Why so much money?
Well, it was just sitting in a savings account earning less than 2%, and I need to diversify my investments a little, but I’m not ready to go back into the stock market yet. I realize there is risk involved with holding a personal loan portfolio, but I’ve met the Lending Club team, and I feel confident in their tactics and processes to minimize that risk.
I’m looking now for investments that generate cash, and Lending Club fits that bill.
Setting up my Lending Club PRIME account
I didn’t want to choose dozens of loans on my own, and since Lending Club was waiving the normal .8% PRIME loading fee, I decided to enroll in their PRIME program.
The PRIME program allows Lending Club to invest on my behalf, which is exactly what I’m looking for. I want a hands off, low risk approach to this pretty significant chunk of money.
They were also offering a bonus on deposits, so I took advantage of that : )
Filling out the forms
I talked with Chris, a client analyst, and he sent me over the form (Prime Investment Account Order Form) that allows Lending Club to invest on my behalf. I figured there must be something to sign to allow them to pick loans for me.
The form has you specify what interest rate you want to show for (and thus how much risk you want in your loan portfolio). The options were: 11%, 13%, 15%.
I went with the lowest risk option, shooting for a 11% return.
Once I had faxed the form back, the Lending Club team started investing on my behalf in notes in my risk range, in $250 increments.
The process took about 3-4 weeks to fully complete. I imagine with smaller amounts it would be quicker. Larger amount would probably take a little longer.
3 Months Later…
3 Months into the PRIME program and things are looking very good. It’s very hands off, as new payments come in, and I have cash sitting in my account, it gets auto-reinvested about once a week.
I get an e-mail every time that happens, but I don’t have to do anything myself for that to happen. I think that’s probably the best feature of PRIME accounts, once you’re setup, your investments just run on auto-pilot according to your interest rate selection.
So far, not yet. But it’s only been 3 months, and I expect with the sheer number of notes that I have invested in (446 as of today) that I will have a number of defaults. I do have one loan that is in the 15-day late category, but hopefully that will get back to current soon.
Diversifying My Investments
As I look into more investments beyond just a savings account, I’m going to get pretty creative. Lending Club is pretty strait-forward, but it is not conventional by any means. I figure as long as I end up with a 5-6% return, I will be happy. There is just no way to have your money work for you sitting even in a so-called high yield online savings account. The rates are just too low right now.
I still plan on staying away from stock investment for the time being. At some point I may look into some dividend stocks for the cash-flow, but for right now I’m sitting on the sidelines. I was pretty much the worst stock investor ever, so I’m very, very hesitant to ever commit a large amount of money to something that I don’t know and understand inside and out.
To sign up for Lending Club Prime: Click HERE
Lending Club Definitely Not Dead – S-1 Filing Goes Public
Jun 20, 2008
I got an e-mail from Lending Club earlier, with an update on their SEC filing. Here’s the e-mail:
We filed with the SEC earlier today. You can read the registration statement on the SEC Website at www.sec.gov. This is an important step in the process that we announced on April 7. Until the registration process is complete, we continue to be in a quiet period and are not at liberty to disclose more details on the process and timing. Please find below the text of our press release.
Lending Club Files Registration Statement with the SEC
SUNNYVALE, CA – June 20, 2008 – Lending Club announced today that it has filed a registration statement with the Securities and Exchange Commission under the Securities Act of 1933 relating to its social lending platform.
The registration statement seeks to register the offer and sale of up to $600,000,000 in Member Payment Dependent Notes to be issued by Lending Club in a continuous offering following the effective date of the registration statement. The Notes will be issued in series with each series of Notes corresponding to a single consumer loan to a borrower member. Lender members will direct Lending Club to apply the proceeds Lending Club receives from the sale of each series of Notes to fund a particular consumer loan selected by the lender member originated through the Lending Club platform.
A series of Notes will be issued only if and when the corresponding member loan closes and is funded. Lending Club will have an obligation to make payments of principal and interest on the Notes only to the extent that Lending Club receives payments on the corresponding member loan. The terms of the Notes, including interest rate and initial maturity, will correspond to the terms of the corresponding member loans but will reflect a four business day lag on payment dates and maturity to allow the platform to confirm payments received on the corresponding member loan.
Lending Club will offer the Notes only through its website directly to lender members.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission but it has not yet become effective. Copies of the Lending Club registration statement can be accessed on the SEC website: http://www.sec.gov/. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.
I found the SEC S-1 Filing: http://www.sec.gov/Archives/edgar/data/1409970/000089161808000318/f41480orsv1.htm
It’s got some interesting stuff in there for sure. Still combing through it, but so far a few highlights…
Lending Club S-1 Highlights
- 5.6 million in cash (see the balance sheet towards the end of the filing) – definitely not dead there.
- Registering $600 million in member notes (Prosper’s dead S-1 was for $500 million)
- Talk of working on resale (secondary) market as already in progress.
The SEC now has 30 days to respond to the filing. Assuming no hiccups there, Lending Club should be back taking lenders soon. Which would make me happy since I was making a decent little chunk of change each month from their referral program.
Lending Club’s New Stats Page is Yummy
Oct 22, 2009
If you’re a visual learner, you’re going to love Lending Club’s new statistics page.
The new page takes all the granular, nitty gritty data that Lending Club collects on it’s borrowers and lenders and turns it into a beautiful, almost sensory, colorful experience.
- 79% of Investors are earning returns between 6% and 15%
- Lending Club has issued over 61 million in loans to date
- 58% of Lending Club borrowers use their loan to consolidate or payoff credit cards
- The highest returning loan purpose? Renewable Energy Financing at 10.58%
- The lowest returning loan purpose? Moving Expenses at 4.59%
- “E” credit grade borrowers are providing the highest average return of 10.88% (“A” credit grade is the highest)
Get $25 to Lend at Lending Club
Lending Club is still giving you $25 to lend if you sign up using this link.
My Lending Club returns
My current return with Lending Club is at 9.15%. I’m going to be moving a decent chunk of my cash fund into Lending Club in the next month.
My take on Lending Club’s SEC Registration
APRIL 12, 2008
I started writing on the Lending Club blog last summer. As my home was in foreclosure and I was preparing to live in my office it was the break I was looking for. It started out just as a writing gig, but the extra money was desperately needed. In fact the day I found out I got the gig, I wrote this post about it being part of a turning point in my whole story.
And this week, with the announcement of Lending Club’s SEC registration, and suspension of new lenders, I was astonished by the lack of basic research that was done by many p2p lending and personal finance blogs.
Many blogs that I highly respect for their tips on saving, investing, frugality, seemed to completely miss the mark on Lending Club’s registration.
I am not a Lending Club employee and what follows is purely my own speculation of what Lending Club is doing based on my personal analysis (keep in mind I was a business finance major in college, and I used to read annual reports for fun).
Lending Club is not going bankrupt
That’s just an absurd notion. Why would they continue to fund loans during this quiet period if they were low on cash? They list 22 employees on their website. They just raised 10.26 million not 8 months ago. From my observations they are not spending outlandishly. Even if they were at a 400K/month (high estimate) burn rate, that still leaves plenty in the bank.
The abrupt stop in allowing new lenders was necessary
Sure, it sucks to wake up to an e-mail that says “no more referral program, no more lenders”. I made $325 just in March from the referral program. But as far as I understand you can’t give advance warnings on this type of stuff. So, yes it was abrupt, but to assure their registration gets approved, the abruptness was essential.
Lending Club will stay a P2P Lender
I would be shocked if they had any intention of moving away from their current model of matching lenders and borrowers. Look at their growth numbers below – why would they stop now?
Referral program will be back
Right before the announcement I was working on a project for Lending Club that involved the referral program. The implementation of this project has been pushed back, but I am still working on it and I would know if the project was canceled. I imagine the referral program will be coming back as soon as the quiet period is over.
Secondary marketplace? Heck yes.
This is the exciting part of this process that many lenders have been hoping for. The establishment of a secondary market within the peer lending community. It is clear that a registration of the p2p loans as securities would allow Lending Club to establish a secondary marketplace. So, if after a year you no longer wanted to hold onto loans in your portfolio, you could resell them to other lenders in the community. It would add liquidity to the marketplace.
Prosper’s S1 Filing is dead
If Prosper’s S1 filing had been successful, to create a secondary marketplace, we would have heard about it by now. I have an e-mail into Prosper following up on their filing, but unless they have some startling news, I think their offering is dead (probably because they didn’t take the steps LC is taking now).
Lending Club is growing
During this quiet period their growth will understandably stall. But if you look at their numbers, they are growing like a weed:
OK, that’s I think about everything I wanted to get off my chest. I hope my insight helps clear a few thing up. They are a good client for me, and I’ve enjoyed getting to know the team over the last 9 months. I’m positive they will be back strong with some exciting stuff once this period is over.