Lending Club – March 2013 Update

Each month I plan on updating my Lending Club investments in both my taxable and Roth IRA accounts. Over the course of March, I was able to get another couple thousand invested in my Roth IRA account. As I get closer to reaching full investment in this account, things will transition to maintaining my investments and watching them grow.

Roth IRA Account:

04-03-13 Lending Club IRA - Main Screen

As you can see, I am just under 80% invested, with another $875 in funding. My goal is still to have all of the original $10,000 invested by the end of April. During March, this account really took off as notes began making payments. I earned $89.60 of net interest in my Roth IRA account and my internal rate or return, using Excel’s XIRR function, increased from 2.82% to 4.68%. My weighted average interest rate in this account is 18.22%.

Taxable Account:

04-03-13 Lending Club Taxable - Main Screen

In my taxable account, I have $100 of notes in funding. A few of the notes that I had picked prior to the end of February weren’t issued leaving some money tied up as I was forced to reselect different notes. During March, I earned $13.33 of net interest in my taxable account and my internal rate or return, using Excel’s XIRR function, increased from 10.32% to 10.42%. My weighted average interest rate in this account is 14.98%.  Like a fool I didn’t screenshot the account with the loan details extended, but I still have a late loan that I would anticipate being charged-off in the near future.

Lending Club Summary:

All told, it was a very good month for my Lending Club accounts as they brought in a total of $102.93 in net interest. For the period my overall internal rate of return came out to be 11.39%. Not too shabby! I fully expect with my risk profile that I will see loans start to sour reducing this rate of return.

Not detailed here, I have expanded from my original two criteria and added two more. I will lay these out in a couple of posts over the next couple of weeks.

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.

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

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  1. Simon Cunningham says:

    This is great. Nice touch with the XIRR. Interesting, but you have about the same invested with LC as me, so it’s nice to share that :)

    • I am a full believer of looking at your returns with a solid grain of salt. The NAR calculation is somewhat garbage, so I keep track of this as well. Glad to see we have similar sized investments and thanks for stopping by!

  2. Digging on those returns! I’m thinking about P2P for a Roth. What are the fees attached? I read that if you ever want to rollover the balance there is a stiff fee?

    • Jacob, thanks for stopping by! I am a big fan of Lending Club, and am bullish on P2P lending as a whole! IRA’s are outstanding ways to invest in P2P lending. Let me get to your questions:

      Fees attached: Lending Club, and Prosper as well, offer no-fee IRA accounts. To qualify for a no-fee account, you must open the account with a minimum of $5,000 dollars which must be maintained the entire first year. To maintain the no-fee IRA, you must have $10,000 invested within 12 months of opening the account. To ensure you meet the requirements, you can simply rollover the full $10,000 to open the account, which is what I did with my Roth IRA. If you fail to meet the qualifications the fee is $100 per year for Lending Club.

      Closing your IRA/rollover fees: First, both Lending Club and Prosper utilize third-party, self-directed IRA custodians. These custodians set the fees for any withdrawals or rollovers. With Lending Club, the self-directed IRA custodian is Self-Directed IRA Services, Inc (original right?). In looking at their fee schedule, an account termination will cost you $150.

      What I would suggest prior to committing to an IRA account is to open a traditional, taxable account. Invest a small amount, learn the process, and decide if Lending Club or Prosper is right for you. You have more flexibility with opening and closing the account should you not be interested in it as a long-term investment.

      Hope this helps, best of luck with your possible investments, and thanks for stopping by!

  3. That annualized return is pretty awesome. Glad to hear you’re crushing it!

  4. Looks like you’re doing great with peer to peer lending! I’ve been intrigued by this in the past but I believe when I looked into it, because of the state I live in, I was unable to participate for some reason. Overall I like the idea and it looks like you are seeing some pretty good results! Very interesting that you can do this through an IRA as well. Thanks for the update!

    • DGSI, thanks for stopping by! I really am supportive of Lending Club, and the peer-to-peer lending model as a whole. I’m not sure what state you live in, but check with both Prosper and Lending Club to see if the offer direct or indirect investment (through FolinFn, the secondary market).

      As for the IRA, both Lending Club and Prosper support no-fee IRAs, so be sure to check those options out as well!

  5. My prosper account keeps pumping out money. I haven’t done a proper financial analysis yet because I just doubled my investment 2 months ago so the number would look funky, but I can tell you that in averaging around 10% so far. Im still quite cautious with this investment just because it seems too good yo be true. But if recent trends continue, I might just become a believer!

  6. Nice! I’m going to start pumping some big bucks into my P2P accounts before the end of the year. The goal is to have 100K in them in about 4 years, assuming nothing changes for the worse.

    • Wow! That is quite the commitment! Not to mention you will create strong stream of recurring interest income. Hopefully they clear up the taxation of the interest/charge-offs in the next couple of years.

  7. W2R,

    These are great results. I only wonder how come your XIRR is that low. I plugged my numbers into Excel and it spitted out 13% (roughly 1% below LC 14% stated NAV). We have about the same size account, but totally different results. The only thing coming on my mind would be a shorter period of invested cash on your side. With 10k invested you only received 171 in interest while my account at 11k received 1.1k in interest. That could be the difference. Is that correct or am I doing something wrong?

    • Martin, the difference between your 10k and mine is the age of the accounts. I rolled the money into the IRA with Lending Club at the end of this past November. Because I have been sticking to my filters it has taken me a while to get invested. In fact, I am not quite there as you can see by my available cash in the account. Once the account ages and the money becomes fully invested, you will see my internal rate of return rise to reflect the fully invested dollars.

      When calculating my return, I am capturing all of the idle cash not invested in notes, thus giving the appearance of a lower return on the money actually invested. I choose to calculate it this way to ensure I am getting the best and most consistent return figure for every dollar in my Lending Club account, even those not invested.

      I am actually planning a post to explain this entire process and method. I hope you return to read the post! :)

      • oh I will definitely return to read it. I am a (how to say it properly) a number crunching geek and I like to have a method to see my account from every possible ankle. I didn’t pay attention to numbers in LC originally and relied on LC’s NAV, but your comment on my web made me think about it a bit more deeply. Then I played with XIRR a bit and since you were in one of your posts posting number around 4% XIRR, so when my number came up at 13.21% I was suspecting having something wrong. This post however clears it up. I am definitely eager to learn more to polish the calculations to get even more precise numbers out of my account. Thanks for posting this.

        • Awesome! I am glad I was able to get you to think about your Lending Club returns differently! Always good to get new perspectives and learn from those around us. That is one of the biggest benefits from the blogging community.

  8. I am thinking of rolling over my 401K from my previous employer (basically from prudential and fidelity) to lending club IRA. I read that Lending Club IRAs are tax inefficient and I would pay high tax on the interests. I would like to hear your suggestions?

    • Lending Club IRAs are actually very tax efficient. Money held within the IRA, if a traditional IRA, is deferred until you pull the money out until retirement. With a Roth IRA, all the interest will be tax free no matter when you pull the money out. Please note I am not a financial professional, so consult your personal tax adviser for additional direction with a Lending Club IRA.

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