Lending Club Initial Investment Update

by Michael on Aug 21, 2013

Lending Club Logo

This is just a quick note to update you on our initial Lending Club investments. As you may recall, we recently opened an account with an initial deposit of $1,500. I then set out to get that money invested.

In short, as new loans were posted, I filtered them based on my loan selection criteria and snagged the winners. This is a bit slower than it used to be because peer lending is no longer the secret that it once was. Thus, there is considerable demand for good notes and they tend to go quickly once listed.

I should also point out that the investment process occurs before the loans are actually issued. Thus, it’s possible that a borrower could change their mind or some aspect of their application might not check out and the loan won’t be issued.

If/when a loan doesn’t get issued, the money that you’d committed automatically reverts to your available balance and you’re free to invest it in other loans. This can be a bit annoying, but it’s not a huge deal.

In the end, I was able to find plenty of notes and get the full amount committed. Yes, I had to re-pick some loans because a handful of my initial selections didn’t get issued, but the majority were issued once Lending Club completed their review.

The end result was a collection of 30 x $50 notes ($1,500 total). The majority (25) of these are Grade C notes, with a handful of Grade D (4) and Grade E (1) notes to round things out. The average interest rate on these notes if 15.79%, but…

That number doesn’t account for the occurrence of defaults, which will almost certainly start to happen over time. When the dust settles, I’m hopeful that I’ll wind up with returns somewhere in the 10-12% range.

As for the future, my current plan is to add $1k/month to this account and to reinvest all payments as they come in. Of course, I’ll be updating you guys regularly as to how things are going so keep an eye out for future posts if you’re interested.

If you want to try it out for yourself, you can get started here.

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