Lending Club Returns Update 4Q13

Another quarter has come and gone, so it’s time for an update on the Lending Club returns I’ve been getting on my account.  At the end of the third quarter, my account was sitting at a return rate of 14.69%.  It’s actually improved a bit since then, but Lending Club has also added the ability to adjust the displayed NAR, which does some funny stuff (see below) and reduces the rate a bit.  I think that’s a good thing (again, see below) and that’s the rate I’ll likely be using for future updates.

Lending Club Adjusted NAR

A few months back, Lending Club introduced what they’re calling an adjusted NAR.  Basically, it uses the historical charge off rates of loans at the different stages of delinquency.  Obviously, the current loans have a historical rate of charge off of 0%.  Once they go into the Grace Period, about 23%, 16-30 days late, about 49%, 31-120 days late, about 72%, and in full default, about 86%.Beating Broke Lending Club Update

As an example, my portfolio currently has two notes that are in the 31-120 days late category.  So, when Lending Club is adjusting my NAR, they use the 72% figure and assume that 72% of the principle will be lost.  Using that number, they then calculate the new, adjusted NAR.  With the two notes late, my adjusted NAR is currently showing as 13.16%.  Still a very healthy number, and likely a more realistic number.  I like the new adjustment, as it should give investors a more realistic number to look at.

Lending Club Defaults and Late Notes

As I mentioned above, my portfolio currently has two notes that are 31-120 days delinquent.  And, if you go by the historical numbers, those two notes have about a 72% chance of eventually going into collections.  I’ve been lucky enough to only have had one note actually go that far to date, and the collection agency was able to get a bit of that money back for me.  It wasn’t the entire amount owed, but a significant portion of the principle, which I was happy for.  I could try and sell off the two delinquent notes, but at this point, I wouldn’t get much out of them, so I think I’ll just ride them out and see what happens.  The total principle involved is only about $35, so it would mean about a month and a half of lost interest payments.  That’s a risk I’m willing to take.

The Future of My Portfolio

With the rates I’m getting, I don’t foresee stopping my investing through Lending Club.  I may even start putting some more money into the account sometime in the future.  At the moment, I’m content to just leave it and reinvest the payments each month.  I’ve seen a few other investors that have either significantly changed how they’re using Lending Club, or have begun backing out of it altogether.  I think it’s something that you need to be able to change how you do it, but I also believe that backing out altogether is a mistake at this point.  The technology is still relatively new, and many of the changes that we’re seeing Lending Club make have been for the better.

I’ve created a page that consolidates all of the posts I’ve done on Lending Club, as well as the quarterly updates since I began doing them.  If you’re interested in starting to invest in Lending Club, you can read more on my Lending Club page, or you can sign up for an account and give it a go.

Top Personal Finance Posts of 2013

I always find it interesting to go back and look at the top traffic posts of the previous year.  I have no idea, really, whether you will find the same interest in this list, but I’m going to throw it out there on the off chance that you do think it’s somewhat interesting.  Or, maybe you’ll find a few extra posts that you haven’t read, but should.  Either way, here’s the 10 top personal finance posts of 2013 on Beating Broke.

  1. Are Insurance Companies Just Big Ponzi Schemes?
  2. 4 Top Mobile Apps to Help You Pay Off Debts
  3. Bathroom Remodels on a Budget
  4. Cash Back Credit Cards with no Annual Fee
  5. The Joneses and Jealousy
  6. Change Your Thoughts and Change Your Wealth
  7. How I Select My Lending Club Investments
  8. How I Save More than Just Money By Cutting the Cable
  9. Car Accident. Should You Pay Out-of-Pocket for Repairs?
  10. 1950 vs. Today.  Have Our Changed Spending Habits Improved Our Lives?

That’s the list.  Some of those are actually quite old, and are just perennial favorites, but there’s a few new ones in there that are quick risers!  Take a look through them, leave a comment or two.

Here’s to a good 2014 for everyone!

How Your Confidence Affects Your Finances, Part One

The other night, my husband and I watched Maxed Out, a documentary about the credit card industry and the effects using credit has on individuals’ lives.

While the movie itself had some dry sections, the heart of the movie, to me at least, was how people responded to heavy debt loads.

Of course, heavy debt loads is a relative term.

The Worst Case Scenario

One college student who was $12,000 in debt chose to take her own life rather than face the endless collection calls about a debt that she obviously felt was insurmountable.

Another woman, Yvonne Pavey, was in debt, but then, with late fees and penalties, the amount of debt she faced spiraled out of control.  Her solution was to simply drive her car into a nearby lake.  Her body was found at the end of the Maxed Out documentary.

The Endless Anxiety and Despair

Stay Confident and Pay Off DebtAnother woman in the documentary began to struggle financially after her husband died and she could no longer keep up with the house payments.  Rather than sell the house, she chose to finance her monthly $4,000 house payments on her credit card.  When she was interviewed for the documentary, she was weeks to days away from foreclosure.  The pain and despair she felt was palpable.  While she hadn’t taken the drastic measure of taking her own life as others had, it was clear that she thought her life was over and that she had failed.

She had mentally checked out of the game of life and felt that she had failed and there was no escape.  This feeling of despair among those who have debts is common.

The Effects on Your Health

In addition, carrying a heavy debt load can take a physical toll.  “Experts say there’s no question that being in debt can be stressful.  And a wide body of research has tied stress to health problems including high blood pressure, cardiovascular disease and stomach disorders such as colitis.  ‘As with any serious stress’ debt does have an ‘impact on one’s physical health,’ said Elizabeth Carll, a New York-based stress and trauma psychologist.  Financial worries may cause a person to be ‘run-down, have more colds, migraines and headaches, [and] their current medical conditions may get worse” (The Washington Post).

As someone who is on a journey to pay off nearly $58,000 in credit card and student loan debts, I can attest both to the sense of hopelessness and the health risks.  For nearly 18 months in our debt payoff journey, the debt was literally all I could think about, and it affected my health.  I didn’t sleep as well as I should, I was quick to anger because of the stress from the debt, and my health failed me.  In fact, it’s taken me 15 months to restore my health and almost begin to feel like myself again.

We have been paying down our debt for two years now, and we have just reached the halfway point.  Our debt now is at $29,000 in student loans only, and we finally feel like we can breathe.  I’m not out of debt yet, but I’m far enough through the process that I can see how much that debt weighed on me like a ton weight around my neck.

Through this journey, I’ve learned that your mindset can make or break you when it comes to both your feelings about your debt and your debt payment.

Stay tuned for part two. . .