Tuesday, June 11, 2013

Lending Club Update

57%B, 40%C, 3%D

I've been investing with Lending Club for about 9 months now... taking it slow.  I decided not to get overly excited, not to jump in feet first.  Maybe I should have.  This is working.

I have yet to have any notes miss a payment, have not collected any type of late fee, or have anything negative happen at all.  My only observation is that notes are being funded faster and faster.  I think the word about LC is out.  It is becoming harder and harder to put money to work.  My screen is pretty strict, I only lend to the best available borrowers.  In a way I feel like the notes I invest in should be rated "A", but somehow slip through the cracks and pay a "B" or "C" interest rate.  I think that is what's going on here.

Sometimes nothing will show up in my screen for weeks at a time.  I've had to loosen my standards a bit here and there to get money invested. An undesirable reality.  But in the end, the people I lend to are making their payments and I get to collect interest.  Pretty neat!

Still I wonder if LC will be around 20 years from now.  What will happen when interest rates rise?  When will the defaults start to happen?  How financially stable is Lending Club itself? 

I can't deny that 14% interest is remarkable!


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  2. Nice results man. The grading also depends on the amount you want to borrow. When I was borrowing and did the screening and when tried to borrow 2000 I was rated A grade and when I changed the loan to 20,000 I was graded at C, so apparently this plays the role too.

    I do not think LC will go out of the business. I have heard they plan to go public which will allow them to offer this service in other states where they currently cannot offer their business. Once public, the clientele and investors will grow rapidly. Of course, there is never a guarantee, but this would boost them.

    In case they would go out of the business, LC has currently an agreement with an external company (a bank? I do not remember now) which would take over all existing loans and administer them until they are paid off. You only won't be able to initiate new loans and trade them on secondary market.

    1. Thanks for insight Martin. I once read LC's arrangement for the unlikely event of a bankruptcy. I can't remember the details, but it was enough to satisfy me.