So You're Saying There's a Chance...
LendingClub Loan Rebounds
This week was good week with $52.43 in payments coming in. That’s a respectable weekly cashflow considering it was the 3rd week of the month, which is typically less active. A bonus is that two loans, one late and one in it’s grace period, became current. Always a relief to see borrowers bring their loans current.
The highlight of the week was undoubtedly the rebound of a single loan. I purchased this loan for $85 with over $100 in outstanding principal. Since I purchased it at the end of May, the borrower had made 3 interest only payments. I was sure this one was headed for the charge-off pile. Surprisingly, the borrower paid 4 months of past due payments, which brought their loan current. I refer to this a a loan rebound, not a technical term.
I’m excited to receive the payment, but I’m also happy for the borrower. I hope this is an indication that the borrower is overcoming any issues he/she was facing and they’re able to stay on track to full repayment.
LendingClub Repayments Received & Fees Paid
The takeaway this week is – Loan rebounds carry a heavy price.
As I mentioned, this week provided a little unusual to receive about an 8th of my expected monthly cashflow during this part of the month. The majority of payments are received around the 1st and 15th. So, an off week with just over $50 coming in is a little bit of a surprise. The cash combined with what I was holding from the previous week takes me over $100, which I will use to invest in 1 more loan this month.
Fees are part of the game. It’s a small price to have LendingClub process payments. The unfortunate part is that sometimes, ok a lot of time, borrowers don’t pay on time. That requires LendingClub to contact the borrower via email, mail and phone. All that takes money, and they pass some of that expense on to the investors. As you can see above, the loan rebound cost me $3.45, or 18% of the principal and interest payment received – ouch.
Investments Made this Week
After the 15th of the month, I typically have between $200 and $250 in cash to invest in new loans. This month was no different, so I searched for a new Grade C loan to invest in.
The screenshot here breaks down the loan details. So why did I chose this one?
- First, I look for verified income. This mean the borrower has provided proof of monthly income – pay-stubs, taxes, etc. This one is verified, so check that off.
- Second, what’s the monthly payment – can they afford it? I like to see a payment less than 10% of their gross monthly income. This loan is at 6.7%, so good there.
- Does it make sense? The borrower is asking for $10,000 to consolidate debt. They have just over $10k in credit cards debt, so seems reasonable.
As with all loans, you never know what the borrowers intentions are – information asymmetry. The best you can do is look at the request and try to find red flags.
- The low time of employment and job title give me a little pause. The borrower has been a sales and leasing consultant for 1 year. Sales jobs are unpredictable and have a high turnover rate. There’s a risk this borrower will become unemployed.
- Delinquencies and public records. I’d prefer to have a borrower with no public records, but sometimes that’s not realistic with Grade C notes. The good news here is that it’s been almost 2 years since the public record and 1.5 years since their last delinquency. I take that as a positive sign – we’ll see.
The statements in this post are my opinion and reflect my personal experience investing on LendingClub. I cannot, and do not, guarantee that your results will be similar. Please, invest carefully and understand that your investment may lose value.
I do not receive compensation from LendingClub for writing or maintaining this post. However, I do receive an affiliate commission if you use the link below to open an account to invest or borrow.
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