Lending Club update time! Lending Club calculates my returns as:
Similar to last months NAR of 15.55%. Interesting to see that I have two loans that are in the Late 31 – 120 Days category now. Let’s take a look at each of these loans. The details on the first:
The first thing that jumps out at me is the inquiries in the last 6 months category. This borrower has 3 inquiries in the last 6 months, so I would have excluded this loan based on my new Lending Club filter of just 1 credit inquiry in the last 6 months. The second late loan:
Hmm… Nothing jumps out at me as a red flag for this loan. I will continue to evaluate which loans become late or default and change my investing strategy to minimize my defaults and maximize my returns.
Defaults suck and it is much more likely that these loans will default now that they are between 31 – 120 day late. However, my investment goal in Lending Club (and I’m repeating myself here) is to maximize my returns NOT to eliminate defaults entirely. I’ve seen quite a few investors fund only A loans in the 6% interest range because they are default averse. If these investors see no defaults whatsoever, they will be getting that 6% interest as a return.
If I fund loans with an average of 16% interest, I will have to see 10% more defaults to have a lesser return than the cautious investor. Historically, this difference has been much smaller than 10%. Granted, Lending Club has been around only since 2006 and past performance is no guarantee of future returns, but investing in higher interest loans is going to be my strategy for the time being.
With all that said, how do I stack up against other investors?
I'm holding steady at 91%. As I mentioned in last month's update, I have some faults with this investor comparison. However, it does provide some information, so I’ll continue to include it in my updates.
I’m getting a little bit lazier (or maybe just focusing too much time on my YouTube channel), so I won’t be including my calculations of my NAR in these monthly updates. I’ll include them every quarter from now on (next one for December).
One final note: I’m cutting back my Lending Club investments from $1,500/month to $750/month. The difference I’m just going to throw into a savings account for the purpose of helping to pay off my girlfriend’s student loans when she graduates medical school in 2 years. The Lending Club loans that satisfy my investing criteria are 90% 5 year loans and I would like to have some liquid cash before then. At $750/month and $75/loan, I will only need to find 10 loans/month to fund. I’m reasonably happy with that as I seem to be getting busier and busier.
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