I havent done an update in a long time, and it’s mostly because I’m a bit sad about where my account is at the moment. During my last update, my lending club returns had sunk from 11% after 9 months to just above 4% after a year. As you can tell by the beginning of this article, it gets worse. It’s ticked up slightly since I last checked, but right now I’m sitting at less than 2% for my ROI, and it could get even worse than that!
My total investment with lending club was done in 3 segments. The first contained a $300 investment, followed by a $400 investment about 3 months later, and finally a final investment of $300 a few months after that. That initial $1k bought me 40 loans. Everything was going well initially (some were even paid back early) but shit started to hit the fan about 6 months ago during the year update.
Of those 40 loans, I’ve had 4 fully paid off (10%), 4 charged off (10%), and have 2 currently in the 31-120 day late period. Honestly, I’m not holding out too much hope for those two loans, and I’m trying to unload them both on the note trading platform of folioFN. I put them up earlier this week (at a pretty solid discount) but still have had no bites. I’d like to at least get something back for them, but Im not sure that anyone would take a risk of picking up these 2 notes (both owe me over $20) – I dont think I’d pick them up, even if I was looking for higher lending club returns.
Looking back on this whole situation, I think what I’d try and do next time I start getting some notes that come in late is to unload them rather quickly, instead of just sitting on them waiting for them to default like I did last time. I knew there was a secondary platform, I knew I could unload them – I just didnt. This is purely my own fault, so I decided to be a bit more proactive this time and see if I could unload these notes at a loss and recoup some of my investment. Getting 12 or 14 dollars back off of 25 is better than 0, and would really help my ROI, which is about to take another huge hit when/if these get charged off.
A Look at the Deadbeats
As you can see, I had 2 default in april at about the 1 year mark (5% of the portfolio) and then another one each in june and july. Most of them defaulted pretty early in the term, meaning I’d lost $92.64 of the $100. Shockingly enough, the first one that I had default was one of the lower risk notes that I invested in (my lowest rate note right now is A1 @ 6.02%). They were also from each one of my portfolios. While the default rate on the other 3 was higher and I cant say that im shocked it happened, but I certainly am annoyed and will work harder to unload these before they become total losses next time. Essentially, I would have been better off taking that money to vegas and playing the pass line.
The two that are currently late right now also seem to be in a similar situation. They are relatively new notes, meaning that if I cant unload them, I’m out a 91% ($45.50) of the $50 that went out with those notes, another huge hit. I’d rather walk away from both with 20 or 30 bucks than nothing! I’ll update on how the trading process works (or does not work) for me and will let you know.
Out of everyone that I know, I seem to have the worst luck with my lending club returns. No one I know is doing anywhere near as poorly as I am. I’m not sure what to make of that – perhaps it is bad luck, perhaps I dont have proper filters or good enough filters set up. Whatever it is though
Right now, my strategy is basically to leave what I’ve currently got in lending club there, and continually reinvest the payments that I’m making, but right now I have no plans to add any more cash into the account. This is partially because my return has gotten hammered in the last 6 months, and also partially because it’s time for tax lien sales this year and I’m planning on getting a few of those and wanted to save my cash until after that.