Wednesday, January 06, 2010

Added a new Lending Club investment loan purely from recent cashflow

My experiment with investing in consumer loans through Lending Club continues with good success. My Net Annualized Return is now at 14.02% with no delinquencies. This morning I just invested in another loan using purely cash from recent cashflow over the past six weeks. Payments include both interest and return of principle.

Actually, I selected a loan and placed an order for it. It is currently in funding and 75% funded. It still has 11 more days to get fully funded, which appears to be plenty of time (11 days out of the 14-day funding period.) The interest rate on this loan is 17.39%. It is for debt consolidation. The loan grade is E4, which is a mediocre quality, but the person has good, verified employment. The Lending Club screen says that loans at this grade historically have a 4% default rate, so the net expected return is about 12%.

My experiment is going well and I would like to put more of my idle cash into Lending Club, but I need to get a bit more stability in my own work income and rebuild my rainy-day fund a bit more before I have much in the way of risk capital to invest. If my work prospects seem reasonably bright in a few weeks, I will likely at least boost my experiment a bit. I actually do have money earmarked for a somewhat larger experiment, but since there is risk involved, I intend to proceed cautiously. I could probably expand this experiment by six to seven times before it would even show up on my radar as even a minor investment. As an experiment, by definition, I am prepared to lose the entire investment.

-- Jack Krupansky


At 1:35 PM EST , Blogger Chris Roane said...

You should keep us posted on how the Lending Club system works out for you.

I just setup an account, but I noticed that they did not verify the "income and net worth requirements" that they make you agree to. I don't understand why they would have these requirements, and as far as you know, do they actually validate these requirements?


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