Sunday, February 28, 2010

One of my Lending Club investment loans repaid in full early

One of the downsides of investing in any loan is that the borrower might decide to pay off the entire loan much earlier that the end of the term. Then you, the investor, are "stuck" with a pile of cash to reinvest. (Life can be tough sometimes.) One of my Lending Club investment loans was just repaid in full after just eight months. I will simply turn around and reinvest the money in a new investment loan, probably at a somewhat higher rate of interest. Unfortunately, the remaining principal (my slice, that is) was less than the minimum loan amount, so I must wait a week or so until I have enough interest flow in from other loans to make a minimum loan investment.

Coincidently, my Net Annualized Return dropped to 14.37%, which is not shabby, but moved in the opposite direction of my goal.

The repaid loan was at 12.21% interest. I'll target 16.5% interest for the new loan to try to boost my return closer to my 15% goal.

This is one of the annoying "housekeeping" chores of investing in loans, but I suppose I should be gratful that this surprise was "paid in full" rather than a delinquency.

-- Jack Krupansky

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