Peer-to-peer lending has been around here in the United States for the better half of a decade. This type of lending environment strives to bring both individual and institutional investors together with various grades of qualifying borrowers. The two main companies in the peer-to-peer lending arena are Lending Club and Prosper, with both having over five years of lending history. Since inception, these two loan facilitators have seen tremendous growth and change as they have developed and created an entire market for this type of lending.
My Lending Club Investments
After opening my first Lending Club account in 2009, I have enjoyed great returns over the four years since. Currently, I am tracking two different Lending Club accounts, a taxable and a Roth IRA account. My taxable account was the account opened in 2009, and has a strong history of greater than 10% real returns over the four years I’ve been investing. My second account, the Roth IRA, was opened in November 2012 when I rolled over $10,000 from another retirement account. Since opening this account, I have slowly been investing the available cash in the account.
If you’re interested in the taxation of Lending Club, check out the Lending Club Tax Guide.
Below is the most recent summary of my two Lending Club accounts. I plan on opening additional peer-to-peer lending accounts over the course of the next couple years with both Lending Club and Prosper.
|LC - Roth IRA|
|LC - Taxable|
As you can see, I am having tremendous success with these two accounts. You will notice a significant difference between my XIRR return (an Excel formula calculating the internal rate of return)and the Lending Club’s Net Annualized Return (NAR). The NAR calculation utilized by Lending Club does not include any idle money in their figure. Additionally, I do not included accrued interest in any of my return calculations. As the time progresses, you will see my Roth IRA account’s XIRR return increase as the account ages, offsetting the idle cash during the initial investment period. I would anticipate by the end of 2013 for this number to begin to normalize to what my long-term return will be in this particular account.
Included in the chart above is the period net interest, in this case the monthly amount, followed by the amount received over the previous 12 months, or trailing 12-months (TTM). While insignificant now, as this account ages, one will be able to see how trailing interest figure grows, demonstrating an ability for this account to compound and one day produce income to supplement my retirement without touching the principal. Net interest is calculated by taking the interest earned less any charge-offs, defaults, and service fees in the given period.
If you are curious as to how I am selecting the loans in order obtain such results, please review my 2013 investment criteria and now also my 2014 investment criteria. I developed and fine-tuned these particular filters after many hours of backtesting with Lendstats and Nickel Steamroller.
For some simple filters that will allow you to invest easily during times with few notes, check out my Simple Filters for Lending Club and Prosper post.
Detailed Lending Club Results
For 2014, I am no longer providing detailed monthly updates. I will be doing these updates on a quarterly basis. Below are my quarterly updates from 2014:
Additionally, the below chart tracks my net interest per month. Pretty sweet to see that amount growing over time!
I’ve also tracked my internal rate of return for my two accounts combined, both on a monthly basis and running basis. These amounts starting at the beginning of 2013 can be seen below:
For me, Lending Club has been a tremendously rewarding asset class. I look forward to making significant contributions and gains from my various peer-to-peer lending accounts, as well as tracking my investments for years to come.
Feel free to contact me if you have any questions about peer-to-peer lending or Lending Club specifically!