Lending Club – May 2013 Update

Please note I understand May wasn’t yesterday! Just getting all of my updates into place from this past summer!

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 May turned out.

Roth IRA Account:

Lending Club Roth IRA - Main Screen - May 2013

As of the end of May, my Roth IRA account with Lending Club had less than $300 in available cash/in funding notes. As I am essentially 100% invested, this should allow me to see my payments consistently increase as I invest in additional notes with the payment proceeds that come in each month.

As for my earnings, during May, I earned $140.96 of net interest in my Roth IRA account and my internal rate of return since opening the account, using Excel’s XIRR function, increased from 6.12% to 7.79%. The further we get from inception and the significant amount of cash drag associated with my slow and steady investment, the higher this return will get. My weighted average interest rate in this account increased from last month and ended at 18.05%.

All that being said, you might notice my first notes going late in this account, which is inevitable for all peer-to-peer lenders. At one point or another there will be a note in your portfolio that will underperform. As of now I am sticking with a buy and hold approach and will not be looking to dump underperforming notes on the secondary market.

Taxable Account:

Lending Club Taxable - Main Screen - May 2013

A tough month for my smaller taxable account as my late note went from late to default to charged-off. Nothing that can’t be overcome, that is for certain! As a result of this default, my taxable account actually had a negative net interest number of $2.84. While any negative isn’t good, I am actually quite thrilled to see that losing the note in such a small account still had a relatively limited impact on the account as a whole. Once I get this account built back up over the next couple of years, the impact will be even smaller.

As a result of the default, my overall internal rate of return since inception dipped from 10.53% to 10.24%. My weighted average interest rate for my taxable account is now 15.05%, an increase over April’s 14.96%.

Lending Club Summary:

All told, it was a still a good month for my Lending Club accounts as they brought in a total of $138.12 in net interest. This was an increase of $22.86 over April’s $115.26 in net interest. Isolating the month of May, my overall internal rate of return came out to be annualized 14.55%. Not too shabby! Moving forward I would expect this to stay in the 12-14% range as defaults, late loans, and un-invested cash drag the returns down slightly. All of this is to be expected given my overall higher risk profile of the notes I am investing in currently.

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 May? Have questions about peer-to-peer lending? Just ask!

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Comments

  1. Great progress! Looking forward to seeing how you did over the summer months.

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