Experiment: Lending Club

The Lending Club Experiment

P2P lending has been around for over 10 years now. Over that time, I’ve never been convinced about their claims in performance. I started my Lending Club experiment in November 2016, around the same time my son was getting good at sitting-up but only a few months after the company fired its CEO, Renaud Laplanche, from questionable lending practices and the stock price was trading just under $6 a share (down over 50% from a year prior).  Why (you ask) did I decide to open my account then? Well, I took uncovering a scandal and the board of a publicly traded company taking action as a positive sign that there would be stricter guidelines towards the loans they issue to investors.

I know i’m starting late but for everyone who is still interested in opening an account with Lending Club my goal is to provide timely updates for you to track against what they claim to give you a sense of how it has been performing post clean-up.

Investment Strategy

Currently my investing strategy is estimating to yield 5.98%. My experiment will follow their recommendation and start with at least 100 notes. Will see how accurate their projected returns are over the years. I will be using their Automated Investing tool with the following options:

  • $25 notes
  • 3 year notes
  •  more weighted in B/C grade return and risk

Lending Club Experiment Automated Investment Criteria Details

Account Summary (as of July 2017):

July 2017 lendingclub summary

Historical (Total of 154 Notes Issued)

July 2017 lendingclub notes

Updates:

[Jul ’17] The annualized returns continue to be high at 14%.  I decided to turn automated investing off. For now I have decided to end the experiment when the last note is paid. The reason is because I’m not seeing any benefit of continuing to lend money if not backed by assets.

If after a year my returns remain high and for whatever reason something changes I will revisit this decision. The market’s continue to be strong with unemployment at 4.4% and the S&P 500 at $2,425.

[Mar ’17] The annualized returns have been high at 14% but given that these are new loans with I suspect to start seeing defaults closer to 12-15 months out. The US market’s been strong closing out the quarter with unemployment at 4.7% and the the S&P 500 at $2,362 (up 25% last 12 months).

[Nov ’16] Account Open with $3,000

 

 

Note: I have no affiliation with LendingClub and do not benefit financially if you invest with them. This page and all others on the site are intended for informational purposes only.

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