Quote: (04-16-2013 10:53 PM)TexasMade Wrote:
Set up sucks for real. One thing I noticed, all my loans were between 8-15 months. Because I was buying basicallyresold loans at a higher cost, I lost about $300 dispite the fact I had only ome default so far and a return rate of 13%. I need to account for that lost money.
WestCoast had some great advice and I would use that as a rule of thumb. As far as short term, I dont know if you should invest in anything more than a "C" if you want that 1K to make money. You are right no about the car notes. Good luck and I hope you do better than me.
I took an L on the lending club, I chose a bad business partner in Mexico last year, dropped too much on my motorcycle, and bought gold at 1900. Bad year last year for me. At least I am in Thailand haha.
Been doing lendingclub for a little over a year now. I screwed up in the beginning, used some of their automatic options and ended up w/ large loan sizes that I couldn't unload before it went late and became unsellable- I'd say if you guys have any loans larger than $50, sell them immediately. Personally I'd only take $25 pieces of loans. There are enough to go around - just get your filters set up, and check it a few times a week. It takes ~5 minutes a day. Returns after a year are about 10%, assuming everything that is more than 30 days late will default at this point.
Basic plan:
Get a cashback or some kind of rewards credit card, and use that to fund your account. I get 2% cash back on my AmEx, so that's an instant return I'm not accounting for in the 10% figure given above.
My filters-
Max loan size 25k
36 month only
Loan purpose: refinance, cc
Min 4 years employment
Earliest credit line: 5 years
Exclude already invested
All states except CA (higher default rates)
0 delinquencies last 2 years
Home: own/mortgage
Then I go through and check each loan, verify that average payment is less than 10% of monthly income, and give it a quick eyeball test to see if it looks legit. Invest $25 in each loan, no more. It's tough to find anything beyond a C loan that qualifies given these filters, but there are plenty B/C to choose from. A loans aren't worth it in my opinion.
Set up the trading platform. Log in at least once a week to check for loans going late (if you have $10k+ in LC you'll be doing this anyway to trawl for new loans as your interest piles up). Once a loan goes 30 days late, sell to recoup the principle. You should be able to sell. I'm now doing this with loans as soon as they go 16 days late. In most cases you've already made back the 1% anyway so you aren't actually going to lose anything.
My stats: ~510 loans, 13 months since initial investment, 3 default/charged off, 4 late 31-120 days (on trading platform, progressively lowering price). Assume those late loans will default, that's 7/510 after a year, about a 1.3% default rate, which isn't bad. That said, statistically loans are significantly more likely to default in the second year of payment. Again, in theory you could lower this to 0 if you sell every note that goes 16 days late.
I ended up pulling about $3k out of LC, as I'd stockpiled interest from sitting on it and wasn't finding new loans fast enough to reinvest.
I think LC has potential; once the ball is rolling, with about 5 minutes a week you should be able to average ~10% returns on a 10k or so investment. At larger volume it's going to be tough to enough loans fitting the filters I laid out above. If you're on top of it, your filters wouldn't need to be so strict, and you could likely resell all loans going late immediately, but at large volumes that'd be a time sink. A $100k+ LC account would probably be a pain in the ass. The other huge disadvantage is interest income is taxed at nominal income tax rates - this can be solved by parking your LC account in an IRA.
