Back in April 2018 we shared that LendingClub had provided us with $5,000 to start a brand new LendingClub account. We wanted to both report on the new investor experience and also share the performance of the account over time. In the last blog post I included a video which went through LendingClub’s automated investing tool. Before we get into the details of the account I also want to mention any changes that happened within the quarter that LendingClub investors should be aware of. On May 8th, 2018 LendingClub announced interest rate changes:
Effective May 8, 2018, interest rates on the LendingClub Corporation (“LendingClub”) platform have been updated. The changes are an increase of 0.12% for loan grades A2-A5, 0.15% for loan grades B1-B5, and 0.45% for loan grades C1-C5.
As a reminder, this account was setup to invest in LendingClub’s suggested ‘All Grades’ automated investing strategy. Below is a screenshot of my target allocation shortly after account setup with about half of my capital allocated to LendingClub notes.
Below is a screenshot as of today with all $5,000 invested which now closely resembles my target allocation.
You’ll notice that investing across LendingClub’s All Grades is skewed towards being conservative as opposed to allocating the same percentage across loan grades. Nearly 80% of my loans in this account are A, B or C grade loans.
At time of account opening, LendingClub noted historical returns range from 2.94% – 6.98%. This has decreased slightly based on the most up to date historical returns. Below is a snapshot of my LendingClub Summary. It’s important to note that Adjusted Net Annualized Return is not a good metric until the loans have seasoned. As we move further along in this experiment we will start to get a better idea of where returns are trending and will begin to include return calculations using XIRR.
Conclusion
The current status of my LendingClub account is very typical for new investors. A handful of loans have been paid in full while just a couple have entered either grace period or the late 31-120 days stage. A majority of the loans are issued and current. As loans begin to season we will see more enter grace period at which point some borrowers will catch up on their payments and some will ultimately become late and eventually charge off. We’ll publish our next update in early October to provide a full update on the third quarter.
Performance measures are meaningless after such a short time, so there is no information here.
Your article is misleading to new folks who don’t understand this.
Fred, The entire purpose of this experiment is for readers to follow one account as it goes from a new account through the typical seasoning of loans. Ryan states in the article that the returns number is not a useful metric until the loans have become more seasoned.
re Fred93: silly comment. Its pretty clear in the title and the body of the message what is going on with this update.
Thanks for sharing this great post.
The real question is whether you would have invested $10,000 of your money in this investment at this time, knowing what you know. Playing with other people’s money isn’t the same thing and as others (and you) have said, the returns shown in this article are meaningless.
I’ll be following along. I opened an account last August as a test account with $10k and am happy to share my data with you.
Here is my personal experience. i signed up by depositing $5000 in Jan 2018 and today my adjusted account value is $5085. when i signed up it stated my returns would be somewhere from 7-9% but actually it’s very dismal. i will be withdrawing and closing my account soon if the same trend continues and just put the money elsewhere or atleast in a highyield CD instead of lending club. i’m very dissatisfied.
An update for my test account I mentioned above. Invested $5000 last August (2017) and then added an additional $5000 over the course of the next 4 months. A year later my balance is $10,624 and my annualized return is 7.76%. I used the advice Peter Renton delivered in spreading out my notes in small increments and, although originally I had spread my risk to include Grade F those were discontinued at some point over the last year and so I kept my biggest risks to Grade D, but primarily weighted in A-C, similar to the spread this article is based on. Would I put my life savings in a product like this? I wouldn’t put my life savings in any one product. But so far I am pleased and will definitely start making this a bigger part of my investment strategy.
As long as you keep re-investing the returned capital and interest your returns will be artificially high. Stop re-investing and your returns will drop like a rock and end up somewhere in the 4% range. Service fees take a bigger percent of your returns each month. For example, on a $25 note at 19.99%, the payment is $0.66 per month. On the first payment, the interest is $0.39, meaning that the $0.01 service charge is 1/39 of it; Toward the end of the loan, the service charge almost eats up your interest.
$550 of my total balance is available cash so I still really only have about 10k invested. Part of my experiment was deciding to see cash accrued so the returns are based off my $10k.