Lending Club

[adiggs]

... Think alternative to bonds and something that is more steady than stock market.

This is very much the sort of diversification I'm thinking of for the investment.

I hadn't thought about this in the context of a ROTH IRA - was thinking a traditional IRA, but I think I've got a reasonable path to legging my way into a big enough chunk to matter, while not being so big I risk changing my financial future (negatively) while I'm figuring things out.

 

[Jonathan Hewitt]

I would stick with a ROTH IRA vs taxable account as with the latter you get a 1099-OID and pay regular taxes on it.

Yeah, that is one negative of holding notes in a taxable account. At least they make it easier now than they used to as they have an export feature to Turbotax to handle the admin side of it.

 

[Nikxice]

After several months of watching my Lending Club ROI erode, returns seem to have stabilized. A few months ago my ANAR dipped to 7.4%, but is now back to 7.7%. As Scott pointed out earlier, defaults on Grades C - G had skyrocketed, but risk is where I hang out, so averaging 3 to 4 defaults a day. This might be an opportune time to go in with a 100K. Investing 25 to 50 dollars per loan can be easily spread out between 2000 to 4000 loans.

Couple of observations. The peer to peer aspect of Fintech is long gone. Years ago investors had access to more information from borrowers. Nothing compromising like a home address, but as an example, borrowers could make their case for a loan by writing a short description. Through the LC website, potential investors could ask questions and receive answers from borrowers. Any sense of community that had once developed around picking loans has been deleted. That communication didn't have to end. Forget the investor, LC has admitted that they are now reluctant to ask more of a borrower once a loan has listed. They might go looking for money elsewhere. More impersonal now, this lost aspect of the business has likely contributed to some defaults.

I view the recent optimism concerning improving ROI resulting not from a cure, but a band aid. A borrower paying a 24% interest rate today might have been offered a rate of 19% less than two years ago. Raising the interest rates on borrowers as a justification for sloppy loan origination indicates to me that LC still has plenty of work ahead to succeed. It's always nice to know there's a WebBank out there!

 

[johnnyS]

I started with a regular account last year. I quickly realized that a Roth IRA is the way to go, but it will take a while with the contribution limits. I use the automated investing feature and our rate of return is around 8% after a year. The big concern I have is defaults will go up when the economy and employment are in decline. As a result I am gradually increasing the quality of new loans. I like the e-newsletter published by Peter Renton. I have investigated a couple of other peer to peer lending companies he has mentioned, but so far I have only invested in Lending Club.

 

[bkp_duke]

Bumping this.

How is everyone doing with their investments here given the change in the macro economic environment?

 

[Nikxice]

Wow, this thread has been dormant for three and a half years, yet it seems like yesterday. Hope there's still a few others around here that have stuck it out investing with LC. Also found it interesting to take a look back at several years of comments.

I still work my LC IRA once or twice each day, usually only takes ten minutes or less. (Family tolerates this distraction, agreement is that next January LC profits will be directed toward purchase of a Model Y) Between 2017 and 2018 my ANAR had dropped as low as 6.5%, where the rate then stabilized for many months. During 2020 I've been watching it inch back, currently seeing 7.07%. Investment of 150K spread over 7,800 active loans, with interest rates about 13%, this year the account has been returning a solid 1K every month. I've also withdrawn 10K each January for the last three years, so year over year my overall account value hasn't changed much.

A few years ago I was averaging three defaults per day. Now my average is just one. What I've been doing differently is focusing on better quality loans, almost exclusively grades A and B. Anyone active in purchasing new LC notes has probably noticed the availability of retail notes going down from from hundreds a day to only 20 to 40 (not Folio). Consequently I no longer employ my usual filters. If I did, there wouldn't be enough notes to stay fully invested. When new notes do appear (still 4 times each day) I only peek at those with a credit score of 670 or higher. The average note I go with now is probably around 720.

Currently I think what's most shocking is that even during this pandemic, borrowers are staying strong and paying back their loans. Time will tell if that holds. In the past when I was living off LC interest rates of 22%, my Late 31 - 120 Days notes were hovering around 300 plus. Currently I'm looking at only 95 notes in that category. I think LC is doing a much better job at loan origination. LC has also demonstrated improvement at estimating investors ROI. For many years they had a nasty habit of overstating expected returns, now I believe they're predicting much more conservative estimates for investors. Sound familiar? Who knows, maybe LC execs have been reading the TMC investor discussions and have learned something about the value of underpromising and overdelivering.

 

[scottf200]

... Anyone active in purchasing new LC notes has probably noticed the availability of retail notes going down from hundreds a day to only 20 to 40 (not Folio). ...

I had a larger $ amount invested than you. I was more conservative in my level of risk (B,C,D and then went to A,B) so I faired pretty well as a bonds alternative. When I noticed the cut way back on retail investors it was a sign they were not really serious about that type of investors.

I've been removing money for quite a while and moved my ROTH IRA portion to Wunder Capital (Solar financing) that worked not similar ideas of Lending Club and in some interview, they even gave a node to LC for making the pathways/inroads with the regulations. Wunder Capital has also moved away from retail because they could not offer the same interest rates as competition happened in their space. I have Wunder Capital large 'notes' at 7% for 5 yrs (20 yr amortized loan schedule) and then you get a ballon payment of your principle back after 5 years. Good amortized loan interest $ returns in the first 5 years. STRATA does the financial custodian role like they did for Lending Club ROTH IRAs. They send my earned interest to my checking account now monthly. (my contributions to my ROTH IRAs over the years so no taxes).

 

[timk225]

I guess something like lending club might be more familiar and safer, but I can do better than the 10% annual return by buying and selling cryptocurrencies. It takes time and patience to understand how the market prices move and what might cause price changes, but you can do a lot better than 10% if you buy and sell at the right times. See coinmarketcap.com for a coin price list.

 

[bkp_duke]

I guess something like lending club might be more familiar and safer, but I can do better than the 10% annual return by buying and selling cryptocurrencies. It takes time and patience to understand how the market prices move and what might cause price changes, but you can do a lot better than 10% if you buy and sell at the right times. See coinmarketcap.com for a coin price list.

For me, that was like day trading in the stock market. I kept losing my shirt and had to give it up.

Now mining crypto . . . I did that 10 or so years ago and made solid bank there.

 

[Nikxice]

I'm aware that many forum posters have relied on the LC Folio Trading platform. This morning I noticed a message on my LC account summary page.

IMPORTANT UPDATE: The secondary market for trading Notes will be discontinued effective August 28, 2020. If you wish to trade Notes on the secondary market, please keep the following dates in mind:

August 18, 2020: The last day you can open a Folio account to trade Notes.

August 26, 2020: The last day you will be able to list a Note for sale. Any remaining Note listings on the trading platform at the end of the day will expire or terminate. Any trades executed on August 26, 2020 will settle in accordance with standard settlement procedures on August 27, 2020.

August 28, 2020: Investor account(s) for trading Notes will be closed, after which you will be able to log in to view statements and legal agreements only.

I have no clue as to why LC is exiting this market, other than perhaps to streamline their operations.

Of possible interest to some, ARKW (ARK Next Generation Internet ETF) has bought almost 500K shares of LC stock over the last three days. Since the pandemic the stock has dropped from the teens to the 5 dollar range. Hard to argue with Cathie Wood. Even a stock that sports a checkered past such as LC, it might be worth taking a second look.

 

[bkp_duke]

I'm aware that many forum posters have relied on the LC Folio Trading platform. This morning I noticed a message on my LC account summary page.

IMPORTANT UPDATE: The secondary market for trading Notes will be discontinued effective August 28, 2020. If you wish to trade Notes on the secondary market, please keep the following dates in mind:

August 18, 2020: The last day you can open a Folio account to trade Notes.

August 26, 2020: The last day you will be able to list a Note for sale. Any remaining Note listings on the trading platform at the end of the day will expire or terminate. Any trades executed on August 26, 2020 will settle in accordance with standard settlement procedures on August 27, 2020.

August 28, 2020: Investor account(s) for trading Notes will be closed, after which you will be able to log in to view statements and legal agreements only.

I have no clue as to why LC is exiting this market, other than perhaps to streamline their operations.

Of possible interest to some, ARKW (ARK Next Generation Internet ETF) has bought almost 500K shares of LC stock over the last three days. Since the pandemic the stock has dropped from the teens to the 5 dollar range. Hard to argue with Cathie Wood. Even a stock that sports a checkered past such as LC, it might be worth taking a second look.

Can you clarify, is the the "LC Folio Trading platform" the area where you can buy/sell notes that are not new? If so, that's pretty much the only area I trade on, this would be an absolute deal-breaker.

 

[Nikxice]

Can you clarify, is the the "LC Folio Trading platform" the area where you can buy/sell notes that are not new? If so, that's pretty much the only area I trade on, this would be an absolute deal-breaker.

Yes. I'm unaware of any other means to buy/sell established notes, perhaps someone else on the forum has that knowledge.
I'm not attracted to the LC Folio platform, primarily because I've never been concerned holding onto notes for 3 or 5 years, along with the small percentage of expected defaults. I know a popular feature of Folio has been that it offered liquidity to an otherwise illiquid market. Maybe not a factor for some, but a sell side negative for Folio sellers is they've always taken a 1% hit with their transactions.

If you think you won't need quick access to your LC funds, perhaps consider purchasing some new notes. Setting up an automated purchase filter can eliminate time spent manually choosing notes on the website. Then if you should need some cash, a couple of clicks opts you out of the automated system and then accrued cash starts to build for withdrawal into your linked bank account.

 

[bkp_duke]

Yes. I'm unaware of any other means to buy/sell established notes, perhaps someone else on the forum has that knowledge.
I'm not attracted to the LC Folio platform, primarily because I've never been concerned holding onto notes for 3 or 5 years, along with the small percentage of expected defaults. I know a popular feature of Folio has been that it offered liquidity to an otherwise illiquid market. Maybe not a factor for some, but a sell side negative for Folio sellers is they've always taken a 1% hit with their transactions.

If you think you won't need quick access to your LC funds, perhaps consider purchasing some new notes. Setting up an automated purchase filter can eliminate time spent manually choosing notes on the website. Then if you should need some cash, a couple of clicks opts you out of the automated system and then accrued cash starts to build for withdrawal into your linked bank account.

Fortunately I have sold most notes in LC and literally have less than a $10 balance now.

The ability to trade notes was the primary attraction for me, so I'll be emptying and closing my account based upon this info.

 

[Nikxice]

Lending Club announced today they will soon be ceasing their peer-to-peer lending platform for retail investors. Here's an excerpt from the email to investors.
"As we move towards becoming a full-spectrum fintech marketplace bank, we have looked closely at our current and future product suite and have started development of new products to help our members keep more of what they earn and earn more on what they keep. Unfortunately, under a prospective banking framework, it is not economically practical for LendingClub to continue to offer Notes. So, we had to make the difficult decision to retire the Notes platform effective December 31, 2020."

It's likely that most of the past contributors to this thread have moved on. In my case I will have to figure out how, where, and when, to periodically transfer my accumulating LC IRA cash to another qualified IRA. There's always "Prosper", but as I look at the recent gains in my E-trade IRA account, I'll probably kick back and just do more TSLA and ARKK. It was fun while it lasted.

 

[johnnyS]

Unfortunately it will be a slow process liquidating the account while the notes mature. The return has not been great the last year or two.

 

[bkp_duke]

Unfortunately it will be a slow process liquidating the account while the notes mature. The return has not been great the last year or two.

I've literally spent the past 18 months doing this as the notes mature.

Even with 0 active notes, my account still has a few dollars trickle in due to bill collection efforts on notes that have been written off.

 

[Nikxice]

I've literally spent the past 18 months doing this as the notes mature.

Even with 0 active notes, my account still has a few dollars trickle in due to bill collection efforts on notes that have been written off.

You raise a good point concerning the plodding collection process for deadbeat notes. Money can trickle into our accounts long after some notes have been listed as Default. I've already invested in hundreds of the 60 month notes just in 2020. I can easily imagine this drain down account process going out into 2027. The only bright side is that over the next few years my current ROI of 7.30% should steadily increase on my remaining LC notes. With no additional notes to invest, a few months into 2021 defaults will begin to gradually slow.

Periodic cash withdrawals for a LC IRA account can be bit of a hassle. You're required to go through a third party administrator. They always need several pages of signed forms for either transfers or withdrawals. Along with a $10 check. Everybody has to get paid.