Lending Club Investing: Good Passive Income Source? (Answer: NO)

[MJ DeMarco]

I've essentially given up on examining this further. Even at a few minutes per week, it's hasn't been worth it. And especially since I refuse to allocate big $$ into it.

My return currently stands at 8.16%.

My investment criteria was as follows:

a) Credit over 700
b) Loan considation / Credit card payment only.
c) Verified income.
d) Mortgage or own.

IMO, it's mostly loans to Sidewalkers (scammers/deadbeats), whereas I was hoping it was loans to Slowlaners (responsible people looking to do better). I've had multiple charge-offs involving people who make one payment on a $35,000 loan and then disappear. F*ck that.

 

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[SJMM]

Theres a company called upfund.io that lends money to vetted amazon sellers. The payment terms are good. The duration of the loans are 4-5 months and the average returns are good in my eyes. I started earning over 10% but now its decreased to about 7-8% because its getting more popular. The money is given to the seller. The seller uses it to buy inventory and when the inventory hits AZ and the seller starts getting paid, we start getting paid as well. We get paid priciple and earnings in 4 payments spread out over the life of the loan. I have invested a small amount and I have it in auto pilot now where the money is being reinvested for me now so my profits are making profits. I get charged a small fee and the AZ seller gets charged a fee also. Check them out. Its fairly new and they have a really good vetting system. I have invested in more than a dozen and only one has defaulted and they paid me all of my principle back. I think its a good option for investing short term. Your money is not tied up for so long like in LC. I too had a lot of defaults with the small amount of money I had invested amd I am just waiting to take out whatever is left. I am not affiliated with Upfund at all. I like it because I am earning way more than what i would be earning at the bank.

 

[GuestUser140]

My only concern is LC themselves... its a $4B company but in my mind, still a "startup" -- even with success on this platform, I don't think I'd feel comfortable with $500K into their system. Not until I see some further maturation.

Glad you bring this up, I feel the same.

LC and Prosper are the biggest, but in Europe we have plenty of small startups that I wouldn't dare touch.

In any case, I wouldn't lend to people to start a business. Regular people who are fixing up their house might be a safer bet.

 

[GlobalWealth]

I am definitely warming up to p2p. I get payments almost daily.
I still only have a small amount but the payments come regularly.

With mintos on car loans the have a buyback guarantee and I have had 1 out of 20 loans bought back. But it went very smoothly and they pay the interest at buyback.



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[MJ DeMarco]

My LC return is up to 9.5% -- still no lates yet as I imagine I'm still too early in the game.

 

[Bananas]

If anyone has any Lending Club experiences please share with us your experiences.

I've just created an account and am looking to report my experience to determine if this is a viable passive income source.

My experiences will be reported in this thread. Please read on...

I joined Lending Club in September 2015 with a super modest starting investment of $2,500. Because I was unsure of how much time I wanted to spend doing this, I went ahead and made my account a TI so I don't have to worry about paying taxes on it. I figure if it's something I want to get into, I'll open a second, regular account at a later time.

I chose $2,500 as an initial investment because my research indicated that an investor with half a brain can't lose if they have at least 100 different loans and the lowest amount one can invest in a loan is $25.

I immediately started trying to buy a bunch of loans that fit a set of criteria, somewhat conservative, that I read about on Lend Academy. It was slow going so I went and signed up with Blue Vestment for automatic investing. I'd say signing up and setting up my filters with BV took less than 30 minutes and then I started picking up a few loans every time LC dumped some. Blue Vestment will automatically invest up to $1,000/month for free, after that there is a small fee. Because the amount I was trying to deploy was so small, I never paid a fee.

Blue Vestment is still running, and when I get loan payments, eventually they accumulate up to $25 and BV automatically picks up a new loan for me when that happens.

That being all settled, I started doing another strategy where I'm aiming to grab another 100 notes. Read about it here: http://www.lendacademy.com/innovative-strategy-lending-club-foliofn-investors/

I will say I like LC so much, that last week I wrote a check (because yes, I HAD to write a check) for another $3,000 maxing out my IRA contribution for 2015, to LC. Which means I'll be picking up quite a few more notes as soon as it gets deposited.

Here is where I am at so far:



You'll notice that since October (it takes about a month after you buy a loan to get any action) I've had 5 of my notes fully pay off. That means you make less interest.

I have 5 notes in various stages of late. There's a few more that have went Grace or Late, but then a payment came in. Apparently one should expect about 5% of their loans to go bad, so I seem to be on track for that. Nothing's Default yet, but one will be. I've got notes on one of my Lates that say the buyer filed for bankruptcy.

 

[Bananas]

Someone mentioned they had 'automated' the process, so I'd love to hear more about that.

I automated using Blue Vestment which is very easy to set up. It's also free for the first $1,000 per month so anyone who wants to dip their toes in the water and see if P2P is right for them can get started with automated investing for free. It's a very simple process to get started.

Sign up for BV and link your LC account
Set filters for loans based on your personal criteria
Add automation instructions: total dollar amount to be automatically invested each month, and loan size

LC dumps loans 4 times a day. BV bought loans for me until my account was empty of cash. When I get payments and my total cash goes above $25, as soon as that happens and a loan is available that fits my criteria, BV picks it up for me. I have had no problems with BV during the six months I have used the service.

What I learned:

I can automate the loan buying process so my cash deploys faster than if I deployed it myself
The BV automation process is solid and runs without being babysat
It is possible to deploy a large amount of money
Were I to deploy a large amount of money, automation would be pretty mandatory

 

[greyman]

I've been using LC for about three years now. I've got ~150k invested in their platform and have averaged about a 10.5% annualized return over that period. I'm pretty strict about my filtering (no defaults in the past 36 months, credit score minimum, only doing debt consolidations) and it's worked out pretty well for me. The only downside is that it's taxed as ordinary income, but I'm still a fan of it in terms of diversification.

I bought heavily into this weeks dip in their stock.

 

[jon.a]

That link isnt working for me.

It won't it's on the inside.
You have to be sponsored by 2 legends.
Have 10k rep points.
And 2k likes to join.
Well, I can wish

 

[MJ DeMarco]

what are your thoughts about real estate crowdfunding websites where your loans are secured by real estate?

No opinion as I haven't investigated it. However having the loan secured could make the world of a difference. I much rather loan cash to commercial RE investments than Sidewalkers buying more home they can afford.

 

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[MidwestLandlord]

I move to rename Lending Club to "Loans to Sidewalkers."

Geez.

I can't wait to get every dime of mine out of this turd pile.

But I'm making SO MUCH MONEY off those sidewalkers!



Edit:

 

[MJ DeMarco]

I'm starting think their business model is for people in pre-bankrtupcy ...

Gonna file bankrupt? WAIT! Take a loan out FIRST at Lending Club and live large one last time!!!

Thread title changed.

View attachment 14848

But I'm making SO MUCH MONEY off those sidewalkers!



Edit:

View attachment 14850

Damn! And here I thought my account was a shit-show.

 

[fastbo]

Be careful ... I got into Prosper.com back when they were new. Maybe 06-08? I ended up losing 75% of my investment even though I invested in B or A or higher paper. Turns out, most borrowers were scammers. They'd file BK, know how to grab a few credit cards and earn a 650 credit score. You have no collateral, no security. Prosper makes money whether they pay or not...

It'll take some time for the defaults to come in but with time, more will default. For the first 12 months or so I saw few defaults, after about a year it was like every week another loan would default.

You can easily get a 10%+ return being a passive lender on real estate. Then you at least have some security... its not perfect but you rarely will see a 100% loss as you can with unsecured debt. Even with a systematic market crash, many markets only lost 30% of value... and if that happened you can probably expect a 90+ default rate on unsecured debt.

I developed absolute criteria based on internet research (taken with a grain of salt, of course) and sensibility (in my opinion). I only invest in loans where the recipient:

- Has not had any recent delinquencies
- Has not had more than 3 credit inquiries
- Has a job (though this information is unverified)
- Is refinancing a loan (which, in my opinion, is more likely to be successful than say, starting a small business)

I've been experimenting with loan term and interest rate.

Here are my statistics so far:

I've invested approximately $7k so far over a 6 month time span.

Loan Term
- 60 month loan term: ~60% current (meaning that the other 40% has either defaulted or is late and will likely default)
- 36 month loan term: ~95% current

Interest Rate (only measures 36 month loan term)
- A-D: 100% current
- E-G: ~90% current

As I said though, I've only been doing this for 6 months. Many of the notes are more recent than that (since I only invest in a note when I see one that I like). So it's possible (and likely) that these numbers will worsen over time.

 

[G-Man]

Basically a 10% default rate.

Now I'd be happy losing just a few %.

View attachment 16695

What a waste of time and money -- not so much the money, but I've probably wasted a few hours of my life (in aggregate) on this shit.

I'd close the account, but I still have 121 notes waiting for their eventual default. And I refuse to give it any more seconds of my life.

You couldn't close it even if you wanted to. I've tried. That marketplace where you supposedly can sell your notes in their sort of secondary market is total bullshit to give the appearance that you have an iota of liquidity. I couldn't sell anything without taking a huge discount, so I figured I might as well just take the default rate and be grateful that I didn't have enough money in there to make a difference in anything else I'm doing.

 

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[MidwestLandlord]

@MJ DeMarco ...it could be worse haha.

Here is my 23% default rate!

 

[fastbo]

If you want to lend money dont use one of these P2P sites. The problem is the P2P lenders are clueless about credit risk and these loans are unsecured. Therefore, you're bidding against clueless people who think 7% is a good return for unsecured debt with poor underwriting, a recent BK, and no income.

Furthermore you can't view the actual underwriting docs. Do you know someone can dispute a BK, foreclosure, or charge off, then during the dispute process it can't be part of the score? So that person will file a dispute and within 30 days their score will jump up while they apply for these types of loans. That's how you find people with AAA credit that defaults in 6 mo. True AAA credit doesn't default, ever. But true AAA isn't applying for Prosper loans, they could go to Bank of America and get a signature loan at top tier rates.

The truth is, Prosper is sub-prime financing and you know where that ended up.

If you're serious go to a real estate club and hook up with a private lender. They lend money out at 10-13% plus 2-4 points to real estate rehabbers. They earn the points and the private lender earns the rate. A good one will have made hundreds of loans with dozens of money partners. They will explain underwriting criteria - usually 65% of value so you have an equity buffer. The loans are typically paid off in 6-12 mo and then you lend it out again. Your money is secured so it will never go to zero. Yes if there's a systemic event like a housing market crash you will lose money but not 100%... whereas if there's a systemic event your prosper loans will most likely go to zero.

I've active in this space and as a lender/investor I will earn 13-15% since I have my own capital.

 

[DrkSide]

Glad this got brought back up. Last time I looked into it I was unable to invest due to the state that I live in. It seems that it changed in July this year so I will be looking into this.

 

[Captain Jack]

I would personally invest in the "D" range - what about you guys?

The vast majority of my notes are Grade E.

 

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[GlobalWealth]

I use 2 platforms in Europe. Both have buyback guarantees for past due loans and guaranteed by the loan originator.

I have had a few default and every one was bought back with interest. One platform averages around 10%. The other around 12%.

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[MJ DeMarco]

amazing huh guys..a new avenue/tool is offered to us outside the regular banking system. You take action with some money/investment...and same ole corrupt wall st shit happens. unreal

This is why I feel bit-coin doesn't solve the human problem. Get enough humans together and corruption won't be far behind.

 

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[MJ DeMarco]

we'll have to see if the issues that have surfaced in the last few weeks are systemic or were localized to that one large investor

What bothers me is the dishonesty. To what extent does it go?

You can still unload your notes on their secondary market if you really needed the liquidity.

If there is a massive recession and LC note holders have to sell for liquidity, this will be a HUGE opportunity for buyers to buy discounted notes. When there's a liquidity push, buyers will get all kinds of assets on the cheap.

 

[Captain Jack]

Here is what Lending Robot sent out the day of the LC CEO ousting-take what you want from it:


"Dear client,

You may have heard the news that Lending Club’s CEO Renaud Laplanche was forced to resign this morning, following the discovery of an improper sale of loans to an institutional investor.

Here’s the impact for individual investors in general, and LendingRobot clients in particular: zero.

That deal concerns institutional investors, and sadly illustrates the risks of dealing with ‘packages’ of loans rather than managing portfolios on a loan-per-loan basis. In addition, the underwriting of the loans themselves is not in question, only that the package of loans sold did not match the investor's investment criteria. No money was embezzled.

By using LendingRobot, you have access to individual loans, not opaque bundles. Furthermore, Lending Club assets are held by an independent third party, a qualified custodian, which means they can’t misrepresent the notes and cash in your account.

Today, like it happened yesterday and will happen again tomorrow, hundreds of thousands of borrowers will make a payment towards their Lending Club loans, some of them trickling down to your account as they should. It has nothing to do with the Lending Club stock price, and we still have the utmost trust in the management of this company.

Steady returns,
The LendingRobot Team"

I can see this viewpoint. When I first started using LC, I bought a small package of loans and they were all over the board. Many of those initial loans defaulted. So I could absolutely see investing in $24 million of packaged loans not going well. However, unfortunately, there's really no way of verifying whether or not they are telling the truth. Was this really a package or was this individual loans that were misrepresented? Don't know.

Another thing that was mentioned in various articles was that the CEO was actually changing the loans to fit the criteria. Again, was this a change of the actual loans themselves or simply a change of the loans in the package? Again, don't know.

Further, the media itself is extremely untrustworthy. Yellow journalism has become the norm. Who knows if what is being published is actually even remotely true. It may very well not be.

But, again, there is simply too many variables here to know (or even guess) what is actually going on.

I was watching Shark Tank last night and Robert Herjavec said something that absolutely applies to this situation: "Be risky with your work. Be safe with your investments".

 

[MJ DeMarco]

Had my first chargeoff on LC. My Annualized return is still 6.4%, with 200+ notes, but I'm winding it down. I can find greener pastures even for stuff that's totally passive.

Yea, I got 3 charge-offs and stopped investing. My net return is about 8.5%.

IMO it's not worth my time (although I spent just a few minutes per login) unless I'm willing to go six-figures on it-- and as I stated above, I AM NOT.

I don't trust LC or any P2P company should shit hit the fan.

 

[G-Man]

I move to rename Lending Club to "Loans to Sidewalkers."

Geez.

I can't wait to get every dime of mine out of this turd pile.

Also see this thread:

*UNSCRIPTED* - What's your focus? Making pennies? Or Millions?

I've had a bunch of chargebacks, too, and with all the promos they've been sending to my inbox offering money for referrals, I'm guessing they've got lots of money heading for the hills.

2 years max before it turns into a straight ponzi scheme.

 

[MJ DeMarco]

Since the other thread was YEARS old and a lot has changed, I've broken out the conversation into a new thread.

 

[GlobalWealth]

I invested a bit of cash in Mintos and Twino. Both are currently yielding around 11% based on my requirements. I have cautiously optimistic and like @MJ DeMarco I am keeping the amounts at a low level until I can gain more confidence.

I have met personally with the founder and ceo of Mintos. He came across as a very smart and ethical businessman. Of course that is no guarantee of abject failure and fraud, but I personally felt comfortable with him.

As @MTF said, Twino has been around for several years. And Mintos is actually just the tech platform where the loan originators sell their loans. For car loans, Mintos uses primarily Mogo, which has been around in Latvia for a long time with great history.

 

[GlobalWealth]

What's your level of trust? Something along the lines of a few thousand euros, low five figures, mid five figures or more? Currently about 10% of my portfolio is in P2P lending and I wonder what's the safe limit from the point of view of a more experienced investor.

It is quite small now, but I will likely add more very soon. But I doubt I'd go more than 20% even if very comfortable.



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[GlobalWealth]

I should be getting my first interest "payment" in a week.

With twino and mintos I get payments almost daily.

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[CMA]

I have been investing in P2P loans through Prosper for about a year now. I must say that this is quickly becoming one of my favorite investments. You pick the loans and have the ability to be as picky as you want, you get paid pretty much daily and the returns have been spectacular on my end (9.78%.) I only have a small % of my speculative money in it, but I will keep increasing if returns stay over 7%. I can share more details (loan types, etc.) if it'll help anyone.

 

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[TJH]

My LC return is up to 9.5% -- still no lates yet as I imagine I'm still too early in the game.

I've used LC since 2012, and I've fully automated my buying process. In addition to the return displayed on LC, I also use XIRR as an alternative return calculation. I like knowing the ratios of "Fully Paid" and "Charged Off" to the total number of notes I've bought. If those ratios are still close to zero, then that means I haven't been investing in LC long enough.

Overall, I like LC, and the return is attractive, compared to what savings and CDs currently offer. I've kept my default + charge off ratio below 5%, and this is for someone that at one time had a -25% return... I'm above +7.75% currently.

 

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