### Author Topic: Help with Lending Club Math  (Read 2694 times)

#### k-vette

• Bristles
• Posts: 256
##### Help with Lending Club Math
« on: November 25, 2014, 11:10:58 AM »
I'm trying to get an estimate on my ROI.  (Nothing in lending club at the moment, but highly considering it.)

Let's say I put \$5,000 in, I can easily calculate my return at the end of a 3 year period.  However, I'm having trouble calculating the return if I reinvest the entire payment I receive each month.  I created an excel sheet that shows the interest, term, principle, and monthly payment.  The term is at 36 months.  Below it I put a box that takes the original \$5,000 principle, and adds to it the payment received.  So know I have \$5,000 plus the payment I received.  (Interest and principle)  I recalculate the interest based on 35 months left.  In the end, it doesn't add up.  So I've obviously miscalculating something.  Maybe I need to subtract the total principle paid within that month from my invested amount?

So \$5,000 up front, following by investing everything received each month up to 3 years.  What do I have now?  And is there a way to show a month by month chart?

#### juuustin

• 5 O'Clock Shadow
• Posts: 67
##### Re: Help with Lending Club Math
« Reply #1 on: November 25, 2014, 12:09:34 PM »
I feel like you would need to somehow weight each interest payment.  So if you are getting 10% for the life of the loan, the \$500 would be weight 1 because it spans the entire period.  The incremental interest that you earn on the reinvestment would need to be weighted as a proportion of the incremental investment.  I am not sure how to do this, but it makes sense in my head.

#### WisconsinFI

• 5 O'Clock Shadow
• Posts: 33
##### Re: Help with Lending Club Math
« Reply #2 on: November 25, 2014, 12:40:36 PM »
This discussion among many others that can be found by searching on that forum may help:

You might be over-doing it trying to manually calculate it. Have you checked out NickelSteamroller?

http://www.nickelsteamroller.com/#!/stats/lendingclub

They provide an estimated ROI depending on certain criteria.

#### GGNoob

• Pencil Stache
• Posts: 725
• Age: 32
##### Re: Help with Lending Club Math
« Reply #3 on: November 25, 2014, 12:49:35 PM »
I used XIRR to calculate my returns
http://www.lendingmemo.com/xirr/

Sent from my iPhone using Tapatalk

#### arebelspy

• Senior Mustachian
• Posts: 27463
• Age: -999
• Location: Traveling the World
##### Re: Help with Lending Club Math
« Reply #4 on: December 03, 2014, 12:28:14 PM »
If you're just reinvesting the money it throws off, why would you need to calculate anything other than what you cash out?

Take what you put in, and what you cash out, put it in a financial calculator, and figure out the CAGR.

(No one mentioned though that this is irrelevant, so maybe I'm the one who's missing something... though I don't think so.)

If you're adding in NEW money, that's where it gets tricky.  Reinvesting the same money doesn't add any complexity.  If you do add in new money though, IRR (or XIRR) is the best way to go, as Logan said.
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#### shotgunwilly

• Pencil Stache
• Posts: 547
##### Re: Help with Lending Club Math
« Reply #5 on: December 03, 2014, 02:25:20 PM »
I'm trying to get an estimate on my ROI.  (Nothing in lending club at the moment, but highly considering it.)

Let's say I put \$5,000 in, I can easily calculate my return at the end of a 3 year period.  However, I'm having trouble calculating the return if I reinvest the entire payment I receive each month.  I created an excel sheet that shows the interest, term, principle, and monthly payment.  The term is at 36 months. Below it I put a box that takes the original \$5,000 principle, and adds to it the payment received.  So know I have \$5,000 plus the payment I received. (Interest and principle)   I recalculate the interest based on 35 months left.  In the end, it doesn't add up.  So I've obviously miscalculating something.  Maybe I need to subtract the total principle paid within that month from my invested amount?

So \$5,000 up front, following by investing everything received each month up to 3 years.  What do I have now?  And is there a way to show a month by month chart?

So, I'm guessing you're showing an outrageous return after 3 years?  You can't add the principle to your invested amount, because it's not return. If you could post the formula you're using, we could probably help you better.

#### rmendpara

• Pencil Stache
• Posts: 602
##### Re: Help with Lending Club Math
« Reply #6 on: December 03, 2014, 03:05:08 PM »
I'm trying to get an estimate on my ROI.  (Nothing in lending club at the moment, but highly considering it.)

Let's say I put \$5,000 in, I can easily calculate my return at the end of a 3 year period.  However, I'm having trouble calculating the return if I reinvest the entire payment I receive each month.  I created an excel sheet that shows the interest, term, principle, and monthly payment.  The term is at 36 months.  Below it I put a box that takes the original \$5,000 principle, and adds to it the payment received.  So know I have \$5,000 plus the payment I received.  (Interest and principle)  I recalculate the interest based on 35 months left.  In the end, it doesn't add up.  So I've obviously miscalculating something.  Maybe I need to subtract the total principle paid within that month from my invested amount?

So \$5,000 up front, following by investing everything received each month up to 3 years.  What do I have now?  And is there a way to show a month by month chart?

If I'm not mistaken, the return estimates assume that all payments (interest plus principal) are reinvested at the same rate.

It gets tricky when you add new principal or make withdrawals, because your ROI isn't as obvious since your base changed. In that case, perhaps take a monthly principal balance average and compare that to your monthly average interest?

In Lending Club you can create "portfolios" or groups of notes that you can analyze separately. This doesn't change anything except how you view returns. I imagine this function in the website was created specifically for the problem you and many others have when capital is added or withdrawn and it's difficult to interpret the returns.