You'll receive a $150 bonus to invest when you open an account and make an initial investment of $5,000 or more
about 2 years ago
I have had a great experience on LendingClub so far. I think the interface is easier to use than Prosper and more loans seem to be available. My returns have been about 4% annually but I started off with safer loans just to test out the platform. I'm starting to use LendingRobot and taking on lower grade/higher interest loans so the returns should rise.
I've used Lendingclub for about half a year now. Fairly happy with my portfolio showing 17% return. That's unadjusted mind you, it will likely go down quite a bit. No defaults yet, but 4/204 notes are late.
Here's some things that I did/do:
Mined their loan data. They have CSVs for download, and that answered my questions such as: which default more, weddings or CC consolidations?
Armed with my criteria, I set up automated investing with $10K. I think that this type of investing lends itself well to pattern analysis (more so than stocks).
Keeping my investment at the initial level ($10K) by making occasional withdrawals. Sounds silly (no compounding), but think of it as frequent rebalancings. If things go as imagined, I'll double up on my analysis and add more funds plus reinvesting in a year or two. I feel better about that idea now that LC is public.
I don't evaluate individual notes. Some have a sad story behind it, some say it's for a new car, but as per my analysis it has no bearing on whether or not you'll get paid. I imagine that some of the stories are fake, too. So I run on "auto" all the way, and browse notes "for fun and science" only.
Yes, Lendingclub, love it, have used it about 1.5 years, I cherry pick each loan by filtering then reading each one before investing. Net interest rate is 13.5%. Biggest complaint is not having enough loans. They can evaporate quite rapidly a lot of times (which shows investor demand). Haven't used Prosper.
Here are a couple of big issues that some people don't realize:
1. Your returns will be heavily influenced by how well the economy is doing. Shitty jobs numbers, means less jobs, means more defaults. A lot of people who have had nice returns during the past few years are just reaping the benefits of a stabilizing economy. You need to compare these loan returns to how well the overall market is doing. (stocks and fixed income) Getting 8-15% over the last few years means nothing if everything else is performing just as well or even better.
2. Yields much higher in the beginning. Don't feed into this because you see a nice number. Defaults happen after the first few months/years.
3. You don't get the same tax breaks like you do with long term stocks. Interest from these loans are taxed the same as short term gains. This is actually a big deal since you are holding to these loans for 3+ years anyway.
There isn't enough data to definitively call this a diversification play. In my opinion, you are pretty much taking the same macro risk like you would with stocks. (minus the tax break for long term stock gains) Also, you are losing out on fees imposed by LC and Prosper. I just don't think the market is liquid enough to justify the risk and opportunity cost.
I came out with about an annualized 11% return over the last 5 years according to LC. Not too bad, but I still think I'm taking the same risk as I would have with stocks and would have performed better with stocks. I'm
feeling a bit lazy now, but I'll probably see what the beta is for this versus stocks over the years. They should be positively correlated.
I like the idea overall. I think it's still in early adopter phase, I need more data to see how to invest properly. If you want the cash flow, have relatively low but sizable investment capital and you're willing to take more risk than traditional fixed income methods, then this wouldn't be a bad idea. But, as a pure investment vehicle? I think you're sacrificing returns for that cash flow option and still taking on the same risk as you would for a traditional stock. (again, you lose on out on that long term tax benefit!)
I'm about 3 years into LC investing but only 1.25 with any significant portion of my portfolio invested. 1.25 years ago I put a decent chunk of change (for me anyway) into it and key Lending Robot do the dirty work. I chose my own filters (but used the 'top expected return' filter) and mostly geared towards C-E loans. I blacklisted F and G loans because the added reward does not outweigh the added risk. After putting that chunk of change, I stopped investing monthly from my bank account and just set Lending Robot to reinvest.
Now I'm hovering between 6-7% return on a mostly-seasoned portfolio. I am still seeing a bunch of defaults. I have not had any negative months but I've come really close. I've noticed that the past 6 months have been one-month-up-one-month-down with my monthly return. I'm still weathering the default storm but I am mostly impressed with the returns so far.
One big negative for me is that it's all taxed as regular income. Overall I think I will continue to reinvest and let it sit. It's been a good, steady growth fund for me. No big upswings, but no downswings. I'm curious to see if anyone else has similar experiences.