|Behold the figure!|
A negative return? Why is it so low, you might ask? The answer is simple: one of the people to whom I lent money decided to stop paying, and that person's loan was just charged off. The change is so dramatic from this point because I only have 16 total loans, so any one default is going to affect me enormously. As Lending Club itself has suggested, the more loan notes you own, the less any individual default hurts you.
See the print screen from the site describing Lending Club's efforts to get the person to pay.
|"Recovery unlikely," eh? So you're saying there's a chance...|
In retrospect, it seems like this guy was probably applying to Lending Club as a last-ditch effort to stay afloat financially. I'm basing this assumption on the fact that his credit score (which you can monitor on the site) has basically gone into the crapper the last few months. It seems like the last thing he needed was more debt.
In short, investing in Lending Club in the minimal fashion with which I have invested is an especially high-risk/high-reward enterprise. I'm positive there are plenty of other folks out who have a comparable number of notes as I do who have no defaults; conversely, I'm also fairly certain that there are those who have more defaults.
The only real way to lower the volatility in your Lending Club portfolio with some certainty is to own more notes. Even so, even easily explained double-digit losses give me pause. Still, the truth of the matter is, I'm only out about $23 and change; this wasn't the sort of loss that means I'll be stuck eating cat food in my retirement.
What do you think? Have you invested with Lending Club? What have your experiences been? Let me know in the comments.