My Lending Club Experiment Results – 1 Year Performance

Investments are scary.

There’s so much unknown, and so little trustworthy information. Whenever I learn about “A new way to double your income,” I roll my eyes, but secretly wonder what would be possible if I pursued it.

I love reading about what others do to grow their investments, especially when there’s a step by step aspect to it. Which is why I’m documenting my journey with Lending Club.

I first heard of Lending Club from my friend Nick Loper as another option for passive investments from his Prosper account. Nick’s results are encouraging to a would-be investor.

What is Lending Club?

Lending Club is a peer-to-peer lending website. You can request a loan from their website or you can invest your own money into small amounts ($25 min) as loan capital.

As an investor… that’s cool.

Here’s how it works:

Now, I’m not claiming to be a financial expert. I don’t understand a lot about Lending Club, but the idea of investing money passively as a loan, and to be paid back over time and gain interest sounds like fun to me!

Risks Involved

There’s no such thing as an investment without risks. Lending Club’s model involves investing your money in different “notes” (another confusing banking term for a loan). These notes are graded based on multiple factors like credit score, income, loan amount, and loan purpose.

Notes are graded A-F. Here’s some more helpful info from Lending Club about the notes:

My Journey

I started my investment with $200 on January 8th 2016. I thought, “Why not? I have some extra cash.”

Well, I played around with the platform. Gained some confidence. Chose my allocation for where I wanted my money to go. And I watched and waited.

I researched how “expert” investors allocated their funds and made my own version of where I wanted my money to go. Lending Club has a great automated system that will invest your money in $25 minimum amounts into your targeted locations.

My current allocations:

After investing another $650 over 6 months, here are my results as of February 1st 2017.

RESULTS

Essentially, I made $56.47 (Formula: $906.47 – $850). A 6.6% return on investment. Fairly comparable to our stock market, if conservatively invested.

This isn’t the whole picture. Technically, my account is worth more than $906.47; however, this value is calculated by subtracting any notes that are late.

As of this blog post, I simply re-invest my interest earned automatically back into Lending Club’s system. I could stop this and take out the $21.61 cash earned.

So, I’m not throwing a party yet.

Defaults

A loan that defaults means that the person who took out the loan cannot pay it. All money invested is lost.

As of this writing, I have 2 loans that are late (between 31-120 days), so they could turn into defaults. In which case, I lose my a part of my $25 investment. However, the interest and principle from my other loan investments will keep me in the black.

My Review
Overall, a fun mini-investment to play with. I will be investing more money from my coaching business into Lending Club.
If you have a few extra hundred dollars lying around and you want to play with investments, I encourage you to give it a shot!

About the Author Alex