Author Topic: Lending Club Default / Grace Period Questions  (Read 3748 times)

Lowerbills

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Lending Club Default / Grace Period Questions
« on: December 16, 2015, 12:23:01 PM »
Quick intro - I haven't been investing long on Lending Club, as my state was just recently opened to investors.

I funded my account with $5,000 initially and over the course of a couple weeks built a portfolio of basically 100 notes @ $50 each.  (There are a few at $25 and a few at $75).  No individual note makes up more than 1% of the portfolio.

For those of you who have Lending Club or Prosper accounts, when did you start to see your first notes go into "Grace Period"?
What do your default numbers look like across credit ratings? (Using Lending Club's A-F scale).  Really what I'm getting at is, for those with experience in this area, how quickly after the note was funded did the borrower start missing payments? 

Has anyone had any success buying notes once they go into Grace Period?  How about ditching notes once they go into Grace or 30 days late?

So far, I'm up to 116 notes with 4 that have been paid in full, and 0 defaults or grace periods.  (KNOCK ON WOOD).  Thinking of contributing more once I get a little more confident in my strategy.

Anyone care to share any filter criteria they feel is especially useful?

Thanks!


RockYourSocksOff

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Re: Lending Club Default / Grace Period Questions
« Reply #1 on: December 16, 2015, 12:59:40 PM »
I've been using Lending Club for about 6 months now.  I saw notes go into grace period or late 16-30 days in the first month.  I've only had one note charge off so far but I've had 4 go into bankruptcy so more are potentially pending charge off.

I only buy notes through the trading platform.  My strategy is to buy 36 month notes that have made at least 14 on time payments.  I try to select notes that are for debt consolidation and I avoid notes that are for home improvement, vacation (are you freaking kidding me??), medical bills and other.  Once I narrow those items down I buy the ones that look best (credit score, interest rate, discount etc.).

I have played with buying grace period notes and allowing them to cure.  I had decent results but decided that I did not want to use my Lending Club money to speculate so I moved back to my original strategy.  Because I sold curing notes for a song I more or less broke even on that experiment.

FLBiker

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Re: Lending Club Default / Grace Period Questions
« Reply #2 on: December 17, 2015, 02:03:23 PM »
I use these filters, more or less: http://www.lendacademy.com/investing-lending-club-prosper-2014/

I've been making 8-9% per year for the past few years.  That said, it's kind of time consuming and I don't love the tax reporting, so I'm thinking about giving it up.  I also feel like my ROI has decreased slightly.

MoneyRx

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Re: Lending Club Default / Grace Period Questions
« Reply #3 on: December 17, 2015, 02:43:17 PM »
I'm also new to lending club (started August 2015 with $2500). I have my automated defaults set at 5%C, 15%D, 50%E, 20%F, 10%G. I do not discriminate based on what the loan is for. In just a few short months, I have had 2 notes go into the grace period, 1 F ($75) and 1 G ($150). The F person must have taken a separate loan out and fully paid off my loan. The G person has had plenty of troubles and there are 20+ collection logs of attempting to contact him, and some say "buyer promised to pay" whatever that is worth lol.

So far I am at a -1.13% return, however, this is very short term and if this guy somehow comes up with the money I will be back into the positive.

I started out doing $75-150 per loan to get my money invested quickly. I had quite a few loans fail to close and felt like my money was just sitting there and not being invested. Now I have my investments set at $25/loan to decrease variance and continue to get money invested quickly once I reach $25 in my account.

I haven't purchased or sold any loans on the trades, as there are fees and people often request a premium for what the loan is worth. My estimation is this is a less profitable route than purchasing new notes.
« Last Edit: December 17, 2015, 03:00:07 PM by MoneyRx »

GGNoob

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Re: Lending Club Default / Grace Period Questions
« Reply #4 on: December 17, 2015, 03:03:21 PM »
Everyone posting here so far seems pretty new to LC. What are you guys using to Invest? For example, I use LendingRobot.com to invest through the API to get instant access to the latest loans. Lending Clubs "auto invest" is slow and basically invests in the leftover loans. LendingRobot can help you build an easy filter or you can just choose fully automatic investing and let them do everything. My preference is to keep $25 notes as long as possible to keep my risk per loan at a minimum. With API investing, I can still get my money invested pretty quickly without having to go more per note.

Point here being that by using great filters (do your research) or letting LendingRobot evaluate each loan for you, you'll have a better chance of having less defaults than most.

Just thought I'd toss that information out there for you guys. I'm not trying to seek referrals as I have more free investing remaining than I need, but if you guys want the extra $5k managed for free, message me for a referral or find the referral link on my blog.

I started investing with LendingRobot when they first launched, before liquidating my Lending Club account and moving more money into stocks. I've since started putting money back into P2P lending because I've always been a fan and just couldn't stay away!

MoneyRx

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Re: Lending Club Default / Grace Period Questions
« Reply #5 on: December 17, 2015, 03:32:30 PM »
I use the auto-invest on LC, and since I still check it regularly, If I have >$25 in my account that didn't autoinvest I will grab a high % loan that is close to funding. Similar to stocks, I go with the mantra time in the market beats timing the market. Since the loan % are already set to account for risk (credit score, income, etc), are there really loans that are "higher quality" than others? I haven't done a ton of research but my current opinion is no there aren't.

GGNoob

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Re: Lending Club Default / Grace Period Questions
« Reply #6 on: December 17, 2015, 05:50:49 PM »

I use the auto-invest on LC, and since I still check it regularly, If I have >$25 in my account that didn't autoinvest I will grab a high % loan that is close to funding. Similar to stocks, I go with the mantra time in the market beats timing the market. Since the loan % are already set to account for risk (credit score, income, etc), are there really loans that are "higher quality" than others? I haven't done a ton of research but my current opinion is no there aren't.

When back testing loans based on filters, yes, there is a difference in notes. I used to spend time researching and choosing filters and having another program invest through the API with those filters for me. Now I just use LendingRobot and have a single filter that says only to invest in loans that have an expected return of 12% or more. With that, it can invest about $2,000 per week at $25 per note. I'll raise that to about 14% or more once my deposit gets invested.


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AM43

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Re: Lending Club Default / Grace Period Questions
« Reply #7 on: December 18, 2015, 08:51:32 AM »
Been investing with LC since 2009, so i guess that makes me a veteran.
Started off with less than $1k and slowly build it up to $20K now.
Never invested more than $25-50 per note.
I can tell you that average default rate(for me) is 5-6%.
On 750 notes I own 50 in default.
I have filters set up and also signed up for automated investing.
On average my returns are 9%, adjusted net returns right around 8.5%.
All and all I am happy with my returns considering that banks, CDs etc pay less than 1%.