Register a SA Forums Account here!
JOINING THE SA FORUMS WILL REMOVE THIS BIG AD, THE ANNOYING UNDERLINED ADS, AND STUPID INTERSTITIAL ADS!!!

You can: log in, read the tech support FAQ, or request your lost password. This dumb message (and those ads) will appear on every screen until you register! Get rid of this crap by registering your own SA Forums Account and joining roughly 150,000 Goons, for the one-time price of $9.95! We charge money because it costs us money per month for bills, and since we don't believe in showing ads to our users, we try to make the money back through forum registrations.
 
  • Locked thread
LorneReams
Jun 27, 2003
I'm bizarre
Banks love A and B loans because of capital issues, but for an investor, it's not the greatest unless you have LOTS of capital.

Adbot
ADBOT LOVES YOU

April
Jul 3, 2006


Milestone day!!

Today I hit 1,000 open notes. (for my purposes, notes that are not issued yet, issued, current, and late are open. Notes that are fully paid, defaulted, or discharged are closed).

So, what do the numbers look like?


quote:

In Funding 10
Issued & Current 959
In Grace Period 8
Fully Paid 105
Late 16 - 30 Days 1
Late 31 - 120 Days 22
Default 0
Charged Off 28

A few more charge-offs, but the payments so far look like this:

quote:

Payments to Date $10,903.62
Principal $7,992.49
Interest $2,910.91
Late Fees $0.22

According to March's statement, I'm hanging around $220/month in interest.

Also, I have created an Access database to track my notes, and I've been able to get some interesting info from it. For example, 60-month notes make up about 10% of my portfolio, but about 40% of my defaults. On my closed notes, average payment on defaults is about $6.36, and average payment on fully paid is about $27.85. I'll be adding more info to it, but I'm not super-proficient at this stuff, so it's slow going.

Monthly income is $814.67 (principal AND interest), so I will be getting about 32 "bonus" notes a month. Since my average payment is $0.8229, it takes 31 notes to get 1 bonus one monthly. My probably incorrect math tells me that if I just keep reinvesting, even if I don't add any more money, the number of bonus notes I get should start increasing by one every month.

Let the crazy compounding begin!!!

baquerd
Jul 2, 2007

by FactsAreUseless

April posted:

Today I hit 1,000 open notes. (for my purposes, notes that are not issued yet, issued, current, and late are open. Notes that are fully paid, defaulted, or discharged are closed).

Nice. I'm not quite there, but I have over 1000 actual notes. My breakdown:

quote:

In Funding 0 (I don't buy new notes anymore, just Folio)
Issued & Current 837
In Grace Period 16
Fully Paid 149
Late 16 - 30 Days 3
Late 31 - 120 Days 2
Default 0
Charged Off 8

As you can see, our numbers are quite a bit different. I sell off my 31 day+ late notes a week or two after they miss the second payment in a row because it makes the tax treatment more straightforward than if they charge off and it's nice to get the immediate money for them. Due to the recent changes, I can no longer sell bankruptcy notes, so I'm about to have some additional charge-offs (the 8 you see are from a while ago when I didn't do folio). My XIRR is sitting around 17%.

April
Jul 3, 2006


baquerd posted:

Nice. I'm not quite there, but I have over 1000 actual notes. My breakdown:


As you can see, our numbers are quite a bit different. I sell off my 31 day+ late notes a week or two after they miss the second payment in a row because it makes the tax treatment more straightforward than if they charge off and it's nice to get the immediate money for them. Due to the recent changes, I can no longer sell bankruptcy notes, so I'm about to have some additional charge-offs (the 8 you see are from a while ago when I didn't do folio). My XIRR is sitting around 17%.

I should start selling my late ones. How much of a discount do you typically put on them?

baquerd
Jul 2, 2007

by FactsAreUseless

April posted:

I should start selling my late ones. How much of a discount do you typically put on them?

Depends on what's going on with the note. If the credit score has tanked, or there's no borrower contact, 90-95% discount. If everything looks good other than them not paying, I'd start more around a 75% discount and increase it towards 90%.

spf3million
Sep 27, 2007

hit 'em with the rhythm

April posted:

60-month notes make up about 10% of my portfolio, but about 40% of my defaults.
Congrats on the 1,000th note. I've seen similar results with my 60 month note experiment. 16% of my notes are 60 months but 36% of my defaults are 60's. So I've gone back to only investing in 36's.

Out of curiosity, how much do your losses add up to per year?

April
Jul 3, 2006


Saint Fu posted:

Congrats on the 1,000th note. I've seen similar results with my 60 month note experiment. 16% of my notes are 60 months but 36% of my defaults are 60's. So I've gone back to only investing in 36's.

Out of curiosity, how much do your losses add up to per year?

So far, my losses have totaled $522. I'm not sure of the per-year breakdown.

spf3million
Sep 27, 2007

hit 'em with the rhythm
Cool, so no where near the max you can claim as losses on your yearly tax returns. I've been thinking about adding more funds now that I see the PRIME auto invest feature seems to work ok.

Amun
Oct 16, 2002

Big lack of new loans that match my criteria over the past week. Anybody else having this problem?

spf3million
Sep 27, 2007

hit 'em with the rhythm
PRIME has been struggling to find loans for me as well. One $25 note purchased since 4/15. 10 were purchased between 4/10 and 4/15 though (6 of which have been issued, 1 expired, and 3 in funding).

Barry
Aug 1, 2003

Hardened Criminal
I just started about a month ago and have been having trouble recently as well. I've also had a bunch of notes that I wanted to fund not issued as well.

emocrat
Feb 28, 2007
Sidewalk Technology
The posts in this thread seem to deal pretty much with just the funding side (I have not read the entire thing). But I am curios about the borrowing side.

What type of loan applications do you guys see, like what are people ostensibly borrowing this money for what kind of credit worthiness is there?

I looked at it briefly but it seems as though its not a great avenue to borrow if you have really good credit like myself. The lowest rates I can get on here are 6.8%, But I can borrow unsecured money for substantially less than that through traditional routes. So, who is using this? Is the process just easier? Or is there a perception that default is less of a problem here than with a bank so it is less risky?

I am just curios if there is any insight towards that side of the equation.

spf3million
Sep 27, 2007

hit 'em with the rhythm
The vast majority of loans are for debt (typically credit card) consolidation. FICO scores run the whole gamut. I'm guessing people look at their CC interest and see that they can get a loan for 5-10% below that. I don't know if they haven't looked elsewhere for unsecured loans or maybe with the existing CC debt they already have, a bank won't be willing to give them such low rates?

emocrat
Feb 28, 2007
Sidewalk Technology

Saint Fu posted:

The vast majority of loans are for debt (typically credit card) consolidation.

Well, that makes a ton of sense I guess. I can see where consolidating that at a lower rate is difficult, other options for it would most likely be Balance transfers to a new card, which have a transfer fee and relatively short low interest time frames, or home equity lines. This would be a much much simpler method to control that kind of consumer debt.

JulianD
Dec 4, 2005
I currently have an account on Lending Club, which I opened a little over a year ago when I was living in West Virginia, and I was stationed with the military in South Carolina earlier this year. WV allows Lending Club accounts, while SC does not. I'm maintaining WV as my state of residence for tax purposes, but I'm about to buy a house in SC. Could this force me to shut down my account, or can I continue to invest since I'm maintaining residency in WV?

mrmcd
Feb 22, 2003

Pictured: The only good cop (a fictional one).

So what are the usual delinquency and charge-off rates per year? I've been doing this about 6 months now, I have ~370 notes, and none of them have ever gone past the grace period.

Seems low, givens the 2-5% historical rates. I'm using a custom filter on Prime, but I don't actually have any actuarial training to claim I know what I'm doing.

spf3million
Sep 27, 2007

hit 'em with the rhythm
That will depend heavily on the grade of notes you're buying. If you want to see how you're doing compared to others with similarly graded notes, go to your account summary page and click on the "understanding your returns" link under the net annualized return percentage. You'll get a graph which looks something like this:



Based on notes which average around 14.86% interest rate, there is a slow, steady decline in return over the first 15 months or so then it levels out at around 8-9% for the duration of the note life.

LorneReams
Jun 27, 2003
I'm bizarre
I just broke 100 notes. I've been putting some of the money I budget for poker on this...so far it's going pretty good, although it's been getting harder to find notes at my criteria level.

April
Jul 3, 2006


I've been having a lot of trouble for the last 7-10 days or so buying notes that match my criteria. I saw that LC has lowered their interest rates a bit, but shouldn't that result in MORE notes?

http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Update-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-April-30-2014

spf3million
Sep 27, 2007

hit 'em with the rhythm

April posted:

I've been having a lot of trouble for the last 7-10 days or so buying notes that match my criteria. I saw that LC has lowered their interest rates a bit, but shouldn't that result in MORE notes?

http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Update-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-April-30-2014
Do you use interest rate as one of your filtering criteria? If so, I'd imagine that in the near term, there will be more higher grade notes (notes with lower interest rates) so it will be harder to find notes that meet your criteria. Maybe in the long term, potential borrowers will be enticed by the lower rates available so there will be more loan applications and then more loans.

Either way, the lower rates aren't a good thing for investors trying to put money to work. If you want the same interest you'll have to accept a higher risk profile. The other choice is to keep the same risk profile and accept a lower reward (aka reduce your interest rate filter).

April
Jul 3, 2006


Saint Fu posted:

Do you use interest rate as one of your filtering criteria? If so, I'd imagine that in the near term, there will be more higher grade notes (notes with lower interest rates) so it will be harder to find notes that meet your criteria. Maybe in the long term, potential borrowers will be enticed by the lower rates available so there will be more loan applications and then more loans.

Either way, the lower rates aren't a good thing for investors trying to put money to work. If you want the same interest you'll have to accept a higher risk profile. The other choice is to keep the same risk profile and accept a lower reward (aka reduce your interest rate filter).

The lowest grade in my filter is B, and I haven't had much problem before recently finding notes to match. I accept everything from B to G as far as grade, but my other criteria usually weed out almost everything but B's & the occasional C. I'll see what happens over the next few weeks, and maybe tweak some settings.

Amun
Oct 16, 2002

April posted:

The lowest grade in my filter is B, and I haven't had much problem before recently finding notes to match. I accept everything from B to G as far as grade, but my other criteria usually weed out almost everything but B's & the occasional C. I'll see what happens over the next few weeks, and maybe tweak some settings.

I actually use almost all of your filters from the strategy you posted earlier (thanks, btw!) with auto-invest on anything that isn't a B. Auto-invest on IR is actually broken at the moment, but I've been logging in at the usual feeding times and there hasn't been a whole lot that matches.

These guys post the number of new loans every time they come out, and it's definitely dropped off a ton: https://twitter.com/PeerCube

Barry
Aug 1, 2003

Hardened Criminal
I guess this is where I will also admit that I use all of April's filters that she posted earlier. I don't really know well enough to change them one way or another so I'm just using them wholesale. Thanks April!

I only have $200 of skin in the game so far but if I ever get a bit more involved and care to analyze things some, I'll be sure to share if I change anything and what my rationale behind that would be.

April
Jul 3, 2006


Barry posted:

I guess this is where I will also admit that I use all of April's filters that she posted earlier. I don't really know well enough to change them one way or another so I'm just using them wholesale. Thanks April!

I only have $200 of skin in the game so far but if I ever get a bit more involved and care to analyze things some, I'll be sure to share if I change anything and what my rationale behind that would be.

Glad to help!! I'll be the first to admit, however, that I wouldn't mind input from others who've been on LC for a while regarding my filters. I'm always open to suggestions, but I'll admit, if I narrow it down much further, I probably won't get any notes at all right now.

Shadowgate
May 6, 2007

Soiled Meat

April posted:

Glad to help!! I'll be the first to admit, however, that I wouldn't mind input from others who've been on LC for a while regarding my filters. I'm always open to suggestions, but I'll admit, if I narrow it down much further, I probably won't get any notes at all right now.

Can you post those filters again? It looks like the link is dead.

April
Jul 3, 2006


Shadowgate posted:

Can you post those filters again? It looks like the link is dead.

Try this one:

https://www.interestradar.com/analy...&HideInvested=1

Shadowgate
May 6, 2007

Soiled Meat

That worked, I just had to sign-up for an account first.

Thanks!

spf3million
Sep 27, 2007

hit 'em with the rhythm
Well after complaining about not finding enough loans lately, LC Prime just auto-invevsted in 5 notes for me in the last 2.5 days. Weird

nicky_glasses
Jun 20, 2011

Toyland Social Club
I dumped a couple thousand into LC last December.. I have 3 loans fully paid and a couple notes get late but caught up again. I've been really lucky. I like to think that my criteria had something to do with it, though.

That being said. I've been reading a lot of financial boards and decided from now on I will continue to re-invest proceeds but I have realized it is foolish to invest out of pocket, post-tax income into LC. Knowing what I know now I wouldn't have gotten into the game and here is why:

You can contribute $17.5k/yr into a 401k, tax free. You can contribute $5.5k/yr into an IRA/Roth IRA. That is $23k/yr I should be saving before I even think about making investments post tax.

Each dollar I put into the above retirement accounts does not take a tax hit. If I put $10k a year into LC, and was saving $13k/yr for retirement, I'd still have $10k of income I'm going to have to pay taxes on at the end of the year! Shift that $10k to maximize tax advantaged retirement accounts, the IRS now sees that I made $10k less.. and of course when you pull any out, taxed again.

I'm getting close to being able to save that much, but not quite there. I expect to be in a higher tax bracket by the time I retire and looking at my MAGI I went with a Roth IRA, a little off topic but here is what I did:

1. paid off all debts
2. 6 month emergency fund in higher yield savings account
3. max 401k match
4. contribute FSA amount that I feel I will use and not lose
5. maxed Roth IRA contributions
6. working on contributing rest of 401k allowed amount

Any HSA if eligible or 529 if applicable I would even do those before investing into LC or any taxable brokerage account.

I'm slowly adjusting my lifestyle and balance it so I can still have fun but hopefully retire 10-15 years early with a very very comfortable income but without working for the man.

EDIT:

TL; DR;

If you aren't saving the maximum amount allowed for tax free contributions (IRA/401k/529/HSA/FSA,etc) first before investing money into LC, etc, know that you are losing out on a lot of money due to tax implications (with the help of the power of interest).

nicky_glasses fucked around with this message at 20:56 on May 14, 2014

nicky_glasses
Jun 20, 2011

Toyland Social Club

emocrat posted:


I looked at it briefly but it seems as though its not a great avenue to borrow if you have really good credit like myself. The lowest rates I can get on here are 6.8%, But I can borrow unsecured money for substantially less than that through traditional routes. So, who is using this? Is the process just easier? Or is there a perception that default is less of a problem here than with a bank so it is less risky?

I am just curios if there is any insight towards that side of the equation.

You're right. If you have excellent credit, you're still going to get lowest interest rates north of 6%. No one with excellent credit in their right mind would pay that rate for a car or a house and if you have unsecured credit card debt you don't have excellent credit.

This leaves those people with excellent credit wanting an unsecured loan for something I wouldn't dare put my money into; business startups, vacations, or other oddball things. I don't see these because I filter those out.

I gladly invest C or D grade loans to people swimming in credit card debt (with a few restrictions) knowing that if they actually use that money to payoff their cc debt, they'll be saving money each month and only have to make one payment.

mrmcd
Feb 22, 2003

Pictured: The only good cop (a fictional one).

LC is supposedly looking into expanding for things like auto and small business loans. They already have a small business operation running but the general public can't fund/invest in it yet. I imagine getting the risk and interest rate modeling right is something that takes a while and they don't just want to throw open the flood gates and end up like Prosper c. 2008.

Right now it's almost entirely refinancing credit card debit and other revolving credit lines.

Barry
Aug 1, 2003

Hardened Criminal

nicky_glasses posted:

TL; DR;

If you aren't saving the maximum amount allowed for tax free contributions (IRA/401k/529/HSA/FSA,etc) first before investing money into LC, etc, know that you are losing out on a lot of money due to tax implications (with the help of the power of interest).

If your sole interest is saving strictly for retirement, you're right, it's likely best to maximize your traditional retirement vehicles. If you haven't put the absolute max into your 401k/Roth, by all means. However, you're losing out on liquidity by tying everything up in retirement accounts. It's not completely liquid in so much as if you wanted to cash out early you'd have to sell your notes on the secondary market, but it's otherwise penalty free.

You're not really condemning LC as much as you are any non tax advantaged investment.

e: Also, as to taxes, you're going to be taxed on a 401k/Roth on either the front or the back end, so you're really just saving taxes on your gains. Which I'm not sure how it's treated, but if it's "just" capital, that's 15%. Not a huge price to pay for some liquidity.

e2: The way I treat taxable investments is whenever I have some extra unplanned money from budget overflows (I didn't eat out that much or went to less concerts or whatever the hell), that's where it comes from. I suppose if that happens more often than not I could increase my 401k withholding by a percent but, again, liquidity.

Barry fucked around with this message at 23:42 on May 14, 2014

JulianD
Dec 4, 2005

Someone correct me if I'm wrong, but I don't believe that what you're claiming is (completely) right. You'd have to do a pretty thorough analysis to determine the best savings route, and regardless, figuring out how much you'd save through traditional retirement accounts requires guesswork.

A 401k is tax free but only initially. You make deposits to the 401k prior to your income being taxed, but when it is withdrawn later during retirement, it is taxed. If you have an employer match, that can also make a 401k more attractive.

If you're depositing into an IRA, you're depositing money that's already been taxed; when you withdraw from it during retirement, it is not taxed at that time.

The guesswork I mentioned before is that there's no possible way to know what tax rates will be when you withdraw from those accounts during retirement. Higher tax rates in the future mean you saved money in taxes on an IRA but not on a 401k (and vice-versa if tax rates are lower). More guesswork comes into play given you don't know what your returns through an IRA or 401k will be, whether an employer match on a 401k will make up for that, whether there is greater risk in LC than traditional retirement vehicles (I personally believe there is), etc.

TL;DR: It is significantly more complicated to figure out the best investment strategy than what you've boiled it down to.

mrmcd
Feb 22, 2003

Pictured: The only good cop (a fictional one).

JulianD posted:

Someone correct me if I'm wrong, but I don't believe that what you're claiming is (completely) right. You'd have to do a pretty thorough analysis to determine the best savings route, and regardless, figuring out how much you'd save through traditional retirement accounts requires guesswork.

A 401k is tax free but only initially. You make deposits to the 401k prior to your income being taxed, but when it is withdrawn later during retirement, it is taxed. If you have an employer match, that can also make a 401k more attractive.

If you're depositing into an IRA, you're depositing money that's already been taxed; when you withdraw from it during retirement, it is not taxed at that time.

The guesswork I mentioned before is that there's no possible way to know what tax rates will be when you withdraw from those accounts during retirement. Higher tax rates in the future mean you saved money in taxes on an IRA but not on a 401k (and vice-versa if tax rates are lower). More guesswork comes into play given you don't know what your returns through an IRA or 401k will be, whether an employer match on a 401k will make up for that, whether there is greater risk in LC than traditional retirement vehicles (I personally believe there is), etc.

TL;DR: It is significantly more complicated to figure out the best investment strategy than what you've boiled it down to.

Regular IRAs are tax free at entry, taxed when you withdraw at retirement. Roth IRAs are taxed at entry, but all retirement withdrawals are tax free.

401k and Roth-401k accounts are similar except they are employer sponsored.

IRAs also have certain income limits that prevent how much money you can deposit or the tax benefits. Of you are above the IRA income limit and already have a employer 401k contributing to an IRA makes little sense because you'll get none of the tax benefits but won't be able to take your money out. Just get a traditional brokerage account in that case.

I'm also generally I'm favor or Roth flavored accounts, because your gains are tax free. Which pile of money would you rather tax? 100k now, or 350k when you retire? Unless you expect a drastic reduction in lifestyle, tax rates, or market returns when you retire, a Roth makes more sense.

Anyway, anyone needing advice on this should probably talk to a real accountant or financial planner, since there is lots of complications for individual situations. Also it's nice LC offers IRA accounts, but I don't think its really appropriate for retirement accounts given how new it is and that there is only one asset class available for investing.

Bhaal
Jul 13, 2001
I ain't going down alone
Dr. Infant, MD
There's also the element of helping people improve their lot. Not just for the warm fuzzies alone, I mean you are of course getting a return out of it. But on top of that I'm of the opinion that helping someone consolidate their debt and cut a massive piece out of their aggregate interest rate only serves to improve their contributions to the GDP / tax base / etc in the long run. However much they save on interest is likely to end up going back into the economy in a more productive way. The amount one regular non-millionaire person can help with this by investing in LC is a small drop in the bucket, but on a larger scale it adds up and moves in the right direction anyway.

nicky_glasses
Jun 20, 2011

Toyland Social Club

Barry posted:

You're not really condemning LC as much as you are any non tax advantaged investment.

Correct. I had realized that I would end up with more money down the road maxing out the tax advantaged investments first.

Barry posted:

e: Also, as to taxes, you're going to be taxed on a 401k/Roth on either the front or the back end, so you're really just saving taxes on your gains. Which I'm not sure how it's treated, but if it's "just" capital, that's 15%. Not a huge price to pay for some liquidity.

The idea is that all debts are paid down first. Then a good chunk in a high-interest high-yield savings account that is liquid (3, 6, 12 months depending). The tops are like .80% to .90% APY. This is the liquidity you need for emergencies, assuming you have access to prime credit and steady income this should be all you need - unless you constantly buy junk and can't save anything.

Also with a Roth I plan on being in a higher tax bracket later, so I pay taxes on it now and at withdrawl, 30 years from now, I'll have saved a boatload from not withdrawing at the higher rate.

Lelorox
Jul 28, 2013

BFC SLACKER 2014
Dammit I've got two payment skippers in their first month of payments. LC is trying to collect on one:

5/21/14 (Wednesday) Attempted to collect payment
5/15/14 (Thursday) PAYMENT Failed

This sucks.

Grumpwagon
May 6, 2007
I am a giant assfuck who needs to harden the fuck up.

Lelorox posted:

Dammit I've got two payment skippers in their first month of payments. LC is trying to collect on one:

5/21/14 (Wednesday) Attempted to collect payment
5/15/14 (Thursday) PAYMENT Failed

This sucks.

As a former first party collections agent for a credit card issuing bank, that stuff happens. Lots of people run out and get a credit card (loan in this case), charge it up, then either forget about it, or ignore the bills. You'll have a few late people at first. Some of them never pay. It gets better as those people fall away.

Barry
Aug 1, 2003

Hardened Criminal

nicky_glasses posted:


The idea is that all debts are paid down first. Then a good chunk in a high-interest high-yield savings account that is liquid (3, 6, 12 months depending). The tops are like .80% to .90% APY. This is the liquidity you need for emergencies, assuming you have access to prime credit and steady income this should be all you need - unless you constantly buy junk and can't save anything.

Also with a Roth I plan on being in a higher tax bracket later, so I pay taxes on it now and at withdrawl, 30 years from now, I'll have saved a boatload from not withdrawing at the higher rate.

Sure, but there is value to liquidity. Even with a decent emergency fund, you never know when you might be long term unemployed or have a bunch of Bad poo poo happen at once. I suppose if it's truly dire you can dip into retirement funds and take the penalties, but I would rather that never happened.

I also assume that I will be paying a higher tax bracket later, but that's all it really is, an assumption. It's a very real possibility that when I'm ready to retire the tax rate for high earners might be peanuts.

I think this discussion might be best for another thread, however.

Adbot
ADBOT LOVES YOU

Inverse Icarus
Dec 4, 2003

I run SyncRPG, and produce original, digital content for the Pathfinder RPG, designed from the ground up to be played online.
NPR Planet Money on Peer-to-Peer Lending, LendingClub, and a world without banks.

http://www.npr.org/blogs/money/2014/05/30/317030992/episode-543-a-world-without-banks

  • Locked thread