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Rakurai

Lending Club investment strategies

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I'm considering starting some minor ($500-1000) investment with Lending Club to try it out. There are a few reasons, but an important one for me is that I like the idea - I can choose loans that not only look like a good investment, but represent people who I think could use some help. Maybe its not the most selfless philanthropy, but oh well :)

 

I'd like to fund loans to people who have had credit issues in the past, but have done a good job rebuilding and seemingly care about their credit rating. For example, if I were to look at a mid-stage rebuilder that reads CB, I might see a past BK or collections, followed by a few years of good payment history, low revolving utilization, and fairly high available revolving credit. That's the kind of profile I'd like to fund - not simply based on their statistical likelihood of default.

 

For those of you that use Lending Club, a similar platform, or who make credit decisions in general: in your opinion, what factors mark a person who has learned from their mistakes and cares about their credit?

 

Secondary questions: are there any factors you think set apart a lower risk application other than credit score and DTI? If you use Lending Club, what do you like to look for in an application?

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I was just looking at my LC account yesterday. My return after losses is ~6% even after 100 of the 914 notes have charged off.

 

I would have to do some analysis on how many of each credit grade I have, but before I started loading up on the higher risk / potentially higher return stuff I made sure I had a healthy inventory of A paper.

 

For the lower credit grades I look for a combo of higher than average income and scores that are low primarily because of high utilization on small amounts of available revolving credit.

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I was just looking at my LC account yesterday. My return after losses is ~6% even after 100 of the 914 notes have charged off.

 

I would have to do some analysis on how many of each credit grade I have, but before I started loading up on the higher risk / potentially higher return stuff I made sure I had a healthy inventory of A paper.

 

For the lower credit grades I look for a combo of higher than average income and scores that are low primarily because of high utilization on small amounts of available revolving credit.

That makes a lot of sense. So your thinking is that with high utilization/low limits, they just don't know how to have good scores?

 

 

Sent from my iPhone using Tapatalk

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I was just looking at my LC account yesterday. My return after losses is ~6% even after 100 of the 914 notes have charged off.

I would have to do some analysis on how many of each credit grade I have, but before I started loading up on the higher risk / potentially higher return stuff I made sure I had a healthy inventory of A paper.

For the lower credit grades I look for a combo of higher than average income and scores that are low primarily because of high utilization on small amounts of available revolving credit.

That makes a lot of sense. So your thinking is that with high utilization/low limits, they just don't know how to have good scores?

Sent from my iPhone using Tapatalk

Exactly. Ignorance about credit scoring + low debt + good repayment capacity.

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I have owned over 30000 notes over past ~8 years , while my lc irr is around 6% my after tax return is under 2% due to charge offs as you are taxed on gross interest and all charge offs are losses which offset other gains otherwise can only be deducted up to 3k. While I do have large carried loss I may use in future, I have decided risk is not worth it. IMO, One of NFCU 3% CD specials might be a better option if your a member. Currently withdrawing from taxable accounts and reinvesting trapped ira funds (iir $200 ira closure fee + fee for each withdrawal\ transfer).

 

 

That said my best performing portfolio filter is 6k minimum income, 680 minimum fico, no delinquency 24 months, A\B notes only, less 2 inquiries 3+ year employed, no pr, debt\ cc refi only , high 3rd party score(have used lendingrobot or interestradar).

Edited by haydeno

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Weird. I'm newer to lending club (have only been in a year) but am averaging ~17%. Whether the loans will close at that return, I don't know... but I'm happy for now.

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My LC account sucks. I am at 4.15 %. I have seen an uptick of notes that make 1 or 2 payments then nothing...

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I'm down to 141 outstanding notes, and I haven't bought any new ones in over a year.

 

On the last day of every month I withdraw the cash that has come in and add that amount to the mortgage payment. No, it's not a lot of extra money, but it does reflect my priorities.

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