Lending Club – April 2013 Update

Each month I plan on updating my Lending Club investments in both my taxable and Roth IRA accounts. Even as loans are getting more and more difficult to find, not only was I was able to fully invest my original $10,000 investment in my Roth IRA, I was also able to invest an additional $500 contribution. At this point, my account should really take off in both income and snowballing into new investments. I am really looking forward to watching this growth!

Roth IRA Account:

Lending Club Roth IRA - Main Screen - April 2013

As you can see, I am just under essentially 100% invested, with $600 in funding. As a result of being fully funded, the payments received have increased significantly. During April, this account really took off as notes began making payments. I earned $101.40 of net interest in my Roth IRA account and my overall internal rate or return, using Excel’s XIRR function, increased from 4.68% to 6.12%. My weighted average interest rate in this account has dipped down to 17.95%.

Taxable Account:

Lending Club Taxable - Main Screen - April 2013

In my taxable account, I am fully invested with no money held up in funding. This account will just continue to turn itself over and During April, I earned $13.86 of net interest in my taxable account and my internal rate or return, using Excel’s XIRR function, increased from 10.42% to 10.53%. My weighted average interest rate in this account is 14.96%. As you can see in the loan details, I have a late loan that I would anticipate being charged-off in the near future. As expected, this would drop my XIRR as the principal becomes officially removed from my balance.

Lending Club Summary:

All told, April was a very good month for my peer-to-peer lending accounts as they brought in a total of $115.26 in net interest, an increase of $12.33 from March. My internal rate of return for the month with both accounts combined came out to be 12.89%. Did you earn 13% on your investments in April? With my Roth IRA fully invested, I expect that the month specific XIRR will continue to move upwards for a few months as the notes age prior to seeing the high point of defaults (months 6-12). Shortly thereafter, I would expect some missed payments and the eventual default of a portion of my holdings. This is, of course, to be expected with my investment risk profile.

I have updated my Lending Club page with this information and invite you to share your thoughts on my investment criteria. Please note when tracking my balance and return I do not include the accrued interest in the account, only the interest actually received net of fees, charge-offs, and defaults.

How did your peer-to-peer lending investments do in April? Have questions about peer-to-peer lending? Just ask!

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Comments

  1. Thanks for this post! I’ve been thinking about doing peer to peer lending as well.

    • Michelle, I would strongly look into it if I were you and make it a part of your asset allocation! Even $10,000 can earn you upwards of $1,000 per year in net interest. Not too shabby!

  2. My April results are modest in LC standards (around 10%) but it sure beats majority of my other investment allocation. I’ve been thinking of increasing my contributions to LC. Unfortunately, as you mentioned, notes are more difficult to find. I wonder if the result of institutional players such as the hedge managers moving into p2p lending.

    • I think it has to do with an overall increase in investor demand as well as an increase in the available resources for investors for automated investing. These days you really need to be investing around the release times in order to maximize your selection. Thanks for stopping by!

  3. Some nice results there with the lending club activity. I’ve been a little gun shy about this given some of the historic rates of default in consumer lending, but it looks like a pretty attractive source of additional income.

    • I think Lending Club, and peer-to-peer lending as a whole, really is a viable investment opportunity worth researching. With six years of lending history, I think Lending Club has shown it can be a viable investment vehicle where you can mitigate your risk of loss by adequate loan diversification. For example, everyone who has invested in 800 or more notes has experienced positive returns. Let me know if you have any questions Integrator and thanks for stopping by!

  4. Nice results! I’m impressed you’ve had so few loans charged off. I’m just about to add more money to my Lending Club account and get investing in more loans. I’ll have to check out your investment criteria and see how it compares to what I’ve been doing thusfar.

    • Part of the success is because of the relatively young age of the notes in the Roth IRA. I would expect to receive more than my fair share of defaults over the next couple of years. As for your investment criteria, please let me know how it compares! I certainly won’t proclaim to have the best filters as mine were only derived by hours of backtesting without true statistical analysis!

  5. I love to hear of your success with Lending Club. The possibilities of the peer lending business already keep me up at night (I have a REALLY hard time shutting my brain down). Hearing success stories like yours just pump me up even more.

    Would you invest in LC when it goes public? I think it may be a pretty good idea. They are the future of lending. While not even close to being a household name, I’m sure they will clear 2 billion in loans this year. Can you imagine how big they’ll be once they are a household name?

    • To be honest, when Lending Club goes public, I will simply put them in the same category as any growth stock when evaluating them. Holding in equity position in Lending Club is so different than investing through their platform.

      That being said… I wish I had $100k five years ago… why? I was offered $100k of convertible warrants by Lending Club. No amount of kicking myself for being young and without capital could replace THAT missed opportunity.

      • Andrew Johansen says:

        “I was offered. . . convertible warrants by Lending Club.”

        Ouch. I grimaced when I read that!
        Well as they say: “You’ve got to have money to make money”!

        More opportunities have and will continue to come along. Can’t always capitalize on them all!

  6. I’ve never tried Lending Club – I hear it all the time from other bloggers, and it seems pretty popular. I’ll have to give it a try.

    • Definitely look into both Lending Club and Prosper, Troy. Both have a lot to offer and depending on where you live you might be limited on your investment options.

  7. Nice job W2R. I bet your investments will now skyrocket. Glad to see succes.

    • Thanks Martin! I certainly hope so!

      • It will! Tat’s what I like on my portfolio seeing that snowball speeding up, gaining the momentum.

        I just crossed my 5 year “account money doubling” threshold. I am excited about it. Now ever 5 years my account should double my money!

        I bet you will get there quickly too!

  8. James Endicott says:

    What’s your investment strategy, i.e., what Lending Club filters are set? Thanks.

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