Tuesday, March 2, 2010

My LendingClub.com Experience

UPDATE (3/4/2010): I managed to sell all my notes and profited a total of $344.00 from both Propser.com and LendingClub.com holding the notes for less than 3 months.

I ended up investing over $20,000 in order to get this promotion they would give me 1% cash back.

After looking at the potential returns, I was super excited and invested aggressively.

Unfortunately, once I reviewed their stats and AFTER I invested my money, I realized that the stats weighed returns on notes that hadn't even had time to default, so they were heavily skewed.

In addition, the biggest risk is the fact that should Lending Club go bankrupt, then you could potentially lose your entire investment.

They don't really tell you that you could lose your money in case of bankruptcy, unless you read the fine print in the prospectus.

After reading this, I realized I didn't want to put all my eggs in one basket and started selling my 250+ notes on their trading platform.

I have 3 notes left, some of them defaulted, but I managed to sell most of them and still make hopefully a little over $200 should this entire thing pan out.

If it weren't for the fact that I could lose all my money if LendingClub goes out of business, I would've kept my investment. Perhaps one day, assets will be protected from bankruptcy similar to how Vanguard protects the index funds should Vanguard go bankrupt.

But even then, I'd be careful. Check out the 45.3% delinquency on Prosper.com loans: