I am taking on a little risk here and there but my strategy is as follows.
2 better class loans for each loan of a lower tier.
So
8 class A loans
4 class B Loans
2 class C …
1 class D …
Figure that way my main block of loans are pretty damn safe bets.
I have 13 loans now and look forward to looking every day.
16 now…somebody stop me! 
If I keep up like this I may get enough defaults to qualify for a federal bailout
Have you actually had any defaults or late payments?
I’m up to 10 loans - 2 of which are 50 dollar loans, the rest are 25 dollar loans, so about 300 bucks. It’s almost addictive in that I REALLY look forward to when I can toss another 25 bucks thataway. I’m hoping that within a few months, I’ll have a payment coming in nearly every day. When I get to that point, I’ll be able to fund a new 25 dollar loan every month.
So far I’ve stuck with B and C grade loans. It’s funny how badly-written some of the lower-grade loan requests are… they tend to make me think that the borrower is maybe not that savvy about a LOT of stuff, hence their lower credit rating, and the loan would therefore be outside my comfort zone, risk-wise.
Nah, just a little amused hyperbole…
Prosper had holes in its criteria where some very bad loans were being classified incorrectly by their own systems. LC, although far from immune has not been anything near like that.
Interesting article!
While LC’s model is somewhat different, I’d be interested to see how the historical default rate has shaken out with them vs. Prosper. If you noodle around LCs site, you can find average actual default rates by loan category which is informative - including the actual rate of return for the lower grades being pretty pathetic indeed (not negative, but say 5%).
I’m not investing anything I can’t afford to lose, and figure that at the very least I’m getting some entertainment value out of it.
I might drop the author an email and ask if he’s thinking of looking at Lending Club as well.
Here’s a weird status:
I’ve got a loan that was issued on 1/15. The first payment is due 2/19. As in, no payments are due.
Yet, on the individual loan page, it shows
“2/4/10 (Thursday) Contacted a 3rd party or borrowers acquaintance
2/3/10 (Wednesday) Contacted a 3rd party or borrowers acquaintance”.
This would make sense if the loan were overdue, but it isn’t. Anyone have any idea what this means?
Had a little flurry of payments come in over the last week or so can’t let $7.52 sit around now… Thus loan #17 was born.
Boo! This is a great idea for me, both on the lending and borrowing side - but I’m in Indiana! I’m not allowed to participate!
Does anyone know of a group like this that is available in all (my) state? Does anyone know why/who I can talk to make this change in my state?
I’m bummed…
Check to see if Prosper.com takes lenders from your state. Though it’s worth reading up on the issues mentioned in the article linked above.
So LC won’t even lend to you? Interesting.
I don’t completely understand why they have it limited to some states. Dunno if it’s something LC can fix in time, or the state has to approve something.
On my own portfolio: I still don’t know why that one loan has some collection activity already even though the payment isn’t scheduled for another week. The borrower’s credit score has also dropped - which may be due to this loan (increased debt), or something else entirely. I’ll post once I know more about that.
On the plus side, I’ve got just over 4 bucks in available cash due to 5 loans paying in the last week or so, and I have 4-5 more that should be credited within the week. So I’ll just need to throw another 15ish bucks to LC to fund my next loan.
I lent on prosper for awhile. My experience was even with those with really high credit scores there was more defaults than what I was expecting (and seemingly more than what prospers statistics showed). I would get paid for several months or more, but quite a few defaulted soon after that. Many of course did pay the whole length of the loan, but overall I think I only made about 2 or 3% out of it, which just wasn’t worth the risk compared to what I could make out of CDs.
Because of this relatively high risk of default, it is important to spread out your money as much as possible.
Looks like this one is going south. The first payment was due on 2/19. While it always takes 4 business days to get a payment credited, right now I see several additional lines of collections activity:
2/24/10 (Wednesday) Contacted a 3rd party or borrowers acquaintance
2/23/10 (Tuesday) Collections Agency contacted a 3rd party or borrowers acquaintance
2/23/10 (Tuesday) Contacted a 3rd party or borrowers acquaintance
2/4/10 (Thursday) Contacted a 3rd party or borrowers acquaintance
2/3/10 (Wednesday) Contacted a 3rd party or borrowers acquaintance
I remember picking this particular loan because the borrower is active-duty military and I seem to recall their CO’s can get in their face if they have issues in managing their personal lives.
Oh well…
Where other sites have failed, Lending Club has succeeded. See, on Prosper and that other one I can’t think of right now, people bid down loans too low. People were so anxious to put their money in the pot that, like a Vegas casino, they didn’t care that the odds were against them. Lending Club solved that, though. They set the interest rate and they keep it at a level that’s still going to turn a profit even at historical default rates.
The tools really help too. I can break down the loans not only by credit score, but also by type. And stats are kept on each of those categories so that I can look up how much and how often these loans go bad.
I’m making money so far. It’s nothing fantastic- something like 5%- but it beats a savings account and it’s more fun. ::shrug::
ETA: I started in Aug 08 with $2,000. I now have $2,157, $2007 of which is still outstanding. I’ll probably toss the $150 back into circulation soon.
To my surprise, that loan that seems to be in trouble actually completed the first payment during the grace period. It was due on the 19th (a Friday). Typically, a payment has been crediting to my account 4 business days later, which would be Thursday the 25th in this case. It actually completed yesterday, the 2nd. There were numerous “collection actions” listed against it.
I hope your loan keeps up the payments, I just posted loan #20 and so far not a late payment yet.
Well, I had a bit of a surprise just now. My “troubled” loan had its second payment due last Friday the 19th. It seems to be taking 4 business days after the due date, for a payment to be credit, so I popped in this morning to see if it had. Not surprisingly, it hadn’t - and there were a couple of “collections activities” earlier this week. I was assuming it was going to be late again.
Then I logged in just now and saw “available cash: 50-something”. Bwuh?
That “bad” loan just paid in full!
Time to fund another loan!
Cool 
Update, in case anyone is interested.
They’ve just started offering 5 year loans (60 months). Not sure when / whether I’ll invest in one of those, I’ll have to think about it.
I’m up to about 22/23 loans, most for 25.00 but a handful for 50.00. So far I’ve stuck to B/C grade loans except for one D-grade loan a month or so ago.
No defaults yet. One loan was a couple of days late last week but it paid well within the grace period. Another loan prepaid about half its principal last month which got immediately reinvested.
I toss in 5/10 bucks when I have it to spare and that, plus accumulated payments, soon becomes enough to fund a new loan. A couple more loans, and a month’s payments will total enough to invest in a whole new loan without my having to top the account up.
My total investment is 543 dollars (for 650 dollars on loans - the difference being principal/interest payments and prepayments). I’ve earned 15 dollars in interest, which is a LOT more than the cash portion of my IRA is earning!
So far it’s working well enough. Annoyances include the long lead time between wanting to invest, and the transfer from the bank being credited to the account; long hold time between when you commit money to a loan and the time it actually funds and starts earning interest; long hold time (4+ business days) between when a payment is due and when it’s credited to the account… basically in addition to their fees, LendingClub probably makes a non-trivial amount on the float. I don’t mind much, it’s really just a mild annoyance.
Thanks for keeping us updated on this. I am really interested in reading how it pans out, including the ups and downs!