My experiment with investing in consumer loans through Lending Club continues with good success. My Net Annualized Return is now at 14.02% with no delinquencies. This morning I just invested in another loan using purely cash from recent cashflow over the past six weeks. Payments include both interest and return of principle.
Actually, I selected a loan and placed an order for it. It is currently in funding and 75% funded. It still has 11 more days to get fully funded, which appears to be plenty of time (11 days out of the 14-day funding period.) The interest rate on this loan is 17.39%. It is for debt consolidation. The loan grade is E4, which is a mediocre quality, but the person has good, verified employment. The Lending Club screen says that loans at this grade historically have a 4% default rate, so the net expected return is about 12%.
My experiment is going well and I would like to put more of my idle cash into Lending Club, but I need to get a bit more stability in my own work income and rebuild my rainy-day fund a bit more before I have much in the way of risk capital to invest. If my work prospects seem reasonably bright in a few weeks, I will likely at least boost my experiment a bit. I actually do have money earmarked for a somewhat larger experiment, but since there is risk involved, I intend to proceed cautiously. I could probably expand this experiment by six to seven times before it would even show up on my radar as even a minor investment. As an experiment, by definition, I am prepared to lose the entire investment.
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