Lending Club – July 2013 Update

As part of my effort to catch up from my blogging hiatus this past summer I am going back and posting my monthly updates.

Peer-to-peer lending intrigued me from the moment I first heard about it, and Lending Club is where I first started investing back in 2009. Each month I plan on updating my Lending Club investments in both my taxable and Roth IRA accounts. Nothing is more exciting than watching my investments compound on a regular basis, and Lending Club gives met that compounding in spades! Now let’s take a look how July turned out.

Roth IRA Account:
Lending Club Roth IRA - Main Screen - June 2013 Update

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As of the end of July, my Roth IRA account with Lending Club ended with a fairly high level of cash at almost $600. Much like in June, there were two reasons why my cash level stayed high. The first, I slightly switched gears on how I was investing, and it took a while for that transition to take place. The second, life was busy. Crazy busy in fact! At this point of the summer I was playing softball several days a week and was quite busy at work (hence no posts this past summer!). Even with the high level of cash still in the account, I experienced a great month, although the late loans are starting to appear and I saw my first charged off loan.

Given my overall risk of the notes in which I’ve invested (weighted-average of 18.02%), these late loans are expected, with many eventually ending in default and being charged off. As you can see above, I have one charged off loan and six in the pipeline as late. While disappointing for sure, this is part of the risk of investing in something with an average interest rate that high. Currently, I am not pursuing a selling policy on these notes, and am instead just a buy and hold investor. Naturally I will keep you informed should I start churning notes for any reason, late or not.

As for my earnings, during July, I earned $121.75 of net interest in my Roth IRA account. Unfortunately, this was a healthy drop from last month due to the charged off loan. My internal rate of return since opening the account, using Excel’s XIRR function, continued to increase as it went from 9.15% to 9.72%. At some point during 2014 I expect to see this number stabilize in the 13% range as my distance from the major cash drag I experienced opening the account increases and the late loans continue to offset my interest income.

My weighted average interest rate in this account is 18.02%, which is a slight decrease from the prior month as the loans I have been able to get into are averaging slightly less than earlier in the spring.

Taxable Account:
Lending Club Taxable - Main Screen - June 2013 Update

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After great month in June, my taxable account continued with another strong month by recording the second highest amount of net interest in 2013 by receiving $14.93 of net interest during the month of July. With no late notes at the end of June, things changed in July as I now have a couple of late loans. The clock begins to tick to when the charge off will potentially occur.

Considering July was a solid month, my overall internal rate of return since inception increased from 10.39% to 10.52%. And finally, my weighted average interest rate for my taxable account remained unchanged at 15.05%.

Lending Club Summary:

All told, it was still a good month for my Lending Club accounts as they brought in a total of $136.68 in net interest. This was a decrease of $28.78 over June’s $165.46 of net interest. Check out the chart below to see my net interest amounts received by month in 2013.

Lending Club - Net Interest by Month - July 2013

Isolating the month of July, my overall internal rate of return came out to be annualized 14.01%! Moving forward this monthly IRR number will vary significantly as notes get charged off. My long-term return projections for my Lending Club investments is in the 12-14% range as defaults, late loans, and uninvested cash drag the returns from their weighted average.

I have updated my Lending Club page with this information. 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.

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