One Year In Review With Lending Club (Peer-to-Peer Lending)

I started using Lending Club in November 2008 and collected my first interest payments the following month.

So far, I have invested $1617.67 into Lending Club and have another $675 ready for deposit whenever I find loans I like.

Lending Club has consistently stated that my "Net Annualized Return" has been in the 10 to 12 percent range with my current "Net Annualized Return" listed at 12.15%.

These numbers have been overly optimistic since Lending Club's formula fails to include transaction fees and losses in traded loans.

Accounting for these factors my monthly annualized returns have been:

Dec 2008: 8.99%

Jan 2009: 9.35%

Feb 2009: 8.76%

Mar 2009: 8.39%

Apr 2009: 8.33%

May 2009: 7.78%

Jun 2009: -5.24%

Jul 2009: 11.26%

Aug 2009: 9.66%

Sep 2009: 10.04%

Oct 2009: 9.81%

Nov 2009: 9.36%

Dec 2009: 5.89%

Jan 2010: 11.88%

Feb 2010: 9.90%

My compounded monthly returns netted me 7.7% in 2009.

My 2009 returns were most affected by my first delinquent loan. I held onto this loan and sold it when it was between 2 and 4 weeks late. I eventually unloaded it but at a 32% discount to face value.

My monthly "annualized returns" are a bit lumpy due to fluctuations in my loan portfolio and the periodic loan trades I make. I don't like carrying any delinquent loans on my books and have only kept performing loans.

My principal lending criteria is not to loan to anybody with a total debt greater than 3x their monthly income. I make $25 loans. This small lending amount takes more time but it ensures more people can qualify to purchase the loan if I ever have to sell it in a hurry.

Additionally, I look at loans for the quality of an applicant's occupation vs. my own opinion on the corresponding industry. I am positive on the outlook for Federal civil service and healthcare jobs and have focused a significant amount of my loans on applicants in these two areas.

I'm seriously considering establishing a self directed ROTH with Lending Club, but I am waiting until I grow my non-IRA account to the no fee minimum (currently $10k).