I stumbled across a place called www.lendingclub.com I was just curious if anyone had any experiences they would be willing to share WRT investing with them.
I thought it looked kinda neat and figured it would be a neat little retirement vehicle and opened an account with $25, added my money to a couple financing an adoption and figured I will start tossing in $25 every paycheck towards other loans if I like what I see and hear.
Thank you
Drach
I’ll be interested to hear what people say. Washington Post had an article a month or so ago about this:
and I was reminded of it when I saw the Kiva thread. Can you actually put in as little as 25 dollars?
I’m very interested in trying it, but I’m in a state where it’s not available. 
I think you can buy notes on the secondary market (look around their website). That would appear to be the way a current loan-holder could liquidate his investment and get some / most of his/her remaining principle.
Just for yucks, I signed up today. Sent my spare 25 bucks via Paypal and added it to someone’s bill consolidation loan. I figure I’ll throw in 25 bucks every month or so as I have it in my small-change bank account.
In three years, I’ll have about 32.50, woohoo - which won’t make me rich but is better than a regular savings account.
I picked the lend-ee based on a combination of fairly decent credit score (low 700s), relatively low amount (3,000), mostly funded already (what happens if you pledge money toward a loan and they don’t get funding for the whole thing?), and moderate interest rate (11ish percent).
Now here’s hoping I don’t screw up the accounting in Quicken. Drachiilix. how do they report the income and repayment? And how to you track it on your side (if at all)? I’m guessing we’d want fairly careful bookkeeping in case a loan goes bad and it gets written off as a worthless debt, like stock that gets cancelled can be written off as a loss?
I signed up to buy notes on the used market. I think this will be even more fun.
Yup, thats all I have in, get paid tomorrow, should be tossing in another $25.
If the loan does not fully fund they kick the money back to your account to try again. My first attempt has not fully funded yet. I figure once a 5-6 months have passed it will fairly quickly get to a point where there is $25 in payments coming in that can be immediately invested in a new loan.
I signed up and have now funded 125.00 in loans (the last 50 just funded today). In a month, I’ve accrued a whopping 48 cents, woohoo 
which is certainly better than the same 75 dollars would have done in a savings account.
Haven’t received any payments yet - the first payment comes some time early next week. So that 48 cents is just “on paper” right now.
It’s amusing watching those pennies rack up. As I have additional bits to invest in the future, they’ll rack up faster hopefully. Obviously someone could default and then I’d be out my cash; the nice thing is that on any one loan I’d never be at risk for much money. Anyway, it’s entertaining.
It can be annoying though, at least 3 times now I’ve pledged money toward a loan and had the loan disappear after all the money is available - guess the people decided not to borrow after all. At least the money gets returned and is available to put toward another loan.
Most of those are not fully approved when you pledged your money. If they fail income verification or LC fails to approve them, the loan gets punted and money comes back. If you set the filters for approved and income verified there are often only a handful available because they close out almost instantly when they do from people looking to invest who know its pretty much guarenteed to finish out and be issued.
I really like it in a “playing the stock market” kinda way, you are just playing with loans. My first payments are due in a few days, I’m pretty stoked.
FYI anyone else who is interested Mama Zappa or myself can send you an invite thet will get you $25 credit to start, (wish they gave US something for a signup)
Nice thing is, most of these folks have scary good credit, defaulting on the loan would bludgeon their credit mercilessly. So its a pretty good bet. Even the worst candidates they approve statistically only have something like a 5.5% default rate.
dunno if this requires a login
In real life, it is actually higher than that:
This shows that as you get to the higher rate, higher risk, higher rate loans, the estimated payback drops precipitously. Of 169 category G loans, 45 are late or in default. The average return for category F is actually substantially worse than category E, despite a higher loan interest rate.
So, it’s definitely NOT risk-free.
I’ve been sticking to category C and D for the handful of loans I’ve funded.
Somewhere in the info about the rate-setting process, they list an “assumed default rate” which is indeed no more than 5ish percent. Not sure where that figure comes from but it doesn’t mesh with their real-world results.
Credit only reflects what you’ve done in the past, not what will happen in the future.
The thing that bugs me about this are the rates. OK I have very good credit and I’m getting credit card adverts for 1.9% interest rates. I still get offers for loans of up to $20,000 at no interest for a year, from my credit cards.
My bank will give me a small business loan for 3%.
So much cheaper credit IS available to people with good credit. So why go here, if you’re credit is all that great. Seems like a bank would still give you better rates. At least my banks would do so.
I’m sure there’s something I’m not getting but till then
Very interesting. Looks like I can’t do it in Ohio, though I’m poking around at the Note Trading Platform.
I looked at the rates from my credit union for unsecured loans - and after making allowances for different loan periods etc., Lending Club’s top of the line rates for those with stellar scores are not out of line with the credit union.
It’s interesting to read how they set the rates though. You’re initially slotted for a grade (A1 through G6 or some such) depending on your credit score… then they move you down a notch or four depending on things like loan amount, number of existing accounts, length of credit history, etc. It’d be nearly impossible to get their absolute best loan rate.
The credit card rates you mention are for limited periods of time, and you make one payment one day late and they go waaaay up, I suspect, so those aren’t necessarily the best.
I don’t know what banks’ signature loan rates usually are for folks with less-perfect credit (700 for example may be good for most stuff but it’s not top-notch).
Anyway - I agree that many folks could do better elsewhere. But for some, it’s probably competitive and certainly an improvement on the credit cards’ usurious rates. The majority of loans seem to be slated for that, anyhow.
For me, it’s a chance to make a small amount of money, and have a little fun watching the numbers inch up. I don’t see this being a major investment but it’s got some entertainment value.
Have your first payment(s) been credited to your account yet?
My first one - 84 cents, woohoo! - was due on Monday (11/30). For a day, it showed all my accrued interest (all 27 cents) as having disappeared, but no payments on my principal. Then the accrued interest came back, but still no payments on the principal. When I look at the specific loan, it shows as “current”, but the payment is “processing”.
Dunno what that means - whether it’s normal for them to take this long, or whether the very first payment on the very first loan I funded has defaulted already. If so, oh well, that’s the beauty of funding such small amounts (25 bucks). It won’t hurt too much to lose it.
My next 2 loans have payments due on the 13th and 14th, we’ll see how they work out.
All in all, it’ll turn out to be worthwhile from an entertainment standpoint at the least.
My first payments have not posted, due dates are today and tomorrow for the first couple. Time will tell.
I’ve been at this for a year and about 9 months. I started with 2,000 and now I have 2150 ish. That’s because someone defaulted and I lost about $210. Of course, over that same time period, my stocks lost 30% of their value. So being in the black at all is still better than the Dow. If I were you guys, I would stick to the A-B class. They still have a great rate but they’re WAY less risky. At C level, the default rate increases a lot.
A word of caution for the penny pinchers: If you can afford to offer more than the $25, do so. If you only fund $25, they take a whole penny from each payment for the processing fee. That’s more than the 1% they said they’d take. It’s not much, but I don’t need to tell you how pennies add up in things like this.
My personal strategy is to only lend to the “refinance credit card” people with great credit scores. They’re definitely using my money to make money, in a penny-saved-penny-earned kinda way. The high credit score is evidence that they’ll have the money to pay me back every month. If you loan someone money for, say, a wedding ring, then that doesn’t produce any cash for them. So there’s less proof that they’ll be able to pay. That’s my theory anyway.
Overall, I love this site. I wish it were faster, like the stock market, but it makes me feel good that I’ve got a solid investment and I’m simultaneously sticking it to the CC companies.
ETA: Don’t worry if your payments are a few days late. For some reason, they take about a week to post to your account. Your loans didn’t default. They’ll backdate the payment to when they got it. So, no worries.
One of mine just posted 
I always figured I would keep doing $25 until my incoming payments/month was $25 then just add my new $25 to the $25 in payments and start doing $50.
Chessic Sense, what you’ve said seems to mesh with the reading I’ve done - cc refis tend to perform a bit better overall. And my own personal inclination is to NOT fund something one-time like a wedding; I think squandering money you don’t have on a big wedding is poor financial planning. You make a good point that the borrower wouldn’t view that as a money-making opportunity!
I did indeed get that one payment about 4 days after the “due date”. It turns out they really screw with the reporting during the payment period - first the interest disappears, then reappears, then the payment is shown as credited but your cash balance doesn’t reflect it… they need to tweak their systems a bit.
Agreed on the penny fee on the smaller amounts - they roll it up to the whole penny. A 50 investment would have the same problem (the one I’ve done has a payment of 1.70 so it would roll up to 2 cents). So one might have to go to 75 or 100 bucks investment to get it to be more proportional.
I’ve so far invested 150 dollars in 5 loans. Of course, it’s the one 50-dollar loan which is showing a credit score drop (sigh). Kitchen remodel and debt payoff.
I’ve got two more that should be coming in some time this week. One adoption, one refi.
I just dropped $50 into #12 with a lil of the xmas money from garndma (she would be so proud). Loving this so far. Just seeing a payment post makes me want to plunk in more money so I can reinvest that $1.70 sitting there mocking me, drawing no interest
LOL - yeah, I feel the same. My most recent investment was by topping off the cash balance 24 bucks and change.
Some musings:
I agree that cc refi seems to be a a decent target audience for loans for the reasons you noted above.
Lending Club probably makes a fair bit from the various “floats” - the time between when you commit your 25+ dollars and the time the loan actually issues and starts earning interest for the lenders. And also between the time they actually receive the repayments and the time they credit them back to your cash balance. Plus as you’ve noted, for the time the cash balance is sitting there, waiting to be withdrawn / reinvested. Not much we can do about any of these except the last (I suppose we could withdraw that buck or two to a bank account and re-deposit it as soon as we’re ready to fund a loan).
Lending Club themselves will never lose money on a loan. Obviously the loan is not “their” money to begin with, but also since they collect a fee off the top of the loan, their profit is guaranteed regardless. Unless of course things default and they have to take collections actions out of their dime, but even then I suspect their costs are less than the fees.
While googling around, I remember seeing some blogger talking about a loan (for wedding expenses) that defaulted on the first payment (i.e. the borrower never repaid a dime). And that rereading the listing, it sent up so many red flags the blogger wondered why he’d ever invested in it. Someone commented “You’d think Lending Club would have gone after that harder, after all it’s 25,000 bucks!”. The commenter clearly had no idea what s/he was talking about, thinking LC was out 25K.
All that said, it is mildly addictive :). I’ve gotten repayments from 3 loans so far; two more repayments (including the second one from one of the 3) are processing right now. I’m sticking with B and C class loans for the most part though somewhere down the line I’m sure I’ll toss 25 bucks at an F or G class loan just for fun.