Understand Your Lending Club Returns Better With These Cool New Graphs

Understanding Your Lending Club Returns

If you have logged into your Lending Club account today you will have noticed something new. Underneath your Net Annualized Return (NAR) number you will see a new link: Understanding Your Returns. This takes you to a brand new screen (just launched late yesterday) with some very interesting information.

Here is the graph I am presented with when I go to this screen in my main Lending Club account. I will explain this graph in detail below.

Lending Club Return graph with 100 notes

First we will deal with the purpose of this graph and then explain what we are looking at. Here is what Lending Club says:

The purpose of this chart is to illustrate how returns typically decrease over the life of an investment. If your account is relatively new, it is likely that your returns will decrease over time as some of your Notes become past-due and charge off. This chart is not a prediction of how your portfolio will actually perform and there are many factors that can impact your returns

A criticism that has been levied against Lending Club in the past is that they do not set investor expectations well enough. I hear this from new investors regularly. They are delighted with their 18% return and fail to realize that most likely this return will reduce to 8-10% as the account fully ages. This graph clearly shows a downward trend in NAR through at least month 18.

Here are some key points to help you understand this chart:

  • While each dot represents a Lending Club account, not all accounts are included in this chart. The default is to show only accounts with 100 notes or more and with no note larger than 2.5% of the portfolio.
  • Every dark blue dot represents one account at Lending Club showing two data points: their NAR and the age of their portfolio.
  • Every red dot represents an account with a similar risk profile to your own. In the graphic above you can see my weighted average interest rate in this account is 17.85% so the red dots show every account with at least 100 notes and a weighted average rate of between 16.85% and 18.85%.
  • The large light blue dot is your own account. I have highlighted my light blue dot with the red arrow.
  • In this graphic I have chosen to use Adjusted NAR (because it is more realistic) but you can also display the graph with regular NAR by toggling the ON/OFF switch on the top right of the screen.

So what happens when you change the filter from at least 100 notes to 500 notes? My account here has almost 1,700 notes so when I choose to display only accounts with at least 500 notes this is what we get. You can see in the graphic below there are far fewer accounts and a narrower band of returns particularly when the account ages.

Lending Club Return graph with 500 notes

My most aggressive account is my Roth IRA account with a weighted average interest rate of 19.2%. This is the account where I have focused completely on the high risk loans (grades D-G) from day one and where I use my tightest filtering. Not surprisingly, it has the highest NAR of all my Lending Club accounts. And it is also performing well against accounts with a similar risk profile. Here is my graph (below) for this Roth IRA showing those accounts with a similar risk profile and a minimum of 100 notes.

Lending Club Roth IRA graph

One Limitation – No Comparison To Folio Trading Accounts

For those people with Folio trading enabled on their account, your account will not be included for comparison here. Now, you will still be able to see your performance on this chart but your own account will be removed from the comparison graph of others. So, all the dots we see in this screen are for accounts that have never traded on Folio. I double checked this with Lending Club.

So, in the graphs above, my main account has had some Folio trades so my dot will be excluded from everyone else’s graph when others are seeing this graph. But in my Roth IRA I have never done a Folio trade, so in this case my dot will be included in everyone else’s graph.

Why? Because NAR does not account for trades on Folio. I know they are working on a tool that will display returns accurately for people who make trades on Folio but that tool is not ready yet.

My Take on the New Graphs

You are probably not surprised to hear me say this: I love these graphs. When Lending Club called me when this change went live yesterday afternoon and told me to check it out, my first reaction was wow! This is just the kind of thing I have been wanting – something that not only can set investor expectations but also provides a way to compare yourself to other investors. Some people invest in only B and C grade loans and then complain that their 7% return is below average. This will allow them to see that for their risk profile they may even be doing better than average.

Are these graphs perfect? No. I would like to see a way to turn off the dark blue dots so you are only seeing the red dots. I would like to see more granular filters for number of loans, not just three settings of 100, 250 and 500. I would like to be able to look at different portfolios in my account and just compare them (excluding the other notes). It would be nice to see selections to segregate 36 and 60 month loans.

Having said all that, I think this is a fantastic 1.0 implementation of these graphs. I think I will start to include these graphs in my quarterly updates.

One final note. Lending Club made a second change yesterday – an updated Lending Club PRIME. I will be discussing that change on Monday.

Now I would like to hear from you? Do you think this is useful or something that you will glance at once and never look at again. Please leave your thoughts in the comments below.

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.

Notify of
Newest Most Voted
Inline Feedbacks
View all comments
Dec. 5, 2013 3:35 pm

I agree that these are a great addition to those investors who do not partake in the trading platform. Naturally, as investors, we are into financial voyeurism and seeing how others are performing is fantastic. Additionally, for new investors it will help temper expectations and visually demonstrates the declining NAR for accounts as they age.

I agree with you on the customizations. While the red coloring is appreciated, for the more analytical of us, it would be nice to really delve down into investors with similar “risk” levels and see how they are performing by stripping away the extraneous information. It is interesting in your view of 500 or more notes that a young portfolio is already in the negative. Rough start for that investor!

Bryce M.
Dec. 5, 2013 3:54 pm

Overall this is a solid addition. I suspect there are some calculation problems with the portfolio characteristics. They appear to be including Fully Paid and Charged Off loans in the age of portfolio and possibly the interest rate calculations. In my own chart, they show my average age to be 13.1 months, but when I calculate it myself using notes.csv, it’s at most 12 months (unweighted by remaining principal) and 11 at least (weighted).

Bryce M.
Dec. 5, 2013 4:14 pm
Reply to  Bryce M.

In fact, the three places where one can see their weighted average interest rates inside the LC platform are each inconsistent with the other. For my account, where every loan is in 1 portfolio:

Weighted Average Interest Rate (under the Portfolio tab): 16.53%
Weighted Average Interest Rate (on the new graph left side): 16.6%
Weighted Average Interest Rate of my account (on the new graph bottom area): 16.68%

Dec. 5, 2013 4:29 pm
Reply to  Bryce M.

Bryce, what is it for your account under account details (on the right side). Is it the same as your portfolio screen?

Bryce M.
Dec. 5, 2013 5:14 pm

I’m afraid I don’t know where you are referring to.

Dec. 5, 2013 6:38 pm
Reply to  Bryce M.

Let me clarify Bryce – At your home screen, hit the ‘More Details’ link to the right of your account name and number. Once in this screen, what is the weighted average interest rate at the top right in the details section. I would imagine that this is the same as the one you are seeing on the portfolio screen. However given all the differences, I thought I’d ask.

In my particular case, my weighted average in the above location matches (within 0.01 and 0.04) what is shown in the new ‘Understanding Your Returns’ summary. It appears that the new summary is rounding to the nearest tenth in both my accounts.

Dec. 5, 2013 6:46 pm
Reply to  Peter Renton

I actually think they have updated the charts. All of my weighted average numbers now match. Both in account details, the summary to the left of the chart, and the number below the chart.

Rob L
Rob L
Dec. 5, 2013 6:20 pm

Very nice addition! One obvious caution. I use custom adjustments that are more pessimistic than the LC historic adjustments. With adjustments turned on for this graph all the other portfolios are adjusted per LC historic. For an “apples to apples” comparison you have to select LC historic rather than custom adjustments at your main account details page before viewing the graph.

Simon Cunningham
Dec. 5, 2013 6:25 pm

It is *so awesome* to see all the lenders splayed out like this. Investing at Lending Club can sometimes feel very lonely. There is no on-site community. You don’t see your fellow investors in each loan. However, this chart goes miles in helping me see my lending as part of a larger movement.

Dec. 5, 2013 7:00 pm

I can see a red dot on your graph where my big blue dot is on my graph. I’m more back towards around 13 months though.

Dec. 6, 2013 3:26 am

“I know they are working on a tool that will display returns accurately for people who make trades on Folio but that tool is not ready yet.”

What kind of time frame are they looking at for having this done? Is this another one of those “Stay tuned for details” items? What are the odds that DanB’s company will get funding for his planned mission outside of the solar system before this tool is done?

The way it is now seems rather skewed. If I understand your post correctly, even having Folio _enabled_ (but not making any trades) will prevent your stats from being counted. This seems like it would eliminate a non trivial percentage of accounts… and probably those on the higher end of the return spectrum. I would think the more active an investor is the more likely they are to have an activated Folio account — even if they do not intend to be an active seller.

Rob L
Rob L
Dec. 6, 2013 8:53 am
Reply to  Peter Renton

Yes, your comparison blue dot is displayed, even if you’ve traded Folio, but you are warned that your NAR may be inaccurate. I would have been disappointed not to have this available since I’ve only done a handful of Folio sales prior to LC’s very belated disclosure that trading IRA accounts isn’t permitted. Doubt they have any meaningful effect on my NAR.

Dan B
Dan B
Dec. 6, 2013 9:08 am
Reply to  Peter Renton

Core…………..Perhaps you should just be content with “stay tuned for details”, Core. Still, I’d say the odds you asked about are decent. After all, the competition for funding for missions outside the solar system is quite intense. The Russians, the Japanese, the Chinese, even the Indians, to say nothing of private efforts like mine. Money has many options to go to. It’s not like p2p where there’s really only 2 choices who can therefore pretty much do or offer whatever they want. 🙂

B. Mason
Dec. 6, 2013 8:26 am
Reply to  core

I can confirm that having Folio enabled but never making a trade yields that message banner. Long ago I put a note up for sale but it never sold, and I haven’t stepped onto Folio since.

G Arnett
G Arnett
Dec. 6, 2013 5:26 pm


A couple of questions/thoughts. Hopefully I am not repeating something, but maybe I just don’t fully understand the graph.
1) What is the explanation for the regression over the long term to the averages we see? Is it mostly due to unpaid notes? It looks like few if any accounts are above 10% after 27 months. This is consistent with what You, Simon and many others have been saying we should expect in the long term.

2) There is a tight clustering of nearly all accounts after 2 years in the 5-9% range with very few outliers. Also, a visual inspection of the risk profiles at these later dates tells me there may be little difference between the higher risk accounts and the less risky accounts. It looks to me like the riskier accounts start off better, but over the long term are no different than the accounts with limited risk. I am not a statistician, but I’d bet that assumption becomes even more evident if we had enough data points to look beyond 30 months. The variability of all accounts appears to decrease as they mature and they seem to be regressing to a mean around 5-9%

If true, this would be a paradigm shift from what we have been saying all along about the risk profiles of our accounts. We may be exposing ourselves to unnecessary risks by purchasing D-G notes. If A-B notes are more likely to repay with a downturn in the economy then perhaps A-B notes represent the better long term investment.

3) If the tight clustering is truly at 5-9% for the vast majority of accounts this investment vehicle is still not as good as the Stock Market over the long term when you factor in 10% historical returns and dollar cost averaging. Hopefully you can convince me I’m wrong because I like this investment vehicle better than mutual funds, but my interpretation of the graph suggests Stocks still have the upper hand over time.

New Jersey Guy
New Jersey Guy
Dec. 7, 2013 10:11 am

Core said: ” This seems like it would eliminate a non trivial percentage of accounts… and probably those on the higher end of the return spectrum.”

I gotta agree with Core on this, and investors should look at this graph with a grain of salt. Since 24 states are not allowed to participate on the Lending Club platform, that means nearly 1/2 of the investors do not show up on those graphs. Therefore, the graphs display a “decent” picture of how an investor might stand, but the results are not truly accurate or close to it. If Core is correct in assuming that Folio players invest on the higher end of the spectrum (which in my opinion is correct), then you can see how Folio investors can greatly skew your overall results.

Just like my NAR (which is currently a NEGATIVE 34%), it’s impossible for Lending Club to accurately display really reliable information until they are fully integrated with Folio. Granted, Lending Club and Folio have made some good strides over the past couple of months. Despite this, Folio users still need to rely on 3rd party sites and their own accounting methods to track true performance.

Oh, and best of luck to DanB on his solar journey!

Dec. 7, 2013 10:45 am
Reply to  New Jersey Guy

New Jersey Guy- I believe I have figured out why Lending Club is doing this. It is a conspiracy. (No surprise there.) By deliberately eliminating most savvy investors from the scatter plot, a given investor will see his returns higher than he otherwise would, relative to other dots. This keeps the investors happy. Much happier than they would be if they saw a large percentage of the dots above their own.

If LC can place your own blue dot there in the proper place, then there’s no technical reason your black dot cannot be shown on other’s plots. This is deliberate deception on their part. They aren’t working on any “improvements”. They don’t ever _want_ people to see those other dots. More dots means more trouble. They aren’t so dumb. They knew exactly what they were doing when they hatched this diabolical dot scheme.

It seems to be working. Just look at all the people beaming with pride on the forum. Everyone posting their screenshots, and unsurprisingly, most all of the blue dots are at the top end of the range. Even if a given user is not happy with his raw numbers, he’s gotta be happy that he’s beating everyone else. Little does he know that he’s _not_.

B. Mason
Dec. 8, 2013 8:37 am
Reply to  Peter Renton

And when they make a NAR to include trading, then they should include a concomitant filter on the chart options to include/exclude Folio traders. Strategies that involve trading are fundamentally different than those which do not.

New Jersey Guy
New Jersey Guy
Dec. 8, 2013 9:55 am

Core said “Just look at all the people beaming with pride on the forum. Everyone posting their screenshots, and unsurprisingly, most all of the blue dots are at the top end of the range.”

Peter Said: “For someone to be active enough to be reading and posting on the forum they are clearly spending a lot of time on their p2p investments. I would expect most of these people to have light blue dots near the top end of the spectrum.”

Not to elaborate on this subject, but I think Peter is right. I thought about the same exact thing right after I posted my last comment.

With all the financial masterminds and the one solar-explorer rocket scientist on this forum, Lendacademy members should be ahead of the Lending Club curve.