcome of this new way of investing. I have also just found out that Maryland and several other states do not allow their residents to have accounts at lenders such as Lending Club.

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