My March 2010 Lending Club Performance Update – Earning a 15.6% Annual Rate of Return

by Hank Coleman

As of today, I’m enjoying a 15.62% annual return on my investments with Lending Club. As you can see by the graph below, I thought that I would breakdown my investments a little bit more in-depth for you this month. I have 30 loans ranging between $25-$50 each invested. I actually stopped investing $50 per loan and switch to $25 per loan I invest in now. I like the diversification the smaller individual loans give me.

What Is Lending Club?

Lending Club is the awesome peer to peer lending investment website where you can lend money without a bank straight to individuals who need it the most.  The beauty of the service for investors is that you can earn a great interest rate on your investments.

For those of you who are not familiar with Lending Club, there are usually about 180 loans on the website at any given time waiting for lenders like you and me to come along and fund them.  And, you can search through them all by several criteria.

My Lending Club Loan Criteria

I think that one thing that makes my investments successful is that I am picky in who I lend my cold hard cash to. I have a very strict lending criteria that I try and stick to in order to mitigate my risk of default. Here are some of my lending criteria that I use when choosing loans with great returns. Out of my thirty loans, I have had one paid off completely (2 years early) and two borrowers that have miss payments (one is caught back up and the other is in collections). So, 1 out of 30 for default is right in line with Lending Club’s historical average 2.4%.

My portfolio of loans primarily contains a mix of Grade C, D, and Grade E loans.  I do not waste my time with conservative A or B class loans which do not pay very much interest.  One of the most important things is picking out which loans to invest in.  While savings accounts, money market funds, and certificates of deposit are paying minuscule rates of return, I continue to be quite happy with my Lending Club experience and the excellent return that I have been earning.

Since May 2007, Lending Club has issued 10,419 loans worth $99,763,900. That works out to over $6.8 million in interest alone paid out to lenders of the site. I love it. I plow back all of my earnings and make new loans with it. So, in a way, my annual interest rate is more than 15.6% thanks to the power of compounding interest (with a twist). Check out my review of Peer-to-Peer Lending, what it is, and how to get started.

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MoneyCone April 8, 2010 at 11:48 am

Thanks for the writeup! I always wanted to give Lending Club a try.. how easy is it to liquidate paid loans? Is it in the form of cash or do they have a points system, which needs to be cashed?

Hank April 9, 2010 at 11:57 am

@MoneyCone – While I have not withdrawn any money yet (thinking about the investment long term), it is all in cash. There is no point systems. I don’t think that they are allowed to work in anything other than cash. They are registered through the SEC and your cash (cash only) is FDIC insured.

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