Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: gamassey on July 22, 2013, 08:39:57 PM

Title: First loan to make a payment, pays in full
Post by: gamassey on July 22, 2013, 08:39:57 PM
I have about 400 loans funded, and the very first loan that puts any money back in the account pays in full. Earned 19 cents on that $25 investment. 

https://www.lendingclub.com/account/loanDetail.action?loan_id=5778039 (https://www.lendingclub.com/account/loanDetail.action?loan_id=5778039)
 
Title: Re: First loan to make a payment, pays in full
Post by: GS on July 22, 2013, 08:55:37 PM
Unfortunately, LC will charge you a $0.25 service fee for a full payment on a $25 note (1%), and therefore you'll lose $0.06 ...  that is a known, but thankfully rare, problem with LC's fee structure.
Title: Re: First loan to make a payment, pays in full
Post by: gamassey on July 22, 2013, 09:08:49 PM
Unfortunately, LC will charge you a $0.25 service fee for a full payment on a $25 note (1%), and therefore you'll lose $0.06 ...  that is a known, but thankfully rare, problem with LC's fee structure.

Great news, my first transaction just cost me 6 cents.  Why would someone go to all the trouble of taking out the loan if they plan to pay it back the first month?
Title: Re: First loan to make a payment, pays in full
Post by: GS on July 22, 2013, 09:11:05 PM
It's not a good decision on their part.  LC also charges a few hundred dollars to the borrower in origination fees, so that, plus the first month's interest, it was an expensive mistake for the borrower.  It doesn't happen too often, and it sucks it was first payment.
Title: Re: First loan to make a payment, pays in full
Post by: 415ab on July 22, 2013, 11:22:27 PM
How common is it, exactly, to pay off within the first 2 months?  Does anyone have stats?   I started investing in mid-April.  By the time I got to around 100 notes at the end of June, 5 of those 100 paid off the loan as the first payment or before making a second payment.  I figured they found a cheaper rate elsewhere, but that would make less sense if they also have to pay an origination fee.
Title: Re: First loan to make a payment, pays in full
Post by: pplinvestor on July 22, 2013, 11:47:22 PM
My experience is about 1% - 2% loans will be paid off in first six months.
Title: Re: First loan to make a payment, pays in full
Post by: brycemason on July 23, 2013, 01:14:32 AM
Early payoff is correlated with Grade. So, if you go lower risk, it happens more often. My current portfolio is in the mid grades, B-D, and in the last 18 months, about 10% of my loans have paid off early (varying lengths of time, obviously).
Title: Re: First loan to make a payment, pays in full
Post by: Fred on July 23, 2013, 01:58:16 AM
One easy way to avoid losing money like this is by investing in loans with interest rates of 12% or more.  Your first month of interest payment should cover the 1% transaction fee if the borrower pays the full amount (at the end of first month).
Title: Re: First loan to make a payment, pays in full
Post by: standby on July 23, 2013, 04:29:49 AM
I've got something like 85 notes.  Started in April.  A couple early ones were paid in full on about the first payment.  The first was one of the riskier notes and I came out a few cents ahead.  The second was an A rated note, and I came out a few cents behind.  Needless to say I was rather PO'd.  The cheapie A rated people are so cheap they don't even pay the lender for their loan.  The rest are all so far so good though.  I can totally understand your frustration.
Title: Re: First loan to make a payment, pays in full
Post by: dontvote on July 23, 2013, 02:13:09 PM
all sorts of reasons to pay off early. some people may just need the money for a short time. one month in, they may find other funding, or have fulfilled their need for a bridge and paying 1% on a 30 day loan may still be better than 15% annually for 3 years.

some others may pay off a small loan early to take a bigger loan out. I'm not sure if LC has a repeat borrower preference but they may.

dontpayearly
Title: Re: First loan to make a payment, pays in full
Post by: Rob L on July 23, 2013, 02:47:00 PM
I have about 1700 notes and so far 3 paid off the loan with the first payment; one A and two D's.
Title: Re: First loan to make a payment, pays in full
Post by: 415ab on July 23, 2013, 09:15:30 PM
It sounds like I've been initially unlucky, then.  The 5 that paid after 1 month (while I had 100 notes) were: C5, C5, D4, D5, E2.  All except one had between 2 and 5 inquiries in the last 6 months.  Maybe that's a clue.  The one at 5 inquiries would no longer pass my buy screen.   All listed as paying off credit cards as the reason for the loan.
Title: Re: First loan to make a payment, pays in full
Post by: mukoh on July 24, 2013, 01:10:17 AM
Out of 400 or so notes over the last 6 months I have 8 full paid. Just FYI. Some are within two months.
Title: Re: First loan to make a payment, pays in full
Post by: JDowding on July 24, 2013, 10:06:46 AM
I see a lot more early payoffs than defaults.   I've been on LC for almost a year, 696 notes, 41 early payoffs, 8 charged off.
Title: Re: First loan to make a payment, pays in full
Post by: gamassey on July 24, 2013, 10:12:05 AM
I see a lot more early payoffs than defaults.   I've been on LC for almost a year, 696 notes, 41 early payoffs, 8 charged off.

Do you seen any pattern to the early payoffs?  For example are they typically A or B loans, or are they for a particular use?  Any thing that may be predictive of early payoff?

Thanks,

Allen
Title: Re: First loan to make a payment, pays in full
Post by: JDowding on July 24, 2013, 10:26:50 AM
Yeah, maybe.  As a newcomer to LC, I selected mostly A--C loans, only now that I've been here a while am I seeing the value of buying "riskier" loans.   Could be that there are more early payoffs on A-C loans.

Title: Re: First loan to make a payment, pays in full
Post by: cnmor54 on July 24, 2013, 11:07:56 AM
I have had my LC account for 2 months. I have 239 notes. 2 have paid off on first payment; a B5 that was a DC and a B3 that was a HI. Both had 0 inquires in last 6 months.
Title: Re: First loan to make a payment, pays in full
Post by: gamassey on July 24, 2013, 11:15:49 AM
Thanks for the information.  There must be some very compelling reason why so many people are paying off these loans in the first 2 or three payments.  The cost to the person is crazy high after they have paid the origination fee, so something odd is happening.

I wonder if these are young people with parents that have some money saved.  When the parent learns their child has taken out a 15% loan they smack them on head and offer to pay it off for them.
Title: Re: First loan to make a payment, pays in full
Post by: SarahV on July 24, 2013, 11:31:18 AM
It seems like people are just using it as a bridge loan. Sometimes people need cash immediately but can't get a "real" loan from the bank fast enough, so they do something like this as a way to get a quick cash advance and then pay it off as soon as they get the other one sorted out. Or maybe they are selling their house and buying a new one, but they need to put down a down payment on the new one before they get the money from the old one. And they can pay it off as soon as their house sale finishes up. It's an expensive way to do it but sometimes it's worth it to people if they would otherwise miss what they see as a big opportunity.
Title: Re: First loan to make a payment, pays in full
Post by: rlv99 on July 24, 2013, 11:52:50 AM
My first investment was in April, 2013,  I bought into 11 loans. Of the 11, 2 were paid in full in the 1st month.

My account rep said it may have been their new institutional partners testing the system.  If so, LC  probably waived the origination fee so they could test it our expense.


Title: Re: First loan to make a payment, pays in full
Post by: Fred on July 25, 2013, 01:26:14 AM
My account rep said it may have been their new institutional partners testing the system.  If so, LC  probably waived the origination fee so they could test it our expense.

Hmm, this is new. 

Could it be that these partners are on the borrowing side,  that they are actually banks funneling borrowers loan requests to LC?

If true, that would be a great move from LC to bring more borrowers to the platform.
Title: Re: First loan to make a payment, pays in full
Post by: rlv99 on July 25, 2013, 12:58:37 PM
[quoteIf true, that would be a great move from LC to bring more borrowers to the platform.][/quote]

Makes sense, Fred, but how is that great for the investor if we still lose money on the transaction?  It would be win-win if LC waived the payment fee on early payoff.
Title: Re: First loan to make a payment, pays in full
Post by: Fred on July 25, 2013, 07:15:49 PM
Makes sense, Fred, but how is that great for the investor if we still lose money on the transaction?

My "great move" comment was directed on the posibility of LC opening the borrowing side to insititutional partners.

Like you, I also do not like it if in fact LC "waived the origination fee so they could test it our expense."
Title: Re: First loan to make a payment, pays in full
Post by: rockinray on July 26, 2013, 07:42:27 AM
I have 77 notes so far. Just been investing for a short time.

3 have paid in full: 1-A1. 1-B3, and 1-C2.
Title: Re: First loan to make a payment, pays in full
Post by: kilein on January 24, 2020, 05:42:51 AM
How common is it, exactly, to pay off within the first 2 months?  Does anyone have stats?   I started investing in mid-April.  By the time I got to around 100 notes at the end of June, 5 of those 100 paid off the loan as the first payment or before making a second payment.  I figured they found a cheaper rate elsewhere, but that would make less sense if they also have to pay an origination fee.
Thanks for the help.