Author Topic: 5 Key Things to Know About Investing at LendingClub  (Read 4780 times)

OleBill

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5 Key Things to Know About Investing at LendingClub
« on: August 15, 2017, 11:53:08 AM »
I received an Email from Lending Club with an attached PDF brochure titled "5 Key Things to Know About Investing at LendingClub". I wonder if this was a mass Email or specifically directed to me because of my recent activities. Did anyone else get this?

sensij

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #1 on: August 15, 2017, 11:54:38 AM »
I received it... doesn't look especially targeted, to me.

Edit:  For context, I'm ~4 mo into my Lending Club experience, and fully invested / re-investing in two IRA accounts.
« Last Edit: August 15, 2017, 01:44:52 PM by sensij »

Lovinglifestyle

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #2 on: August 15, 2017, 12:38:58 PM »
I also received it, and wondered if I was targeted because of my declining balance in spite of occasional purchases.

storm

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #3 on: August 15, 2017, 03:30:41 PM »
Received it on both my taxable account which I've been pulling out of and my IRA where I'm reinvesting.  Don't think it is targeted.

Fred93

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #4 on: August 15, 2017, 03:57:27 PM »
I did not get it.

dr.everett

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #5 on: August 15, 2017, 06:31:46 PM »
Received it but haven't read it yet. Has anyone else & does it contain anything worth while?

SLCPaladin

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #6 on: August 15, 2017, 11:54:14 PM »
I received it, glanced over it briefly, and decided it wasn't important information. The main takeaways appeared to be how to manage your expectations about LC as a new asset class.

I pulled up the PDF link from the email and copied and pasted the 5 key take-aways and the intro into each section (PDF was too large to include as an attachment on the forum site). There is nothing profound here and certainly not anything that a mere cursory reading of some of the threads on this forum haven't touched ad nauseum vis-a-vis investment strategy. With respect to point #5, in an environment of deteriorating returns, reinvesting "may" greatly impair returns (full disclosure: I've been winding down my portfolio for the past 6 months).

Introduction
LendingClub Notes provide access to consumer credit, an asset class that was previously only available to institutional investors. Because many LendingClub investors are new to consumer credit, itís important to understand the asset and what to expect. Here are five key things to know about LendingClub Notes that can help you get the most out of your investment experience.

1. Focus On Net Returns
It may be tempting to look at a Noteís stated interest rate and assume thatís what your return will be, but the interest rate doesnít reflect all of the factors that impact returns. Three of the most notable factors are
charge -offs (when borrowers do not repay their loans), prepayments (when a borrower pays more than their minimum required amount, reducing the amount of interest youíll receive over time), and fees. Charge-offs are typically more impactful than prepayments and fees, which weíll cover in-depth in the next section.

2. Charge-Offs Will Happen
Itís inevitable that some borrowers will get behind on their loan payments. Some of these borrowers will get back on track and others will stop repaying their loans. After itís clear that a borrower wonít make any more payments a loan is considered ďcharged-off.Ē All investors in consumer credit experience some charge-offs, so itís important to understand them 2 and consider how they might impact your investment strategy.

3. Diversification Is Key
Purchasing multiple Notes that correspond to different loans or borrowers can help limit the impact of any single charge-off. In fact, 98% of investors who own 100+ Notes of relatively equal size have seen positive returns.

4. Monthly Payments Include Principle And Interest
Loans on the LendingClub platform are fully amortizing, which means monthly payments to investors include both principal and interest. Early on, a larger proportion of any payment is made up of interest. As the loan ages, payments are comprised of more principal.

5. Reinvestment Is Critical For Consistent Returns
Because Notes are fully amortizing, about half of your original investment principal for a 3-year Note can be returned to you within 14 months (assuming the borrower does not chargeoff). New investors can be surprised to see half of the money they earmarked for investment back in their pockets in a little more than a year.

Conclusion
Consumer credit is an exciting asset class and weíre proud to make it accessible to a broad range of investors. Our Notes have some unique characteristics that set them apart from other investments and allow them to offer the potential for solid risk-adjusted returns. If you have any questions about how our Notes work or what to expect from your investment, our team is here to help. Contact us to learn more about what Notes can do for your portfolio.
« Last Edit: August 15, 2017, 11:57:20 PM by SLCPaladin »

nonattender

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #7 on: August 16, 2017, 12:34:43 AM »
Good that they're setting expectations, bad that they're switching between "principle" and "principal" while doing it.  -ye olde English teacher
A little nonsense now and then is relished by the wisest men.

dr.everett

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #8 on: August 20, 2017, 12:14:44 AM »
@SLCPaladin- Thanks for the excellent summary- after reading it, seems to be what most of us who have been here on the forums for a while already know. In a way it's also kind of sad because as others including myself have said, it seems like LC has their head in the sand and isn't doing anything to get better. Maybe if they did we'd stop selling and fleeing? Seems silence is SOP for LC, LR, and others.  ::)

apc3161

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #9 on: August 20, 2017, 02:08:19 PM »
@SLCPaladin- Thanks for the excellent summary- after reading it, seems to be what most of us who have been here on the forums for a while already know. In a way it's also kind of sad because as others including myself have said, it seems like LC has their head in the sand and isn't doing anything to get better. Maybe if they did we'd stop selling and fleeing? Seems silence is SOP for LC, LR, and others.  ::)

I think it's because they have nothing good to say. They are in a tough position. They are losing money themselves. They are losing investors, but also can't raise rates or make lending more stringent because there is more competition than there use to be. Nobody is happy with how things are: The investors, lending club, etc. I guess the only people who are happy are those who default on their loans, and get away with it.

storm

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #10 on: August 20, 2017, 08:33:37 PM »
I think it's because they have nothing good to say. They are in a tough position. They are losing money themselves. They are losing investors, but also can't raise rates or make lending more stringent because there is more competition than there use to be. Nobody is happy with how things are: The investors, lending club, etc. I guess the only people who are happy are those who default on their loans, and get away with it.

Well said.

According to this LC Blog post, things are improving.  Unfortunately for many of us, the loss from the 2015-2016 loans are eclipsing the returns from newer vintages.

SLCPaladin

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Re: 5 Key Things to Know About Investing at LendingClub
« Reply #11 on: August 21, 2017, 09:53:24 PM »
@SLCPaladin- Thanks for the excellent summary- after reading it, seems to be what most of us who have been here on the forums for a while already know. In a way it's also kind of sad because as others including myself have said, it seems like LC has their head in the sand and isn't doing anything to get better. Maybe if they did we'd stop selling and fleeing? Seems silence is SOP for LC, LR, and others.  ::)

I do think that LC is going to eventually phase out the retail investor. Retail investors, as a group, have greatly diminished as a share of note purchasers on the platform. But when it comes right down to it, I don't think retail investors purchasing individual notes is scalable. To make this so-called new asset class really take off, it's going to have be able to be offered as an automatic investment as mutual fund or ETF. I have to be able to put my 401k and IRA investments into this asset class, otherwise it's going to be niche as far as retail investors are concerned. There is just a limit to the number of hobbyists who are willing to spend the time necessary to back-test and try to pick credit worthy notes at $25 a pop.

I would argue that there is much more capital that could be deployed from retail investors than one might assume, but I think LC consciously courted the banks and institutional players. To be fair, the Renauld LaPlanche debacle may have forced their hand a bit, but even after the turbulence subsided I never really saw a big effort to address some of the thornier issues that have bothered retail investors for some time. I think that was a lost opportunity.

@apc3161 I think you hit the nail on the head. Although I quibble with your premise that LC can't raise rates. I've yet to see any analysis that there is a hard ceiling for which credit demand will fall off if LC were to continue to hike rates. Is there more competition than their used to be? All I've seen in the past 4 years is tons of consolidation and platforms fizzling out. Credit availability is going to be getting scarcer with QE ending, so I think LC is in the perfect position to raise rates. And they should act before the Fed, not after.
« Last Edit: August 21, 2017, 09:55:26 PM by SLCPaladin »