I embarked on this hobby principally because I knew I could do a better job than what I did at Prosper.com. At Prosper, I loaned over $5000 out and as of this weekend have a net loss of $45. Initially, I was very successful at Prosper. At first, I had a 78 loan portfolio with zero delinquents. I eventually got very cocky and took on way to much risk. I transitioned the average interest rate on my portfolio from 17.5% to 21.5%. Bad move.
Today, I'm far more conservative at Lending Club. I am only lending to those:
* In the military
* In Federal or state civil service
* In health care
* Frequently only those that have been in their job for a minimum of 3 years.
* With less than 20% debt-to-income
* Zero delinquencies last two years
* Loan request no more than three times documented gross income
My loan portfolio stats are:
Total Loans (48): $1052.12
Charged Off (0): $0
In Funding (2): $50
Issued & Current (44): $1002.12
Late 16 - 30 days (0): $0
Late 31 - 120 days (0): $0
Fully Paid (2): $0
Default (0): $0
Weighted Average Rate: 11.84%
Expected Monthly Payments: $36.21
Accrued Interest: $6.37
Payments to Date: $183.73
Late Fees Received: $0
Lending Club states that my weighted average rate is 11.84% and my net annualized return is 11.94%. But, the nasty little secret is that Lending Club's formula for determining account returns does not factor in sold loans. Why not? I have no clue. When you factor in that I sold two of my loans at a loss, my net annualized return is closer to 9%. My goal was for a net return of 8.4% or better. So, I'm happy with the results to date.
I sold two of my loans that were in the 16-30 day late category. I sold one of the loans for a $7 loss and the other loan for a $3 loss. The first loan continued to deteriorate. The second loan ended up returning to a current status before I could cancel my sale.