Lending Club Review: How I Got A 11.37% Return After 2 Years

Lending Club Review: How I Got A 11.37% Return After 2 Years

What is lending club and how can you make money from it?

(listen to the podcast episode if you don’t want to read it lol)

Lending Club is a peer-to-peer (P2P) lending platform on the internet that let’s people pool together money to fund people who apply for loans.

You can use my link here so we can both get benefits if you’re interested in making an account 🙂

Someone could be looking for financing to remodel and renovate their homes, or they could be consolidating or refinancing their debt.

You buy “notes,” AKA loans, in increments of $25.

Your hypothetical returns on the loans that you buy depend on the credit score and credit worthiness of the individual that applies.

The person who applies for a loan doesn’t get their loan until their entire loan is funded.

To put it another way, you don’t actually buy their notes until enough investors pool together money to reach the amount that they’re requesting.

You make money when the person starts paying back their loan.

You get your percentage of your principle back, along with the interest.

It gets divided up amongst all the investors based on how many notes you all bought.

My returns: 11.37%

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So you could, in theory, spread your $1000 across many $25 notes of all Grade A people and get lower returns.

You could spread your money across all people with lower credit scores and thus get higher returns but also have higher risk that they’ll run away with your money and you won’t get any of it back.

After looking into the literature by other financial bloggers, I saw that there were almost no difference on returns between investing in a weighted-average sort of way to hedge your bets (as in, more Grade A’s, less Grade B’s, even less Grade C’s, and down and down the line), versus spreading your money evenly across all Grade classes.

So I spread my money evenly across all grade classes.

You can read my initial investing theory based on their blogs here.

Read: Getting My Feet Wet With Peer to Peer Lending Via Lending Club

The hard part about the returns

However, the hard part was spending the time sifting through all the notes to choose the “right” ones to invest in.

Because everyone’s situation was different, I tried to look beyond the numbers and see if I could ascertain their life situation and trustworthiness based on the town, age, profession, income level, how many income earners, current debt level, how many times they’ve defaulted, etc.

I tried to apply as much humanity as possible to the numbers besides just looking at cold analytics with no emotions attached.

Looking beyond the numbers to get to the human component of investing

Whereas some people might poo-poo investing in the Grade D’a, for example, I understood the plight of the Grade D credit score people because I have been there myself.

After coming back from traveling Asia for 4 months, my credit score was really low because I had failed to pay some credit card monthly payments because we didn’t have access to wifi.

I really tried to read between the lines of the story that the numbers were trying to tell me because they F’d up by accident like me and their credit scores took a hit.

Chalk it up to luck for my first year 2018, almost no one defaulted, and I had like a 10% return after half of them paid off their loans.

Screen Shot 2019-12-10 at 11.40.26 PM.png
This picture doesn’t show all of my notes but it’s just to give you an idea

You can see that the Grade C’s and Grade D’s have as much of a pay back rate as the Grade A’s.

So take that!

Then this year 2019, majority of them paid off their loans and I was able to withdraw most of my initial investment of $1000.

Screen Shot 2019-12-10 at 11.37.11 PM.png

Screen Shot 2019-12-10 at 11.37.22 PM

You can see from the top right hand corner of this screenshot that my weighted average returns is 11.37% over the whole time I’ve had the investments.

My thoughts on these returns

There’s a saying that wealthy people have at least 7 different streams of income.

While these returns are nice and all, and I do love the idea of having different sources of income besides just stocks and bonds, I thought it was better to have money in Vanguard in terms of liquidity.

You can see that even after 2 years, my loan investments still aren’t paid off, though most of them are.

Don’t invest here if you’re going to be in a pinch

If I were in a financial pinch and wanted money real fast, I wouldn’t be able to sell the loans as fast as I would like.

Whereas with Vanguard, I could sell the shares and have the money in bank account in a couple of days.

The human component of these returns

I would like to think that my returns show that automation isn’t always best when it comes to humans.

I only say this because the bloggers who I learned from used the automated investing feature of Lending Club to invest their tens of thousands of dollars.

I think ESI Money, one of the bloggers I read from, actually invested over $75,000 into Lending Club notes, automated…lol.

Correct me if I’m wrong though.

I manually hand-picked the notes, laboriously reading over their details, and made the call.

However, what you’re reading could be survivor bias where the winners of any particular trade gloat or showboat their “strategy” that worked by luck or chance.

Would I invest in Lending Club again?

I suppose the only way to know if my “human component” loan investing method works in the long run is to keep investing more money in and see if the returns keep happening over the long run.

However, after reading Essentialism by Greg McKeown, I want to start focusing on a core investment portfolio that I don’t have to spend much time researching.

That basically is Vanguard.

So I am starting to refocus my investment strategy and cashing out of my cow that I invested in via crowdfarming, and my peer-to-peer loans.

What I’m doing now

I just transferred out another $300 from the $500 I already transferred out.

That leaves about $200 left in my account from my principle.

After it’s all said and done over the next year or two, I’ll probably have a return average of about 10-11% before taxes.

Not too shabby 🙂

And start doing more side-hustles to invest more and more into Vanguard to reach my one million dollar mark of investment worth.


Resources mentioned:

Jack The Dreamer

I'm a dreamer. But you know what? All the best people are. And if you're one too, join the revolution! My blog is about being financially independent and working towards that goal each and every single day so that we can all start living the life we've always dreamed of! Jack the Dreamer, over and out!