Lending Club PRIME Update – April 2011

Two months ago I reviewed Lending Club PRIME sharing my thoughts and results after opening the account in April 2010. Now I am coming up on a year since the account was opened and I still remain very happy with how it is going.

As you can see in the graphic above my NAR is now 10.37% as compared with 10.48% two months ago. The account has increased in value by $663 since my last review, but I have had two more defaults which bumped my NAR down a bit. I have been tracking my NAR daily just to see the impact of the defaults – both these new defaults came in the same week and my NAR dropped from 10.70% down to 10.17%. I have a few more loans that have slipped into late status so I expect some of these loans will end up defaulting and my NAR will drop further.

My Actual Investment Return

More interesting to me than NAR is the real world return. Over the six month period from Sept 30, 2010 to March 31, 2011 the actual increase in the value of my account was 4.53%, or an annualized rate of 9.06%. Now, this is lower than the NAR because of way the that formula is calculated. This is why I always recommend that investors calculate their actual return instead of relying on the Lending Club NAR number. I am still very happy with a 9% return, particularly when I consider this is a PRIME account which means it is a completely hands off investment.

Below are the loan details. Lending Club has added a net 76 new loans to the portfolio and if you compare the breakdown with last time it is pretty much exactly the same.

For a detailed explanation of how a PRIME account works you should read my initial Lending Club PRIME Review.

Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech.

LendIt Fintech conducts three conferences a year for the leading fintech markets of the USA, Europe, and Latin America. LendIt also provides cutting-edge content all year long via audio, video, and written channels.

Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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C. Jensen
Apr. 11, 2011 1:34 pm

I really wish that with the IRA option (which is also a PRIME account if I understand correctly), Lending Club would let the investor still specifically choose their loans. I realize that this would take some time because the amount of money some people have would be significant, but why not offer the option? This is the single thing that keeps me from opening up an IRA with them.

What are your thoughts? Since you have both types of accounts, I’d be interested to know if your goals are the same and if so, which one has been performing better.

C. Jensen
Apr. 11, 2011 4:33 pm

: Thank you for clearing that up for me. Time to get my Lending Club IRA cooking!

Dan B
Dan B
Apr. 11, 2011 5:05 pm

Are you planning on adding new money into this account? Do you know how many of the “31-120 late” notes are making payments?

So is anyone interested in a winner take all contest?? How about this Peter……………..Each entrant sends you say a $100 entry fee together with their email address & online name & then publicly states right here their best guess as to what the NAR on this IRA Prime account will be on July 31st 2011. You hold on to the “pot” & publish your NAR on July 31st, then forward the entire pot to the entrant that comes closest to the correct number. Obviously this would not be open to any employee of LC or Peter himself, his family etc. Entry deadline end of April? What do you say Peter? How many legal no-nos would this infringe upon?

Dan B
Dan B
Apr. 11, 2011 10:31 pm

Sure, I’d be happy to go first. after you get back to me on…………… Are you planning on adding new money into this account? Do you know how many of the “31-120 late” notes are making payments?

Dan B
Dan B
Apr. 12, 2011 12:46 pm

I’m holding off on my pick & analyses until we see how many people take up my challenge but here’s something to consider in the mean time.

My NAR on my only LC account is 9.91% today. I have approx. 500 notes & $11.6k in it. Without adding any new money or withdrawing any money, my NAR on July 31st, 2011 will not only DEFINITELY be higher than this account Peter but I’m willing to give you 10-1 odds on any figure you’d care to wager that my NAR will be AT LEAST 1% higher than this accounts’ NAR. What do you say Peter?

Dan B
Dan B
Apr. 13, 2011 3:44 am

Considering that the average age of the notes are approx. 11 months & that this is a hands-off account I’d say that you have good reason to be rather pleased with the results to date. The thing that surprises me the most about this account is the low number of “lates” you have at this point & the slow pace in which that number is increasing. Of course this goes a very long way in explaining your stellar default numbers to date.

One possible explanation for all of the above could be that you have a substantial percentage in 60 month notes? It’d be logical to assume that the default cycle on those would peak at or around the 28th-30th month as opposed to the 18th month on 3 year notes. No one really knows whether that’ll be the case since 60 month notes have only been around since May 2010 which was only 11 months ago.

@Peter………You’re wise not to take my bet since it’s highly unlikely that I’ll suffer any defaults between now & July 31st…………….. given that the only 2 notes I have that could default have both been making regular payments for months now 🙂

Dan B
Dan B
Apr. 13, 2011 11:36 pm

@Peter………. That is surprising & yes I think it is an anomaly because default numbers are not going down.

Dan B
Dan B
Apr. 14, 2011 4:06 pm

@Peter……………..Did it knock down your NAR by 0.3% or thereabouts?

Dan B
Dan B
Apr. 15, 2011 12:51 am

Wow that’s a really small decline. That’s one advantage of having close to 800 notes.

Simon Dixon
Apr. 29, 2011 2:56 pm

This is very interesting to see these companies grow. I just posted a blog on how I see the peer to peer industry gradually replacing banking.

Would love to hear your thoughts.

https://www.simondixon.org/peer-to-peer-lending-will-it-replace-banking/2011/03/27/

Simon Dixon

Adam Moe
Adam Moe
Apr. 29, 2011 7:00 pm

I’ve been interested in peer-t0-peer lending also. Another site that takes a look at Lending Club.

https://lendingclubwatercooler.blogspot.com/