Four New Features from Lending Club

The Lending Club blog announced four new features today:

• Notes Already Invested in
• Charged off loans and notes
• Give your friends $50
• Reinvesting Monthly Payments

These are all very useful features. I checked them out in my Lending Club account. But first, to give you some idea of the possibilities of peer to peer lending here are a few details of my rickety lending. Currently I have 44 notes in Lending Club that have a weighted average interest rate of 11.45%. None of my notes have ever been late. Based on outstanding principal the composition by rating are A 6%, B 55%, and C 39%. It seems to me that this is a very good interest rate when compared to Certificates of Deposit.

Notes Already Invested In

The “Notes Already Invested in” feature was one that I had requested in October. The part that is most useful to me is the ability to exclude notes already invested in when browsing and searching. I just have to select the check box at the top of the search page.

Charged off Loans and Notes

As far as “Charged off loans and notes” are concerned, I don’t have any of my notes that are past due so there is nothing for me to see — yet. Here is what Rob has to say:

We have added a “charged off” status to your account, so that you can now differentiate defaults from charge-offs. While “default” occurs automatically when a loan is 120 days past due, a loan or note only gets charged off when Lending Club considers it unrecoverable after a review of the collections activities (which can happen before or after 120 days). These charge-offs will appear in your end of year statement so that you can report them as losses for tax purposes.

Give Your Friends $50

The “give your friends $50” feature appeared at first to me to be a gift certificate I would have to buy. But no, it is a promotion and a very good one. Lending Club explains their generosity:

Well, we spend around $50 attracting a new customer anyway so instead of making an ad agency richer, we thought it would make more sense to let you invite your friends and deposit $50 in their account, make them $50 richer and make you look good in the process!

I have already sent invites to several friends and family who will appreciate $50 to play with. The slick interface allowed me to choose from my email contacts and edit the email invitation if I wanted.

Reinvesting Monthly Payments

“Reinvesting Monthly Payments” offers the ability to schedule a search that runs automatically when your cash balance equals or exceeds a given amount. This feature currently uses LendingMatch; Lending Club will be adding the ability to use the more granular credit criteria soon. I am using this feature by setting the minimum amount of $25 and the lowest target average interest rate. As soon as my cash balance reaches $25 I should be notified by Lending Club of the order that is waiting. I’m not interested in the order — I pick my own notes — I just want to be notified that I have enough to invest in another loan. We will see if it works the way I have set it up.

Update

22 Feb 2009 A Lending Club Investment Analysis (PDF) was conducted by Javelin Strategy & Research (January 2009). Accounting for loans paid off early, late payments, defaults, and a Lending Club 1% service charge, the overall investment return still averaged 9.05%, with a median return of 10.48%, based on a Weighted Average Return on Invested Capital.