Author Topic: Feedback on Lending Club Business  (Read 5980 times)

flojoflojo

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Feedback on Lending Club Business
« on: January 09, 2013, 01:12:13 PM »
Hi There,

Looking for some feedback on starting a business around Lending Club...

My Background: I worked in the credit card industry for 7 years and know credit policy inside and out. Since I started investing in Lending Club in 2010, I've made 267 loans, have never had a charge-off or default, and am getting >15% returns.

Feedback requested: I'd like to find a way to make a side business off my credit policy knowledge. I want to help others invest, and make sure people that are good credit risks get their loans funded. I'm looking for feedback from this group on a couple ideas on if you think they would work or are interested in them:
  • A daily newsletter where I highlight any loans I would personally invest in, with a link to the loan. I would charge ~$10 per month to be on the list.
  • An investor service where you deposit your money with me and I invest it for you (similar to the Prime service on Lending Club), but I will get you better returns and take a small fee.
  • Any other ideas on how I can help people make better investment decisions?

Thanks!

John

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Re: Feedback on Lending Club Business
« Reply #1 on: January 09, 2013, 01:44:47 PM »
I have been cautiously funding loans for only a few months now with great success so far....   I am still getting my feet wet and am only risking a few hundred dollars a month until I build more confidence in the system.  So for me I would have to be investing a lot more per month to justify the $10 monthly fee and by the time I build up enough confidence in the system I probably won't feel the need for this kind of service.  Have you considered offering a rating system for a few cents per loan?  This would be justifiable for someone investing on any scale and it would open up a lot more prospects for you.  A possible way to market it would be to post previous ratings vs success rates for those loans.

 

flojoflojo

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Re: Feedback on Lending Club Business
« Reply #2 on: January 09, 2013, 02:44:05 PM »
That's helpful. Thanks John

Zach

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Re: Feedback on Lending Club Business
« Reply #3 on: January 09, 2013, 03:02:53 PM »
Hi There,

Looking for some feedback on starting a business around Lending Club...

My Background: I worked in the credit card industry for 7 years and know credit policy inside and out. Since I started investing in Lending Club in 2010, I've made 267 loans, have never had a charge-off or default, and am getting >15% returns.

Feedback requested: I'd like to find a way to make a side business off my credit policy knowledge. I want to help others invest, and make sure people that are good credit risks get their loans funded. I'm looking for feedback from this group on a couple ideas on if you think they would work or are interested in them:
  • A daily newsletter where I highlight any loans I would personally invest in, with a link to the loan. I would charge ~$10 per month to be on the list.
  • An investor service where you deposit your money with me and I invest it for you (similar to the Prime service on Lending Club), but I will get you better returns and take a small fee.
  • Any other ideas on how I can help people make better investment decisions?

Thanks!

Not to discourage you, but there are a number of experienced P2P lending investors that have already taken the same initiative....

p2panalytics.com
p2p-picks.com
interestradar.com

With an investment service, you'll need to get some legal approval (I am pretty certain) to invest others money...Probably a series 7 and 63 license and possibly be a CFP...

Just my two cents.

rawraw

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Re: Feedback on Lending Club Business
« Reply #4 on: January 09, 2013, 05:38:16 PM »
You portfolio doesn't seem too old -- what is the average age?  Not knocking your skills, just saying defaults are part of the game and they'll happen.

AnilG

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Re: Feedback on Lending Club Business
« Reply #5 on: January 09, 2013, 06:35:46 PM »
This forum is DIY types so you are not likely to get a positive response. You will be better off targeting institutions, investment advisors, and hands-off high net worth individuals.

I think you have potential opportunity with both 1 and 2. The #2 will require you to be RIA with the state. The #1 will likely work if the newsletter is daily as loans fill up quickly and targets investment advisors. You can also consider offering your services as consultant. The P2P industry is still very new, as the industry grows I am sure more 'services' opportunities will come up.

I run PeerCube http://www.peercube.com, a Lending Club loan selection platform and quantitatively analyze Lending Club loan data on my blog Random Thoughts http://andirog.blogspot.com. Last year, I was approached by both institutions and high net worth people to consult.

Send me a PM through PeerCube or my blog if you want to discuss more.


Hi There,

Looking for some feedback on starting a business around Lending Club...

My Background: I worked in the credit card industry for 7 years and know credit policy inside and out. Since I started investing in Lending Club in 2010, I've made 267 loans, have never had a charge-off or default, and am getting >15% returns.

Feedback requested: I'd like to find a way to make a side business off my credit policy knowledge. I want to help others invest, and make sure people that are good credit risks get their loans funded. I'm looking for feedback from this group on a couple ideas on if you think they would work or are interested in them:
  • A daily newsletter where I highlight any loans I would personally invest in, with a link to the loan. I would charge ~$10 per month to be on the list.
  • An investor service where you deposit your money with me and I invest it for you (similar to the Prime service on Lending Club), but I will get you better returns and take a small fee.
  • Any other ideas on how I can help people make better investment decisions?

Thanks!
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

flojoflojo

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Re: Feedback on Lending Club Business
« Reply #6 on: January 10, 2013, 01:24:09 AM »
Thanks Anil - your thoughts are greatly appreciated. I PM-ed you via your blog.

brycemason

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Re: Feedback on Lending Club Business
« Reply #7 on: January 11, 2013, 01:57:19 AM »
15% without one default is amazing. I'd love to know how you think about picking, as well as how old your average note is. Welcome to the forum!

DanB

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Re: Feedback on Lending Club Business
« Reply #8 on: January 11, 2013, 02:31:10 AM »
No offense, but 15% without a default from only 267 notes is good..................but hardly amazing. How old is the average note? What is the mix of 36 to 60 month notes?? 15% NAR or ROI?

If the answer to those 3 questions are appropriate then I'd be willing to use the word "amazing".................in another year, assuming at least another 200 notes that are at least that old in the portfolio.

SeanMcD

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Re: Feedback on Lending Club Business
« Reply #9 on: January 11, 2013, 06:04:40 PM »
How old is the average note?

This question seems to come up every time returns are discussed.  I understand the reason for it, since most loan defaults don't start showing up until after 6-9 months.  The question it always raises for me, though, is if young loans make such an unrealistic boost to your returns, wouldn't it make sense to constantly churn your loans by listing everything competitively on the secondary market, good and bad, and intentionally keeping your average age low?  Does the delay in reinvesting the proceeds eat up too much return to make it worth doing across the board?

Keltset

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Re: Feedback on Lending Club Business
« Reply #10 on: January 11, 2013, 07:52:43 PM »
How old is the average note?

This question seems to come up every time returns are discussed.  I understand the reason for it, since most loan defaults don't start showing up until after 6-9 months.  The question it always raises for me, though, is if young loans make such an unrealistic boost to your returns, wouldn't it make sense to constantly churn your loans by listing everything competitively on the secondary market, good and bad, and intentionally keeping your average age low?  Does the delay in reinvesting the proceeds eat up too much return to make it worth doing across the board?

All of my notes are always up for sale on the secondary and 2012 closed out somewhere between 15-16% (Good year!! I wish I could maintain this number forever which isn't likely) for me, I started investing late 2011. I use XIRR which includes my idle cash and downtime. Since I started listing all of my notes for sale my average age has dropped sharply and my return has increased by a couple points. I simply don't value age of notes when considering return rates unless the influx is all "new" money. It really depends on peoples strategy and what they are doing. If the strategy is buy and hold through maturity then age will have a dramatic affect on the return figures. The only problem with a churning strategy comes in the ability to find notes that meet the criteria to continue to purchase. As the selection of notes that meet my criteria slow down I increase the premium I charge on the secondary which slows down the turn rate of notes to match the ability to reuse the money on a new note, and as a second boon I make more when the notes do sell. So back to your point- I judge the persons content, ideas, and implementation as opposed to caring about the age of the notes in the portfolio which is not nearly as relevant as the time that the money has had time to work. The time that the money has been working for that overall return using a specific strategy is the question that should be focused on in my opinion...

writing2reality

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Re: Feedback on Lending Club Business
« Reply #11 on: January 14, 2013, 11:05:17 AM »
All of my notes are always up for sale on the secondary and 2012 closed out somewhere between 15-16% (Good year!! I wish I could maintain this number forever which isn't likely) for me, I started investing late 2011. I use XIRR which includes my idle cash and downtime. Since I started listing all of my notes for sale my average age has dropped sharply and my return has increased by a couple points. I simply don't value age of notes when considering return rates unless the influx is all "new" money. It really depends on peoples strategy and what they are doing. If the strategy is buy and hold through maturity then age will have a dramatic affect on the return figures. The only problem with a churning strategy comes in the ability to find notes that meet the criteria to continue to purchase. As the selection of notes that meet my criteria slow down I increase the premium I charge on the secondary which slows down the turn rate of notes to match the ability to reuse the money on a new note, and as a second boon I make more when the notes do sell. So back to your point- I judge the persons content, ideas, and implementation as opposed to caring about the age of the notes in the portfolio which is not nearly as relevant as the time that the money has had time to work. The time that the money has been working for that overall return using a specific strategy is the question that should be focused on in my opinion...

I certainly agree with you Keltset that the longevity of investment strategy is a better indicator than pure "seasoned" return ideology.

Going back to the OP thoughts, like Anil mentioned, this forum will have a hard time replicating your "intended" market. Most of the investors here are very actively involved in developing their own investment criteria through research and analytical analysis. As such, your intended market would be those uninterested in doing such work. This, in my mind limits the first option you mentioned, because if I am going to pay $120 per year for loan picks, then you had better provide enough picks to support the size of account I desire. Example: New investor with 20k to invest. Within the first six months, will you be linking (realistically) 800+ different loan options (assuming they want to put $25 per note, and without counting the reinvestments from payments)?

Going to your second idea, essentially setting up a hedge fund (ignoring the obvious legal and reporting requirements for such an entity), you have to be able to successfully market some sort of a return, without getting yourself into a Madoff situation. I personally would be extremely skeptical of someone providing a guaranteed return with only a three year investment history. This certainly isn't a knock on your background, or expertise, just an observation, as I too have imagined created a similar vehicle for investment that would produce a fee for my "investment services".

  • Any other ideas on how I can help people make better investment decisions?

And a final thought, although made very much tongue in cheek, would be to simply share this proprietary knowledge! :)
WriteYourOwnReality Blog: http://www.writeyourownreality.com