Comments on: My First Default With Lending Club Personal Finance for Young Professionals Wed, 18 Jul 2018 13:30:58 +0000 hourly 1 By: Andrew Mon, 11 May 2015 01:59:52 +0000 I agree with your assessment of scammers. First, DTI does NOT include housing costs. I was shocked when LC even pointed out they have a disclaimer stating that. Unless someone is homeless, the DTI calculation is unknown. That is a vital piece of information. Second, the company is susceptible to application fraud. Someone can apply for a loan knowing they will declare bk in 30 days and LC isn’t equipped to handle it. Their applications should include a line about the applicant not knowing of any negative event happening in the next ____ days. Someone with a 700 credit score committing bk 30 days later is obviously a scammer (and Is possible because housing is not included in DTI).

By: Harry Campbell Sat, 11 Apr 2015 19:53:59 +0000 I want this to be passive income so I have used the knowledge of the experts (Peter at Lend Academy is one) to determine my filters going forward. And now I just fill up the loans 🙂

I’m actually about to drop another 11k in my LC roth ira for 2014 and 2015

By: Grant Sat, 11 Apr 2015 07:29:42 +0000 Good thread. I’m very surprised about many of the default rates I’ve seen. I tend to invest primarily in B/C loans with a about 10% A, 10% D and 4% E. None with a grearter risk profile. It makes a lot of sense to put thought into how you filter and I add one more which requires a manual look- the loan payback must not be more than 10% of their gross income, especially for 60 month term loans.

Those reaching for yield by purchasing high-interest loans should take note. While you may outperform in the near-term, your return will regress over time. Further, if there is a town turn in the economy, these are likely the first loans to go bad and you could end up doing badly.

As far as scammers, I’m certain there are many. It’s frustrating when you get 1-3 payments, then they stop paying and often go Chapter 7. That’s just the cost of doing business. LC does a good job of policing credit scores, but I understand nearly all if not 100% loans are fully funded. They do not aggressively enforce income verification- that is concerning. I’m not surprised because they want to fund as many possible loans- particularly now that they are a public company. I intend on monitoring closely their default rate. I’m currently earning an adjusted NAR of 9.85% which I consider excellent. I know that rate will diminish over time as the loans mature, but all and all, I’m very happy. I would be much more nervous if I owned a lot of more speculative loans. Interestingly, I don’t see a huge divergence between loan grades- sure the D/E loans default more often, but not disproportionately for the risk. I get plenty of A loans aging out and several have gone bad. With this many loans out, some probably had medical problems, died or fell on hard times. I think it’s good mental hygiene to look at your overall rate of return and not focus too much on individual loan performance. The biggest frustration now is that nearly 80% of the loans are bought by hedge funds who use API calls to scoop up many of the best loans. This seems wrong for a supposed P2P company, but that’s life I guess. Makes it time consuming to develop a large number of high-quality loans. GLA

Avg Loan age- 7 months
My Notes at-a-Glance 3701
Not Yet Issued 138
Issued & Current 3,241
In Grace Period 19
Fully Paid 252
Late 16 – 30 Days 7
Late 31 – 120 Days 25
Default 2
Charged Off 17

By: Harry Campbell Sun, 20 Apr 2014 21:36:25 +0000 Hey Chuck, your concerns are definitely valid. I would prefer if LC would review the apps fully before posting for lenders but that’s not what they do. I think most loans actually fund before the app has been verified although if LC does find something fishy, then yes they ‘should’ remove the loan from their database and you’d get your money back.

I haven’t heard much about your second point but that doesn’t make much sense to me. That might be a question better suited for LC, I’d give them a call.

The thing you have to keep in mind though is there’s a reason why these notes are paying such high interest rates, there’s risk. I still am not comfortable investing more than 5%(right now at about 1-2% of net worth) of my portfolio in LC even after doing it for a few years and seeing the high returns. It sounds like you’re a pretty smart guy though since you’re already weighing the pros/cons and reviewing the fine print. Lmk if there’s anything else I can help you with.

By: Chuck C. Sat, 19 Apr 2014 18:39:26 +0000 Thanks for the article. I heard about Lending Club on the news and am doing some research to see if the investment is right for me. Lending Club offers lenders two services which justify their fees: verification of loan applications and collection of outstanding debts. I’m concerned with how well they carry out these tasks.

Regarding loan applications, when I browse notes, I’m shocked that many are already close to fully funded before the application has been reviewed. My reading of the loan application is that the loan is issued when the note is fully funded, whether the application is fully reviewed or not. What is Lending Club’s risk that would justify it to fully review an application if investors have already put up the money? Wasn’t this lack of incentive one of the problems which led to the financial crisis?

Regarding collection of outstanding debts, I’ve read some comments here that give me pause, but one of my main concerns is on page 2 of the prospectus. It says that 3-year notes can automatically be extended to 5-year notes, and payments received after the 5-year maturity date will not be sent to the lender. So if the loan is in collection at the maturity date, or if the last payment is just a few days late, does that mean the lender automatically loses the outstanding principle? I think that would hurt investment returns, but you’d have no way to measure it until you’ve held the notes for 5 years.

By: Harry Campbell Thu, 27 Mar 2014 15:59:44 +0000 Yea Steve I think you’re out of luck, it’s hard for even Americans that don’t live in the right state to sign up with LC. You could try posting your question over on the forums on Peter’s site:

By: Steve Thu, 27 Mar 2014 06:29:04 +0000 And from what I can see I cannot be exempted from being an accredited investor.

By: Steve Thu, 27 Mar 2014 05:23:47 +0000 Ive been digging for days looking for means to sign up as a Canadian. I cant figure it out. Care to share any insight if you have any? my ideas have been along the lines of Trying to register a TIN #, or a SSN, Work Visa? Anything…

By: Just curious Wed, 26 Mar 2014 13:49:13 +0000 Sorry. The 575 is the loan payment projected with LC. Should have clarified that one.

By: Harry Campbell Tue, 25 Mar 2014 21:40:43 +0000 Is your interest rate 5.75%? That seems too low based on your credit score and loan amount.

But as far as borrowing from LC, it is pretty straightforward. You’re right to question it since it may seem too good to be true. Why would LC offer me a 10% loan for example when my cc company is charging me 20%? But the reason why is bc people like me are on the other end investing, not some bank with overpaid board members, lavish branches, etc.

If your cc interest rate is higher, than it’s probably a slam dunk to consolidate into an LC loan and save yourself some interest. Good luck in paying off your debt bud.

By: Just curious Tue, 25 Mar 2014 21:32:48 +0000 Ok. I’m actually thinking of getting a loan through LC. Sob story. Divorced, short sell on the house, credit card debt around 20k , and slowly rebuilding credit. 684 at the moment. I hate that I have to turn to these methods but CCs are just driving me nuts and I’m sick of banks gaming me left and right. Is this a safe way to get a loan? I’m not to keen on upfront costs. I’ve been “approved” for 21k at 575 for five years. Not bad considering no banks do debt consolidation anymore. Any risks for for me?

By: Wole Tue, 05 Nov 2013 12:59:42 +0000 wow Mike. Sorry to hear that. That sure seems like a lot of notes. What type or filters do you use to select notes? I personally try to stay away from borrowers trying to borrow close to the max or the max amount.
I have not had much trouble with notes I buy from the initial stage. I have however had issues with notes that I have purchased from the secondary market that make me really suspicious. I have gotten notes from the secondary market that look very attractive with track records with no missed or late payments since the issue of the note (sometimes as long as a year), only for the load to go completely bad after I buy it…almost like the seller new something I did not know. I find this very unsettling.