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TJG210
LSU Fan
New Orleans
Member since Aug 2006
26085 posts
 Online 

Lending Club Strategies
Just started loaning on lending club a couple months ago and was interested to see what others people are doing as far as strategy in choosing who to lend to.

I've invested about 3/4 of my initial investment amount, but currently all of my loans are currently either A or B grade. I don't lend to folks who have previously had delinquencies, and look for people who have over 680 in credit. Usually neither of those are available in C or worse, when buying these "junk" notes, what do you look for?
This post was edited on 3/25 at 12:57 pm


GenesChin
Army Fan
The Promise Land
Member since Feb 2012
36147 posts

re: Lending Club Strategies
You could look into the basics of how CDOs are run and price based off those models.

Seemed to work right up to 2008


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40
dantes69
Boise State Fan
Boise, Id.
Member since Aug 2011
1851 posts

re: Lending Club Strategies
I found a better return on 36 mo. loans that are under $10,000 - 10% A - 40% B - 40% C - 10% D


LSUtoOmaha
LSU Fan
Nashville
Member since Apr 2004
24940 posts

re: Lending Club Strategies
I don't think this is legal in the state of Tennessee, unfortunately. :(


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GenesChin
Army Fan
The Promise Land
Member since Feb 2012
36147 posts

re: Lending Club Strategies
What type of return are ya'll finding on this site?


Hoyt
Alabama Fan
Alabama: The Beautiful
Member since Aug 2011
4344 posts

re: Lending Club Strategies
Are all of these loans unsecured?


DirtyMikeandtheBoys
LSU Fan
Member since May 2011
18354 posts

re: Lending Club Strategies
yes


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TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
18384 posts

re: Lending Club Strategies
C and D ratings are the sweet spot for me. The 5 year notes are always disturbing because they are almost always carrying tight debt service.


TJG210
LSU Fan
New Orleans
Member since Aug 2006
26085 posts
 Online 

re: Lending Club Strategies
quote:

C and D ratings are the sweet spot for me.


Are you looking for anything specific, credit rating, past history?

Do you bail at the first sign of trouble?

quote:

What type of return are ya'll finding on this site?


Most of the folks I've seen talk about this are getting around 8-10%. I think right now, I'm at about 8.75%.....though my sample size is hardly a good indicator of what it will be over the long run.
You do have to remember on top of what you get, you need to pay the site commission, and then pay the standard capital gains rate to the IRS.
This post was edited on 3/25 at 1:51 pm


TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
18384 posts

re: Lending Club Strategies
A's aren't worth the trouble. The rates are way too low. B's have been over targeted recently because they are the "safest" with a real return. C's and D's (particularly D's) are being skipped over by both the safety seekers and the yield pigs. Fs and Gs are complete crapshoots, but even with the high rate, don't sufficiently reward you for the drastic decrease in credit quality. That means the yield pigs are in E's which has pinched the available supply. Going from C to E gives you less than a 1% increase in expected return.

I generally find it difficult to determine the difference between C's and D's by just looking at the credit metrics, which is why I lump them together.


SomethingLikeA
Member since Jul 2013
630 posts

re: Lending Club Strategies
Love the explanation Hidden Flask.

Very well said.


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dantes69
Boise State Fan
Boise, Id.
Member since Aug 2011
1851 posts

re: Lending Club Strategies
I am getting 10%, however I have been able to get into 102 new loans in the past 3 months off of returns, that gives me a compounded return of 27%


TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
18384 posts

re: Lending Club Strategies
I don't think that's right.


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10
Ole War Skule
LSU Fan
North Shore
Member since Sep 2003
3056 posts
 Online 

re: Lending Club Strategies
I was looking at this pretty seriously a couple of months ago and it seemed that institutions were buying up most of the 'good' loans with automated systems before they hit the street. I contacted a couple of those and was thinking about putting money with them, but both show reduced yields in the last 6 months due to so much many buyers getting into the game.

Are you still able to find significant quantities of good loans to buy?


TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
18384 posts

re: Lending Club Strategies
Institutional buyer platforms don't have access to the same loans as those that are posted on the individual investor site.


TJG210
LSU Fan
New Orleans
Member since Aug 2006
26085 posts
 Online 

re: Lending Club Strategies
quote:

Institutional buyer platforms don't have access to the same loans as those that are posted on the individual investor site.

There are two different sites? How do loans get routed? Do the smaller ones go to the individual investor site, larger ones to the institutional?


TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
18384 posts

re: Lending Club Strategies
Just a random mix.

They did it to avoid the hedge funds with algorithms gobbling up the best loans and leaving the consumer side with the scraps.


TJG210
LSU Fan
New Orleans
Member since Aug 2006
26085 posts
 Online 

re: Lending Club Strategies
What do you generally do when you get someone who is in the grace period or late? Is it best just to cut bait and sell the note for whatever you can get for it?


TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
18384 posts

re: Lending Club Strategies
I don't sell. I haven't looked at it in the past year and a half, but the discounts used to be ridiculous. I just always buy very small chunks so that any given single loan default won't hurt me.


b-rab2
LSU Fan
N. Louisiana
Member since Dec 2005
11700 posts
 Online 

re: Lending Club Strategies
I think I'm about to hop in to this investment tool. I am thinking of getting my fiancé in on this and this can be her way of investing. I'll stick to the stock market.


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