Good Riddance F and G Notes on Lending ClubNovember 9, 2017 | By: Sean Murray
When Lending Club announced they were discontinuing F and G grade notes on their platform for investors, I wasn’t surprised. Investors in general have been reporting disappointing returns, even dipping into negative territory some months. My own portfolio there is on track to generate a loss for 2017, which seems even worse when I consider that those funds could’ve returned nearly 15% in an S&P 500 index fund or more than 600% in bitcoin. Granted, only a small portion of my investable assets were tied up in Lending Club so it’s not all bad.
Out of the 3,262 notes I purchased on Lending Club, only 99 were F-grade and 53 were G-grade. They didn’t do so well in retrospect, echoing Lending Club’s findings.
27 of my G notes have already been charged off. 17 have been paid off, with the rest still outstanding. A charge-off rate over 50% is not so good on its own, but the data is worse because the interest earned on the performing ones was not enough to offset the charge-offs. Even if all of the remaining notes perform, it is no longer possible to earn a positive return on G notes. The amount I loaned exceeds the total dollars returned. The end result of a category that investors heralded as high-risk, high-return is a big fat loss.
31 of my 99 F notes have already been charged off. Only 26 remain outstanding, 4 of which are delinquent. The rest have been paid off. At this time, the amount I loaned exceeds the total dollars returned. It is still mathematically possible to break even if the remaining loans do not default, but we’ll see. Suffice to say, these were a bad investment.
I have been winding down my portfolio since May 2016. RIP F and G notes.Last modified: November 9, 2017
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.