#foliofn

[treverimarket]

P2P Lending: Finally, It’s a Wonderful Life

[socialbanker]

One Month Anniversary

It took exactly a month and 5 days for the Net Annualized Return on Lending Club to flip from "New" to an actual percentage.  I've been pretty busy during this month purchasing notes via the Trading Platform and funding new loans.  Normally the first payments from new loans would be rolling in right about now but I was able to get a head start via the Trading Platform.

It has been quite a learning experience for me so I'll break it up into 2 categories.

Funding Lending Club Loans

It takes about 4 business days to ACH money to Lending Club which is quite atrocious.  The amount of cash I leave free is so that I have money available in the account to use instead of having to wait a week to get it.

Average time after a loan reaches 100% funding to be Issued can vary anywhere from 1 day to 7 days.  Of the ones that reach 100% funding about 10-20% get cancelled.

The minimum fee taken by Lending Club is 0.01.  So expect on a $25 loan at least .36 to be taken for a 36 month loan and .60 for a 60 month loan.  This makes the no fee loans now being offered by Lending Club for loans over 25k very attractive.

As an addition to the above, on a $50 loan the fee is about 0.02 and for $75/100 as well.  Don't know if the fees are worth the additional risk but if you have $10,000 in loans it adds up.

It seems the credit score are all updated near the end of the month.  The easiest way I've found to see all of them at once is via the note export or the Trading Platform sell screen.

Note Trading Platform

This is the area where there is not a whole lot of documentation so I had to do a lot of learning here.

Although the FAQ says that the cutoff time on the same day 11am PST for settling the notes.  Based on my experience the cutoff time is more like 7am PST if not earlier.

Due to the lack of adequate filters, you will need to wade through scores of bad notes.  I will detail the ones to avoid unless they are severely discounted.

Notes where Days Since Payment is "--" or over 27 days.  There is a flaw in the system where if the payment arrives before settlement, the note goes back to the seller.  So if the payment fails or the borrower decides to stop paying, guess who ends up with the note?  YOU DO.  Do not get tricked into this HEADS the seller wins and TAILS you eat a bad loan scenario.

Anything where payment received is today and it is between 1-3pm PST.  That is when most ACH payments are starting to trickle in.  The payment has come in but the note information does not get updated properly.  This usually results in the note suddenly looking cheap.  What will happen is you will get refunded your money and note returns to the seller.  You end up with money that didn't do anything for a day.

Notes under $5 in remaining principal.  I fell for this one a couple times because the notes were slightly discounted and it was a certainty that the borrower would pay.  But remember when the principal they owe is reduced, the amount of interest does as well.  No matter what, Lending Club will take their 0.01.  At $5 and under, almost all the interest accrued for the month will go to Lending Club.

Always go into the loan for details.  There are current notes that have COLLECTION LOG for missed payments.  And there are current notes where the borrower is habitually in grace period.

Speed matters.  This is first come first serve so the best priced loans don't last more than 15 seconds.  I've seen perfectly good notes drop for 30+% discount twice already in 2 weeks.  So training the eye to do quick due diligence and make a snap decision is needed.