LendingClub Files for $500M IPO • Hacker News Board

Re: LendingClub Files for $500M IPO

#11

Post by bsims » Wed, Aug 27, 2014, 9:08 PM UTC

A part of this article is false.

"LendingClub doesn't loan out its own capital and collects fees of loans that are originated on its platform from both individuals and more sophisticated investors alike."

Lending Club owns a subsidiary fund that invests in the platform as well.

Investors should be aware that LC is both a platform, and an investor in it's own platform which, if not monitored closely, can be potentially dangerous.

[Source] http://www.prnewswire.com/news-releases/lending-club-announc...

Re: LendingClub Files for $500M IPO

#12

Post by mattzito » Wed, Aug 27, 2014, 9:10 PM UTC

cm2012 wrote: post #2

Everyone I talk to has had good experiences with lending on lending club. Has anyone here had a bad experience?

I haven't had a bad experience, per se, but after running through almost all of my initial loans and not opting to reinvest in more, it seems like a relatively decent but not great way of investing your money. I think if I were willing to carefully vet the loans, or focus on a particular vertical, I could have done better.

So, in my case, I did three portfolios - a fully manual hand-picked small portfolio, a blended approach with a higher risk, and then a portfolio of all high-interest, high-risk loans.

The hand-picked ones did extremely well, netting me 8.5%. The very high-risk ones got around 5-6%, and the blended around 4%.

It wasn't bad returns, but the interest income (iirc) is taxed as income, and that wasn't ideal for me.

EDIT: because I opted not to reinvest, all the numbers above are what my return is as my portfolios all wind down. At the beginning the returns were much better, 13-15%, but a significant percentage of people get about 75% of the way through paying off their loans and then get behind and default.

Re: LendingClub Files for $500M IPO

#13

Post by rtanaka » Wed, Aug 27, 2014, 9:22 PM UTC

cm2012 wrote: post #2

Everyone I talk to has had good experiences with lending on lending club. Has anyone here had a bad experience?

I spent a lot of time handpicking my 200 investments and I'm sitting on a 12.23% (adjusted) return right now. I think by most measures, this would qualify as a good experience. For me though, it's not. When someone defaults on me (I've had 1 officially and 2 more that will likely get charged off soon) I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount of effort to collect but it doesn't help how I feel. Especially when the people filling out the loan application write things like, "I'm a hard worker. I always pay my loans back, etc, etc" As someone, that would never short change someone on money owed I feel very let down when it happens to me and I take it a little too personally. It also doesn't sit right with me that LC takes a cut of every payment but doesn't share the pain of losses in any way. What it boils down to, I suppose, is that LC is just not the right investment vehicle for me.

edit: correcting default stats.

Re: LendingClub Files for $500M IPO

#14

Post by jliptzin » Wed, Aug 27, 2014, 9:24 PM UTC

rtanaka wrote: post #13

cm2012 wrote: post #2

Everyone I talk to has had good experiences with lending on lending club. Has anyone here had a bad experience?

I spent a lot of time handpicking my 200 investments and I'm sitting on a 12.23% (adjusted) return right now. I think by most measures, this would qualify as a good experience. For me though, it's not. When someone defaults on me (I've had 1 officially and 2 more that will likely get charged off soon) I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount of effort to collect but it doesn't hel…

Sometimes shit happens and people really just don't have the money to pay back their loans. I'm sure they feel even worse about it.

Re: LendingClub Files for $500M IPO

#15

Post by pktgen » Wed, Aug 27, 2014, 9:25 PM UTC

mattzito wrote: post #12

cm2012 wrote: post #2

Everyone I talk to has had good experiences with lending on lending club. Has anyone here had a bad experience?

I haven't had a bad experience, per se, but after running through almost all of my initial loans and not opting to reinvest in more, it seems like a relatively decent but not great way of investing your money. I think if I were willing to carefully vet the loans, or focus on a particular vertical, I could have done better. So, in my case, I did three portfolios - a fully manual hand-picked small portfolio, a blended…

The tax issue can be worked around to some extent by using an IRA. Lending Club will also open trust accounts so it should be possible to open one in the name of a solo 401(k) (only an option if you're self-employed). I'm going to try this in a bit.

Re: LendingClub Files for $500M IPO

#16

Post by pkaye » Wed, Aug 27, 2014, 9:26 PM UTC

rtanaka wrote: post #13

cm2012 wrote: post #2

Everyone I talk to has had good experiences with lending on lending club. Has anyone here had a bad experience?

I spent a lot of time handpicking my 200 investments and I'm sitting on a 12.23% (adjusted) return right now. I think by most measures, this would qualify as a good experience. For me though, it's not. When someone defaults on me (I've had 1 officially and 2 more that will likely get charged off soon) I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount of effort to collect but it doesn't hel…

What was your mix of loan grades? Did you have any grade A loans default?

Re: LendingClub Files for $500M IPO

#17

Post by AjithAntony » Wed, Aug 27, 2014, 9:29 PM UTC

rtanaka wrote: post #13

cm2012 wrote: post #2

Everyone I talk to has had good experiences with lending on lending club. Has anyone here had a bad experience?

I spent a lot of time handpicking my 200 investments and I'm sitting on a 12.23% (adjusted) return right now. I think by most measures, this would qualify as a good experience. For me though, it's not. When someone defaults on me (I've had 1 officially and 2 more that will likely get charged off soon) I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount of effort to collect but it doesn't hel…

How long have you held these notes? That seems like an exceptionally high return, and low default rate, unless this is like your first year.

Re: LendingClub Files for $500M IPO

#18

Post by jliptzin » Wed, Aug 27, 2014, 9:33 PM UTC

I have had a LC account for about 4 years. The returns aren't that great, around 6%. I did some random loans of mixed interest rates, but have also applied my own set of filters which brought the rate up a little bit over the last year.

The notes are also not liquid. You will suffer huge losses if you need to sell. I thought this would mean that I could get other people's notes at deep discounts...typically sellers want to offload late notes to avoid a full loss. However, in my test of buying about 30 late notes, I discovered the real problem - if a borrower makes a payment on your note while the transaction is still "settling" (typically 24-48 hours after you purchase the note), the transaction is cancelled. You can't cancel the transaction during the settling period if no payment is made though. So, what ended up happening was I was building a portfolio of junk notes that defaulted 98% of the time - the advantage is definitely with the seller and I suspect that is why there is a huge lack of buyers on their platform.

Re: LendingClub Files for $500M IPO

#19

Post by rtanaka » Wed, Aug 27, 2014, 9:34 PM UTC

pkaye wrote: post #16

rtanaka wrote: post #13

Earlier quoted context omitted.

I spent a lot of time handpicking my 200 investments and I'm sitting on a 12.23% (adjusted) return right now. I think by most measures, this would qualify as a good experience. For me though, it's not. When someone defaults on me (I've had 1 officially and 2 more that will likely get charged off soon) I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount of effort to collect but it doesn't hel…

What was your mix of loan grades? Did you have any grade A loans default?

I went with mostly B/C since they seemed to yield the best return for the risk. Here's the actual breakdown: http://i.imgur.com/egbkFfh.png My charged off one is B and I have an A and a C that are 31-120 days late now.

edit: updated with actual chart and data (i guessed the first time)

Re: LendingClub Files for $500M IPO

#20

Post by rtanaka » Wed, Aug 27, 2014, 9:35 PM UTC

AjithAntony wrote: post #17

rtanaka wrote: post #13

Earlier quoted context omitted.

I spent a lot of time handpicking my 200 investments and I'm sitting on a 12.23% (adjusted) return right now. I think by most measures, this would qualify as a good experience. For me though, it's not. When someone defaults on me (I've had 1 officially and 2 more that will likely get charged off soon) I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount of effort to collect but it doesn't hel…

How long have you held these notes? That seems like an exceptionally high return, and low default rate, unless this is like your first year.

I started in January of this year. It does seem high for sure. I'd like to think I spent a lot of time finding people that had the most to lose when making a decision (mortgage, relatively high income, stable job, etc) to lower my risk. But who knows.

edit: so i just checked for real. looks like it's been over a year (time flies). for the record, it shows 199 (instead of my stated 200) because i put $50 into one investment instead of the standard $25. http://i.imgur.com/o2DdDLU.png