Lending Club Update

As I mentioned and advocated for last month, I've cautiously dipped my toes into the Lending Club pool, and I wanted to give an update on how I'm doing.

Returns

The graphic above shows the percentage of return that I have received.  As you can see, I presently have a net annualized return of 8.29%.

Analysis


While I'm pleased with the return, I expect the percentage to go down significantly in the next few months as one of the loans that I purchased a note on is currently in talks with a collections agency.  I only hold seven notes, so any defaults significantly lower my returns.  While I suppose that it is possible that I will recoup some of my money, I'm not holding my breath.



It is worth noting that the person who is (apparently) defaulting had a credit score that Lending Club ranked as an A (the highest).  Additionally, part of what I was looking for with most of my first investments was to only fund loans that were asking for less than $10,000 total.  My assumption was that smaller loans would be "easier" for the debtor to pay off, and therefore I'd be less likely to lose money on them.  This loan was for $8,300 total (I only invested $25 in it), so, at least in this case, my guidelines proved to be incorrect.

I will write a separate post to describe the methodology with which I choose loans.

Evaluation


I will keep investing in Lending Club, though probably in even more limited quantities.  This has less to do with the fact of the default, and more to do with the fact that I have worked in my job for enough time that I am now eligible to invest in my company's generous 401(k) program (my company matches 100% of what I put in, up to the federal limit, so I automatically get a 100% return on my investment over there).  With roughly 25% of my base pay going into my 401(k), I'll have less money for other investments.

Do you invest in Lending Club?  What have you experiences been?  Let me know in the comments.