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%.
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.