My one year experiment with Lending Club has led me to the following for those who do not live in a "funding state":
- It is easy and quick to get going in Lending Club, although I would recommend buying in slowly to get the best performance
- It is easy and very slow to get out of Lending Club (sold 150 Notes over two months)
- Learn how to find Pre-Grace Period status of Notes
- Don't hold on to Grace Period Notes and hold no hope for Late Notes (it's just better that way)
- There are three very different markets: A/B, C/D, E/F/G. I focused on E/F/G most of the time. My conclusions may not hold as well for the other two markets.
- Both High Yield To Maturity and Low Markup buying techniques work well
- Lending Club's Net Annualized Return is only valuable to compare against other investors and to track historical changes, the number itself is pretty much meaningless
I also wanted to be able to report on what it is like to get your money out of Lending Club (a concern for many). You can do it. It will take time. I am selling them off at about 2 to 3 Notes a day on average. I offer my Notes for sale at either 16% Cash-on-Cash-Return or a specific Markup, which ever leads to a lower price. I started with a 3.9% markup, and dropped it to 3.4%, 2.9%, 2.4%, 1.9%, 1.4% and now 0.9% markup. When I noticed that I was not selling 2 to 3 Notes a day, I would lower my Markup by 0.5%. I am not selling any of my Notes at a loss (except any Grace Period Notes, but those are becoming rare as my portfolio shrinks).
It is weird not going in and buying Notes anymore.
This has been a terrific experience. I have really enjoyed working with the P2P lending community, especially Peter Renton of Social Lending Network. There is so much great information out there to learn.
If you run across this post and are considering Lending Club as an investment, might I make a few suggestions:
- Read all you can. My blog, Social Lending Network (BTW Peter has a course you can buy that should give you plenty of information), etc.
- Start investing right away. Don't wait until you have all the details.
- Start small. As you gain experience (and make mistakes) your educational process will accelerate. You will not learn enough from reading alone, and you want your mistakes to be with a small portfolio.
- Make mistakes, but try not to make my mistakes (or Peter Renton's, etc. learn from us). Don't be afraid to make mistakes.
- Share what you learn. Start a blog (free at blogger.com) and share what you are learning. Link to great sources of information you've found.
- Get involved. The P2P lending community has several great leaders in it. Follow their twitter accounts. Read their blogs. Circle them on Google+. Comment. Share. Be part of the discussion.
Signing off for now.