My experiences with the lendingclub.com – #1

I saw the lendingclub.com site a few years ago when it had much less experience and growth than today. I thought it might be very risky as I did not look at the details too closely. This time I looked at the details and saw that you can invest as little as $25 per loan, select the grades of loans you will tolerate, and select the mix of the loans which are suggested to you, and even select individual loans and amounts if you think you can know and judge better then the lendingclub.com itself (I think this is a mistake for small ticket investors and those with less then a few years experience on the site but there are many people that want to enjoy this level of control).

I thought I would like to have a PRIME account ($5000.00 and higher initial investment) initially in order to see how things went from a wider perspective (can have up to 200 different loans out with a PRIME account (5000/200=25)). However, after browsing a lot more and checking things I have decided to start with $250 which is the minimum quick transfer that can be done. I transferred and cleared out my Paypal account balance plus a few dollars from the backup source and away we go:

I decided I do not want to fund any accounts that have a grade of D or worse. My reason is based on my view of credit and the industry as a whole. I do not think the credit companies should cater to individuals who show a need to correct their spending habits and credit habits until they have proven themselves. If we loan to more worthy folk it will help more and hurt less (I hope). Otherwise we are just greedily hoping that a higher percentage of a more risky mix actually pays their bills without trying to pull them up. Another thing if a bank sees what the lendingclub.com considers an A through C rating and will not make a loan to them or one at a reasonable rate then this is the business I want my investment to compete for!

So I transferred $250 and looked at the grades and selected only A, B and C grades and did an update. Then I went to the more options and used the slider to target around 10.01% return as that had the most diversified mix for my taste (one or so in A, some in B and some in C and 10 investments of $25 each). Then I placed that order.

After looking them over I notice many are not approved and many that are not approved have funds assigned to them. I assume if they do not approve the funds will become available again for reinvestment. I also see that many that have been approved have time left and none of them have been funded 100% yet. I will leave this post here so I can gather more useful information.

13 thoughts on “My experiences with the lendingclub.com – #1”

  1. I don’t understand why you would place an automated order without looking over the loans first, nor do I understand why you wouldn’t invest the minimum of 25 dollars per loan in order to mitigate risk. Lending Club is not “choosing” loans through the automated system, but merely randomly selecting listings that match certain interest rate criteria.

  2. @David – Thank you for your inquiry, if you read my entry closer you will see I did make the minimum of $25 per loan and yes, I did use the default as initially, when using their software, it was not apparent that you could do both the search and then refine and select. I also think (or thought) it might be better to “trust” what came up from their recommended and try for an average return rather then trying to be overly smart and to just see where that leads. I really want to try that strategy using a minimum of $5000 once I secure those funds that can be invested in this more risky venture! As it stands many of the loans that I did not like have not been funded yet and/or have been rejected and thrown back, so I took an A grade loan with one of the return $25 which I did look over and let’s see what happens from there on. From what I have been reading it is not the grading entirely which can be used as an indicator, there are also the amount asked for, spelling in the explanation (some of them don’t have any explanation which scares me as well), if the payment amount is high (higher then $300/mo as an example). So we press on…

  3. So far: Of the $250 I put in when I said I did only $125.00 has been issued to date, 2x$25 have dropped off giving me back available cash of $50, which I purchased another for $25 and will purchase another for $25 today.

  4. I was getting all worked up thinking Lending Club could possibly be a contributor to what ails our economy, giving loans to people blindly as anyone could put anything on a computer screen application…so I gave them a call, and Skype’d my buddy:

    I just called the lending club and asked some questions.
    [1/4/2011 4:27:29 PM] Me: They verify everything except the employment information, UNLESS they see a flag and then they verify that.
    [1/4/2011 4:28:16 PM] Me: Credit scores and credit information is verified, nothing gets an Approved stamp unless those things have been verified. And if it is Approved and the employment information has not been verified then most likely it will not be.

    So it seems that is why they can claim such a low default rate. In my thoughts at this time I would like to continue with my small investment building a little and also saving on the side for a new account, a PRIME account, where they do all the work for you based on some broad criteria (your target risk/investment).

    One of the most important thoughts to have about the Lending Club is that the notes are 36 and 60 month term loans, this is not a fast turnaround, especially if you are investing $25 (minimum) per loan. You must think 3 years 5 years just to get the ball rolling, if you invest along the way from each point in time that is your last investment you need to start counting another 3 or 5 years depending on the term. If you can hold that thought, and never never ever invest capital you think you will be getting back soon, then you can do this business!

  5. Also, it has been almost a week and still $75 is pending, not committed to loans yet, takes time just to get your money spent in this venture!

  6. So far: Of the $250 I put in when I said I did $200.00 has been issued to date, 3x$25 dropped off giving me back available cash of $75, with which I purchased another 3 for $25 of which 1 funded so far. My opinion has changed a lot! I believe now the minimum I should invest should be $5000 spread to 100 notes. Also it takes quite some time to get the “deals” established, better to do more at a time.

  7. For the curious my account status summary looks like this now:

    Available Cash $0.00
    In Funding Notes $50.00
    Outstanding Principal $200.00
    Accrued Interest $0.02
    Account Total $250.02

  8. Ok, the last outstanding loan funded today, now I have ten, payment schedules are for next month, spread out, here is a glimpse:

    Available Cash $0.00
    In Funding Notes $0.00
    Outstanding Principal $250.00
    Accrued Interest $0.13

    This process, with 10 loans, took 15 days, I imagine with 100-200 loans it would have taken just a bit longer, food for thought.

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