P2P Lending / NFT Lending Forum

https://forum.lendacademy.com/index.php?topic=4834.msg43253#msg88888888Quote"> from: SLCPaladin on April 07, 2018, 11:45:58 PM

I too have been attempting to sell off the notes in my Lending Club IRA account. I've been at it for several months and probably won't finish for another month. I've been writing a blog, billlanke.blogspot.com, for about a year dealing with my Lending Club experience. I've currently posted the method of selling notes and the issue surrounding this. I assume all of the readers in this forum are familiar with the process.

My next post will deal with the process I use and contain some numbers showing daily progress. I'll follow this with an updated status on how the overall fire sale is going. Then I hope to try to make a stab at computing how much selling out early cost me. Follow along if you wish.

Apparently not all notes move from late through default to charged off. Some skip default and go from late to charged off.

In hindsight, I'd have been better served by investing in a high yield corporate bond ETF (like JNK). I'd gotten higher returns and it's very liquid asset. I'm afraid I'm going to pass away in the next 3-4 years and leave my wife with a mess of notes left in Lending Club. That was not my intent when I started with Lending Club. My bad, sorry girl.

My experience with dumping notes is apparently different than others. I decided to dump all my notes ending after 2020. These were all 5-year notes selected by automatic investing. I moved them to a seperate portfolio and listed all at the same time. Based on previous tests, I started them at a 1% discount. I tracked the results on my investment blog.

About 25% sold within 3 days and the selling practically stopped. I moved the discount to 2% and about another 25% sold.  I re-listed the remaining notes this past Monday at a 1% discount and about 10% sold by mid-week. I raised the discount to 2% and another 10% sold. I expect the sales to level off here.

A couple of other points. I offered the notes that were in the grace period for $10 and those late for $5. Some of these sold. I did not like offering bigger discounts until I remembered my purpose was to get rid of these notes and that the increasing discounts were only a few cents per note.

I received an Email from Lending Club with an attached PDF brochure titled "5 Key Things to Know About Investing at LendingClub". I wonder if this was a mass Email or specifically directed to me because of my recent activities. Did anyone else get this?

I also use Self Directed IRA services to hold my Lending Club account. I've transferred money from Lending Club to SDIRA a couple of times and then withdrawn the money. I have not transferred to another IRA.

If you go to the sdiraservices.com there is a tab at the top called "Forms". It is a list of the available forms. There should be one there for transferring your IRA money to another IRA. I've also called SDIRA Services and they are quite helpful. Good Luck.

A recent post by SeanMCA on another thread made me curious about the impact of the service charges on fully paid loans. Unfortunately, this led me down a path looking at payments made on a specific loan. I duplicated the calculations Lending Club made with each payment and realized how misleading the interest rate is. They compute the interest on the declining balance (as they should) but as the payments add up, the interest you earn declines.

I did an example starting with $100 invested at 10%. The borrower would have to pay back about $3.25 a month to pay this off in 36 months. Following is a chart of the first few months of payments.

Year   Month   Balance   Payment   Interest   Pd Princ   New Bal
10.00%   0   $100.0000            $100.0000
1   1   $100.0000   $3.2500   $0.83   $2.4167   $97.5833
1   2   $97.5833   $3.2500   $0.81   $2.4368   $95.1465
1   3   $95.1465   $3.2500   $0.79   $2.4571   $92.6894
1   4   $92.6894   $3.2500   $0.77   $2.4776   $90.2118

If you take this through the 36 months and total by year, you get the following sums.
   Amt Pd   Interest   Balance   Ret/$
Year 1   $39.0000   $8.6332   $69.6332   8.63%
Year 2   $39.0000   $5.4534   $36.0866   7.83%
Year 3   $39.0000   $1.9406   -$0.9727   5.38%
Life   $117.0000   $16.0273      5.34%

You earned $16.03 in interest on $100 over 3 years. That is an annual return of 5,34%. If you add in the service fee (totals $1.17), your return is further reduced to 4.95%. And, these assumptions to not consider the impact of charge offs and fully paid loans.

The only way you can continue to get near 10% is to constantly re-invest the money you receive. When you want off this merry-go-round, you will pay a penalty.

Where am I wrong?

I've had an IRA account with Lending Club for over 2 years. The initial results were good. But after a year, they started to decline and now are pretty bad. Bad enough that I decided to quit investing in new notes. But rather than give up, I'm analyzing lots of data and my experience. I'm documenting these in a blog http://billlanke.blogspot.com/" class="bbc_link" target="_blank">http://billlanke.blogspot.com/. I'll be adding the results of my analysis every couple of days. When I do, I post a tweet on Twitter, @billlanke, as a notice of a new post.

I invite anyone to look at this blog and comment on it. I'm sure I'll be covering ground already done by others. But you never know.