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My Lending Club account liquidated

Today I finished liquidation of my Lending Club portfolio. I decided to keep 500 dollars in the account and just reinvest the proceeds. I will keep the account totally passive. I will not be adding more cash and withdrawing any cash until retirement.

At this moment I am playing with other people’s money. I received $2,765.06 in interest over the lifetime of my active management account. I left 500 dollars out of that interest in the Lending Club account to play with.

Lending Club

 
If I lose it, never mind, it was not my money anyway (sort of).

I will not be reporting this account in my reports on this blog regularly but either annually or semi-annually if at all.

Why I will no longer invest in Lending Club

Lending ClubEvery great story will end one day. This is the case of my investments in Lending Club. Yes I am closing my account (or significantly reducing my exposure) with Lending Club and moving all available cash to equities.

The reason? Recent changes in trading platform which now prevent me from effectively manage and protect my investments.

What are those changes about?

Some investors and gurus call it a loophole and I am fine with it. For me it was an edge to protect my investments.

Lending club was processing notes in a certain time frame and there was a time or day limit when the notes were supposed to be processed. If it didn’t happen I sold the note in the secondary market with a discount before the note turned into a grace period status.

This is no longer possible. Now during note processing it will not be possible to sell the notes. When the processing is over you will be able to sell the notes as long as they are in current status. If the notes during that period changes into Grace period or late, you won’t be able to sell. You are locked in a bad note.

 
(MORE: Major Changes to the Lending Club Trading Platform Today)
 

My first reaction was that it was similar to NYSE or NASDAQ preventing you selling stocks which are declining and allowing you to sell them only when they are rising.Mad man

Normally I would be OK with this procedure in LC trading platform if I had a lot better filtering options and enough time to evaluate the notes. Right now in today’s environment investors in LC were buying using phony filters and mostly had no time to use them unless they automated the process.

Now trading in LC becomes more risky to me and I am not willing to take that risk.

As Peter Renton says, for some investors this will be a major blow:

There is a little loophole/trick that some investors have exploited to offload their notes that are about to go late…that allowed investors to sell a note the day before it went into In Grace Period if they knew how to exploit it.
That loophole has now been closed. Investors will no longer be able to list a note for sale once Lending Club has begun processing the payment…For most investors this will be an inconvenience and for some it will be a major blow because the loophole will now be closed.

Yes, I must admit, I was one of the investors using this process to my advantage. Not anymore. Thus it is time to say good bye.

What’s next?

My next steps will be unwinding the positions and selling whatever I can without loses. I am also expecting some late notes starting to show up in my account.

As of today, my NAR reached 16.28% and my XIRR 11.60%

It was nice experience and great returns. In the future I may use LC with very little money (up to $1000 but not more) if I see the trading platform improves and be providing more valuable information to investors so we can see to whom we are really lending our money, whether it is an honest borower or a scammer.

 
(MORE: My Returns at Lending Club & Prosper for 2013Q3 – 13.89% ROI)
 

At this point I would prefer investing into small businesses rather than to consumer credit which seems to me less risky. An example would be U-haul company which allows you to lend them money on their website the similar way as you did in LC. They will use the loan to expand their business by buying equipment. the interest rates are smaller than with Lending Club, but the loans seem to be safer since there is a company behind it with some assets which can be used to satisfy investors.

You still will be able to see my Lending Club results at my Lending Club holdings page, but I will no longer update the page. You would be able to see the result up to today.

I loved it, but this story reached its end.
 
 

Posted by Martin March 10, 2013

Lending Club Goal 2013 Completed!

Lending Club Goal 2013 Completed!

I would like to announce that I completed my first goal I set for 2013 and that was to reach 14% annual return rate. I am very happy about it, because with this rate of return, my investment will double every 5 years!

My other goals are going well too. It looks like I under-sized my goals and was too generous. But that is OK. If I meet all my goals prematurely I will adjust them for the rest of the year.
Read More

Posted by Martin March 05, 2013

How to Spot Bad Notes in Lending Club Before They Turn Bad – Part 1

Lending ClubSince a few months ago when I claimed that I had zero In Grace Period, Late, or Defaulted notes in my Lending Club account, I have started receiving emails from other investors whether I would be willing to share my strategy how I avoid the notes before they turn bad.

Originally I was just responding to those emails, but the number of them was growing so much that I made a decision to publish my strategy of managing Lending Club account.
Read More

Posted by Martin November 04, 2012

Lending Club Performance

Lending Club Performance

Recently I posted my Lending Club performance, showing my return rate chart from the beginning of investing, my account value growth and my interest paid. You can see it here.

I also was claiming in several of my older posts that I was able to avoid default notes or even late notes due to my strategy of watching notes. To prove it I decided to post the following printscreen showing my account and showing my results.

Lending Club

You can click on the picture to enlarge it.

As I said before, I have been investing with Lending Club for almost three years (this coming March 2013 it will be three years), I have saved slightly above $7,000 and my rate of return is now at 13.12% and rising. As you can see from the picture under the “My Notes at-a-Glance” I have zero late, default or charged off notes so far (and I hope it will stay like that in the future).

Posted by Martin October 25, 2012

Lending Club Holdings page

I really enjoy investing with Lending Club. I’ve been investing with Lending Club for almost 3 years and over that time I have developed a method of selecting, evaluating and watching new notes in which I want to invest and those I am already invested in. The method of watching the notes I already own helped me to avoid late or defaulting notes. And by that I mean absolutely no troubled note at all. By watching carefully my notes I was able to sell any note before it turned bad. This process helped me to have only current notes and increasing my return.

The following charts are showing my current record and I added a new page named Lending Club Holdings for quick review of my account progress.

For the upcoming period (not necessarily next year) I have a plan to save $10,000 in Lending Club and then I will continue reinvesting all proceeds only. After I reach this goal, I will focus on my TD Ameritrade trading account and save/invest $10,000 in TD account.

Interest rate over time:

Current account value:

Monthly payments (interest & principal):

Annual interest income:

Are you considering investing with Lending Club? Do you need help? Contact me for information or help.

Happy trading!

Posted by Martin September 11, 2012

Focus on savings and investing with Lending Club

Focus on savings and investing with Lending Club

Money growing Recently I was evaluating my investment goals and the way I was saving money for investing. In many of my previous posts I preached a way of saving into non transaction fee mutual funds, which would allow investing small amounts let’s say $50 every month without paying a fee. Then I could see something I didn’t like. Those funds locked my money for 6 months. If you sell prior to that test period you will pay a back fee. Another issue with this is that the return on those mutual funds was very low, many times they didn’t even keep up with the market and in many occasions lost value.

Yes in a long term, the mutual funds can be a great tool, but they didn’t look great to my purpose.

And I didn’t see a great opportunity I had right under my nose. Investing with Lending Club. Yes, that investment can lock your funds for up to three years, but you can always sell on the secondary market FolioFn and raise your cash back.

At first I was scared of this, thinking that I could be losing money when selling on the secondary market, but over the time I realized – not necessarily!

I’ve been investing with Lending Club for three years and since the beginning I was able to reach 12.83% annual return rate, no delinquent or late notes and when needed I was able to sell notes without having negative impact to my return rate. After almost three years of successful investing with Lending Club I realized that this may be the vehicle I was looking for and which can help me to park my small money, grow them on a nice high interest rate and relatively safely.

I redirected all my savings to my Lending Club account and I also decided to take some risk and use leverage to boost my account value and get more money back home. I took a loan of 2000 dollars at 7% interest rate and invested that loan in my Lending Club 12.83% rate netting 5.83% return home. I am paying the loan from my regular paychecks which totals some 61 dollars per month, but my Lending Club “loan portfolio” is paying me some 63 dollars monthly back, which I decided to reinvest and use it to pay the original loan back only if i won’t be able to pay it back using my paycheck proceeds. This looks to me like a nice plan, so after three years I will repeat the process, borrow another 2,000 dollar or more and invest it.

However, this approach may not be suitable for everybody. You have to know how to invest with Lending Club and protect your current investments. On the Internet you may find a lot of negative articles of people with bad experience or low return on investment results. When I was reading through some of those articles, I could see how badly managed their portfolios were. Loses can be avoided if you know how to do it. Next time I will try to write about some of the techniques you can use to protect your portfolio and get rid of the notes before they turn bad.

Before then, here are the charts of the current value of my Lending Club account and monthly payments (principal and interest):

Are you investing with Lending Club?


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Happy Trading!

Posted by Martin July 30, 2012

Lending Club investing experience

If you ever heard about Lending Club, seen some ads about investing with Lending Club and making 9% or more, you probably wonder whether it works or it is safe investing. You probable tried searching on Internet to find out what others have to say about this type of investing.

Are you confused about the amount of articles?

Well I have been investing with Lending Club for about three years right now. During this period I read many articles from the Internet seeking what are experiences of other people who invest with Lending Club. There are plenty of possible articles on this matter!

The results of those articles articles may be very confusing and discouraging new investors. A lot of them basically claim that Lending Club investment is not that bright and that excellent as it claims to be. Many said that their return was actually lower that claimed. Many pointed out that there is actually higher real default rate than the one claimed.

What I have found is that many investors who participated on their private “tests” of investing with Lending Club actually mistaken this type of investment with savings account. They put their money to work, invested a few thousands of dollar and then forgot about them. At the end of their three year period they provided the results which were mediocre.

Investing with Lending Club is not a savings account. It needs your attention. It needs your attention almost on daily basis (depends how large your portfolio is). It is almost similar to investing into stocks and you have to do your homework prior to investing into debt notes. Fortunately Lending Club provides you with great tools to do it. You can set your filters up to weed out notes with bad records on file (I wrote about my filters in this post, you can check it out). After investing your work doesn’t end. I review my portfolio almost on daily basis and always check the notes how they are performing.

If I spot notes which look to me problematic, or showing a potential for trouble, I sell them. No questions asked, no double guessing. There are tools and strategies which can help you to find such notes in your portfolio and you can get rid of them while it is possible. It is late to try getting rid of note which are already late. You have to do your homework constantly, the same way as with your stocks (if you invest into stocks).

You cannot stay passive. Only active investor, planting his portfolio diligently and weeding out all bad weed will be rewarded. I am trying to do my part and to this day my return is 12.71% and I had no defaulted note for the whole time investing with Lending Club although I am investing into A to E notes. So if you are OK to do some work don’t worry, go for it and you will be pleasantly surprised. If you need help, you can write me a note and I can help you to start.