May
My first late loan at Lending Club
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Sorry for being nearly as quiet as Lending Club lately. A quick update on my Lending Club portfolio is in order. Most importantly, I had my first late loan. It is only 16-30 days late, but as most P2P lenders know, once a P2P loan is delinquent there only a small probability of recovery.
Before the quiet period started, I had participated in 51 loans for a total of $1,250.17. Two loans are fully paid, 48 issued and current, and one late (details below). The weighted average interest rate is 11.23%. So far, I have withdrawn $128 that I plan to reinvest in Prosper loans.
Details on the Delinquent Loan from Lending Club
If the following information is correct as presented, there is no reason that the borrower should have not been able to pay this loan.
Loan number: 243957
Grade: B4
Interest Rate: 10.39%
Loan Amount: $7,500
Location: Brooklyn, NY
Home ownership: Mortgage
Current Employer: Retired
Gross Income $3,750 / month
FICO Range: 679-713
Earliest Credit Line: 09/1996
Open Credit Lines: 5
Total Credit Lines: 10
Revolving Credit Balance: $33.00
Revolving Line Utilization: 0.30%
Inquiries in the Last 6 Months: 0
Accounts Now Delinquent: 0
Delinquent Amount: $0.00
Delinquencies (Last 2 yrs): 0
Months Since Last Delinquency: 24
Public Records On File: 0
Months Since Last Record: 0
So far, I am still pleased with my Lending Club portfolio, but three years is a fairly long period. I wonder how many of the 48 remaining loans are going to hold up.
I wouldn’t get worked up about it. For comparison, I have over 225 loans with lending club, and I have 1 person 16-30 days late, 3 people 30-120 days late, and 3 fully paid. So it’s about the same rate. The interesting thing is, last month I had 1 loan late 16-30 and 2 late 30-120 days, but they were not the same loans. Lending club doesn’t update late loans very well. Perhaps I’ll start tracking my late loans more closely. Anyway, here are my basic calculations on loan default rates: http://www.step3prophet.com/2008/04/running-some-nu.html
Thanks Daniel for stopping by to comment.
I am not too worried about it, but your first late loan (on both Prosper and Lending Club) can cause your skin to go slightly clammy. The most important thing to remember is that you planned for late loans (and defaults) and that is why you were expecting higher than risk free CD rates.
[...] Personal Loan Portfolio Experience in P2P Lending on Prosper and Lending Club « My first late loan at Lending Club [...]
I started using Lending Club as an investment experiment early in 2008. The experience was interesting as you have to “wait” to get the loans funded and your money can tie up for awhile waiting for loans to get fully funded. I ended up using about 25% less capital than originally planned because of this. I have a diversified mix of loans (over 100)from all categories except A type.
the first month or so went well but then one loan was late. Every month several loans join the late profile. 1% of loans are still considered just late although they are well past 120 days. I consider this a default. One loan paid off very early, a couple seem to be fast tracking to pay off early. I had a couple of loasn that were late that are now current, but 99% of the lates ones just get later. So my stats after 7 months are
1% early payoff
80% current
5% short late (up to 30 days)
1% default (past 120 days)
13% past 31 – 120 days overdue
The “late” and “current” loans are a mix in terms of risk types. Percentage wise, I have as many “B” as “G” that are late. Based on the “late” rate ie the additional loans that become late every months I predict a default rate well above average for lending in general. I assume some of this is because interest rates have dropped and therefore the rates became high for many of the borrowers.
No lectures on risk please as I stated this was an experiment and I just wanted to share my experience. I have not tried other p2p lending sites.
Thanks for stopping by to share your experience. I’d be curious to know your late loans broken out by credit grade. Are they the lower grades as we might expect or are loans going bad at random?
By the way, I found the funding process to often take longer at Prosper than at Lending Club, but it depends on timing.
The late loans seem pretty random. I have no “A”s in my portfolio but I have all other grades. The lates ones include all types B-G. I’ll compile the “late” statistics later if interested.
just reading though these comment, i have been thinking to put some money in this pot but at this moment we cannot. Reading all your comments in regards to the late payers, lets not forget why the borrowers come to lending club, their history is not so good in paying on time or they would get a better rate the the regular institutions.
I may throw more money into lending club later. I agree that most of the people come to these formats for a reason. A few come for the novelty, another few come because they can get a better rate, but many come because they cannot find a good rate (or a loan at all) elsewhere. In fact, most people who apply are rejected for a loan at Lending Club.
I have lent money to this same person. It is the only loan that I made to a person who was listed with a mortgage, even though my personal rules for P2P were not to lend to those who were vested in the illiquidy of a house.
Live and learn.
Mike, Sorry to hear that you are on the same loan. I am personally up to three late Lending Club loans.
I too have tried to avoid people who have mortgages. I have serious concerns about the number of people with bad mortgages who are underwater in their homes and desperate.
If you are interested, I have mentioned the risks of home owners a few times such as the following articles: 1) Homeowners using payday loans to pay the mortgage. 2) The mortgage crisis’ impact on your P2P lending strategy.
Even Ed Mcmahon couldn’t pay his mortgage due to poor borrowing decisions.