Lending Club Update

 

 

As you can see, the returns are simply phenomenal!  It's tough to get interest rates like this in anything else except mortgage REITs.  I don't want to own mortgage REITs!

I've been investing at lendingclub.com for about a month and a half now.  So far no major complaints and no red flags.  I'm starting to think this is a valid investment option.  To date I haven't had any defaults or anything negative.

What I Like:
●Returns are very high (so far)
●Simplicity. This is very easy and takes little to no time. I spend hours and hours researching stocks before I invest, it's not necessary with lending club. A first grader could do this.  The site itself is also user friendly.
●If a loan defaults I can sell on the secondary market and recoup part of my losses.  I have yet to implement this tactic however.
●Fixed income alternative.  I plan to use LC as a portion of my fixed income allocation inplace of bonds and preferred stock.

Concerns:
●There aren't enough attractive (using my criteria) loans to put a lot of money into this.  I want to own as many loans as possible to diversify.  It's the same tactic I use in my stock portfolio to reduce risk.  Unfortunately I would have to modify my screens to be less selective to accommodate a large investment.  No thanks!
●I do not know how this will affect my taxes.  We will see during tax season!
●The interest these loans pay are front end loaded.  It shows a massive annualized return right now.  It will become lower over time.  I'm pretty sure I'll experience a few defaults at some point as well.
●Time delays.  It takes a little bit for a loan to fully fund.  Usually less than 5 days.  Then the loan has to be approved which can tack on even more days.  Then the payment rolls in and that has a time delay as well.  Patience is needed!
●Some loans are rejected further delaying investments

My Screen:
●36 Month - Term
●20 Max - Total Credit Lines
●0 - Delinquencies
●$15,000 - Max Loan Amount
●0-1 - Inquiries
●Consolidate Debt/Medical Expenses - Loan Purpose
●Exclude Loans Already Invested In
●10% - Max Debt To Income
●Mortgage/Own - Home Ownership
●4 Years - Min Length Employment
●B-G - Interest Rate

●Verify all information is filled out
●Verify all grammar and spelling is correct
●Verify requested loan payment is less than 10% listed income

This screen is quite selective.  I wouldn't even qualify!  I get excited to see a C or D make it through.  Most of the time there will be a couple B loans, sometimes nothing at all is available. 

For now I will continue investing with lendingclub.  Thus far the returns are great and it has surpassed my expectations.  I'll be adding another deposit soon.