The Lending Club Experiment at One Year – the Gravy Train Grows Crowded

It has been over eleven months since I opened my Lending Club account and started experimenting in the field of peer-to-peer lending. While I have been providing monthly updates on my little  headquarters page, many have asked that I write a new post to summarize the results. So here’s the summary:

With an annualized return over 17% to date on a $33,000-and-growing balance, I am very pleased with the results so far. And although I expect the return to drift down to about 12% over time, everything I’ve learned to this point tells me this is a valid way to earn higher returns in today’s low yield environment. Here’s my up-to-the-minute account summary:

Returns-to-date (including late/default status)

Returns-to-date (including late/default status)

The default rate has been fairly low so far and thus I expect it to increase if we are to eventually end up at 12%: assuming all possible late loans on the books today end up in default and more come in indefinitely at the same pace, we would still end up with an over 13.5% return. See the HQ page for more on the trend.


At the moment, the conditions that allowed me to get this great return are no longer so easily available. The supply of investors has grown more quickly than the pool of borrowers, as Lending Club freely admits in this April post on their website. A Wall Street Journal article on August 6th noted the same thing, and this Bloomberg Story has a nice picture of the various big businesses swooping in on the action.

The situation persists, even as they crank up loan volume: in April as they wrote that post, they were excited to pump through $140 million in loans. By last month (July), the number was already up to $173 milllion. The company’s loan volume since 2007 totals over $2.3 billion, with more than half of it in the last year.

You can see the effects of this directly in my own results. Remember the good ol’ days, when I was able to deploy my first $10,000 within a day or two? I filtered notes for the higher-yielding C through G categories along with a bunch of other restrictions* and still got a screen like this:


208 notes?! Must have been nice!

If I log in right now and attempt to pull up results with the same filter, this is what I get:


Today, only ONE note met my criteria

One measly note. And it’s not even a “debt consolidation” loan – the type I prefer to fund.

So where does this leave us? In a slightly less cushy place, but still a good one. Let’s review the facts:

  • I believe that Lending Club is still a good investment opportunity, just not quite as lucrative as it was a year ago. The notes that are most readily available are the safest ones – grade A and B, with interest rates of 6-9%. Looking in the system right now, I see 32 of these. It’s easy to invest a few hundred dollars a day. Just impractical to deploy a portfolio of $10,000 or more unless you have a lot of time on your hands.
  • You can always compete for the tasty scraps: digging through their website, I see that they release a new batch of notes at 6AM, 10AM, 2PM, and 6PM Pacific Time every day. With a speedy mouse finger, you can still get the higher-yield notes rather than settling for the safer but blander options that get left behind.
  • The company is working to expand as quickly as possible. For Lending Club, this is an embarrassment of riches – they have a rapidly growing pool of borrowers on one side, and an even hungrier pack of investors on the other. Although I’m only making things worse with articles like this**, it is still worth reporting on an interesting situation. They just need to advertise more on coupon and shopping blogs, and less on those targeted towards early retirees.

Although the situation represents a slowdown for investors, the opposite is true for borrowers. Due to the number of people that want to lend you money, borrowers can now expect lower interest rates and faster funding. If you have good credit and find yourself in the “A” category of Lending Club’s rate chart, this could be an opportunity to instantly acquire up to $16,000 at a rate of 7-9%, then use it to displace other more expensive debt.

As you move down into lower credit scores, you’d pay higher rates, and although I’d invest in your notes, on a personal level I recommend moving back into your parents’ basement before resorting to borrowing money at 20% interest unless for a very short-term emergency.


I’m planning to keep my account open for the long haul, and keep reinvesting the roughly $1000 per month of principal and interest payments that it now generates into new notes. I also expect Lending club to be able to fix the supply issue in the long run, and I will report back to you if I see this happen.

Still interested in following along? You can dig in with your own investor account here.

On the borrowing side? You’ll want to use this link.

Other Articles in this series:
The Lending Club Experiment – Part 1
The Lending Club Experiment Four Months Later
Lending Club Profits and your Taxes
The LC Experiment Headquarters Page


The Investor and Borrower links above will benefit this blog if you use them and end up creating an account for yourself (and thanks). 

*Here is my own lending club filter, developed after research on lendstats.com and bravenewlife.com:

– Delinquencies last 2 years: 0
– Home Ownership Mortgage+Own
– Exclude Loans already invested in
– Minimum employment 4 years
– Interest rate C,D,E,F,G
(this is a higher risk, higher return strategy that the statistics seem to suggest will work much better on average)

**Comparing their news releases to my own referral link stats, between 1-3% of LC’s investors are directly from this blog. Investors from MMM outnumber borrowers by about 100-to-1: Go Mustachians!

  • David September 5, 2013, 12:32 pm

    Well, I’m not going to complain about getting 8 or 9% with many of the B level notes. They seem pretty juicy to me, too. Still better than most corporate bonds.

  • Dylan September 8, 2013, 11:22 am

    Here’s my take on the LC. If you want to invest anything more than 5k in this site you will be hampered by a very clunky interface. If you want to use the exciting criteria you read you will finance 1 load a day. It takes far longer to invest in LC than anything else I can think of. My return is 18.70 right now since I started in June, which is why I put up with the clunky interface. I don’t use much filtering criteria except for not being late and no public notices and a job is necessary. After that I just rely on LC stats. My take though is the platform has a lot of promise, the value equation is solid for both sides and I doubt LC will jeopardize it’s reputation or IPO with a large bogus bubble loan creation. The problem isn’t too many loans which you would expect in a bubble situation but too few.

  • Veritas September 18, 2013, 8:02 am

    MMM – thanks for articles on LC which gave me insight and kick in the pants I needed to make an investment. As I live in a state that does not allow purchases of loans on the “primary” market my choices were the secondary loan trading platform or establishing a Separately Managed Account with LC Advisors, an affiliate of LC. I went with the SMA which requires that the investor be an accredited investor (income / net worth requirements) and also investors have to pony up a substantial minimum investment amount. I told LC Advisors my loan filter criteria and their traders buy the loans for me (initial loans and the re-investments). I chose the SMA because I was willing to invest the minimum amount and I don’t have the time to put the money to work myself on the LC platform. The SMA charges a 1.1% management fee. It’s been a month since funding my account and about 20% of my money is still in cash due to the tight loan supply. My filter criteria are basic and slanted towards the higher quality loans – 80% in B and the remainder in A and C grade. I expect to get an net annual return of 8 – 9 % which I am content with. I think for the most part the days of frothy returns in the high teens are over for investors getting in the game now. LC Advisors told me that pursuing a meaningful amount of lower quality (D, E, F…) loans would result in a very long funding process of at least 7+ months which I was not interested in. LC seems like a great way to diversify from the stock market while also earning solid returns. The real test will come a year from now when the inevitable defaults start to roll in or if there is a significant leg down in the economy. Thanks again for pointing out the LC opportunity!

  • Zach October 28, 2013, 2:27 pm

    As a borrower what is the advantage of using P2P vrs finding one of the credit card offers for one year at little or not interest rate?

    • Ed June 5, 2014, 5:06 pm

      The advantage is the loan is for a longer period of time.

      After that one year, the interest rate is going to go way up. And you’re in no better position than when you started.

      Also, usually the debt is a lot larger than what one credit card will hold. Additionally, if you have so much on many cards, you’re probably not going to be approved for such a large card.

      I experienced this first hand. I applied for a $15,000 personal loan through one of the banks and was denied. Interest rate was around the teens, but probably for a long time. I applied for the same loan and got a rate that was 7.9% for 36 months. Just paid it off about 10 months early and don’t have any more debt.

      It worked for me. I imagine it works for a lot of people. It is not necessary by any means, but it definitely gave me the shot in the arm I needed to get out of debt and I am well on my way now.

      • Zach June 8, 2014, 5:11 am

        Thanks Ed. Great to hear it worked out for you.

  • Steve D September 2, 2014, 4:07 pm

    Lending Club has been quite a ride for me. I was posting a 14.5% return for about a whole year in 2013. I even snatched a 2 month late $2,200 note for $1.96, which I collected $350 on over a couple months, then sold for $1,200. I remember seeing it for sale and not believing my eyes. Anyway, to make a long story short, for some reason this year, I had quite a few defaults totaling close to $2,000. Many of them were low interest, good credit types. Some people just stop paying their debts. The place has also become saturated with terrible loans in the last couple years. I pulled out of LC after all this, but I may give it another shot at some point.

  • JD October 27, 2014, 12:21 pm

    Watch out below! 100% of my loans originated in April and May 2014 have resulted in paying a few payments and then immediately filing bankruptcy. Using the same filters I have used since 2012 which resulted in ZERO defaults until recently. These were all B1 through B5 rated loans. I think it will be exposed in a few years now that banks and large investment funds are using Lending Club, that they are picking off the premier customers, leaving the low hanging fruit (rated higher by lending club than they should be) for us individual investors. The borrowers borrow from lending club, pay off the bank/credit card loans/loans they know have the resources to actually collect and recoup some percentage of original capital in bankruptcy court. It has been fairly well reported here and the other blogs that Lending club really doesn’t have the resources/infrastructure set up to pursue any collections/litigation and they sell the bad debt off in packages (which their terms even state the lenders get no benefit from once a borrower goes to bankruptcy and lending club makes the decision to write off your loan). The banks win again and individual investors are left holding the bag, sound familiar??

  • MAnderson October 29, 2014, 10:25 am

    JD: interesting to note, my first charge off on my-2-year old LC account was in APRIL 2014 as well; TEN charge offs since then. Was sitting at 18% for over a year, now just this month, fell to 14%.

    I have stopped funding my LC account for now.

    I think your suspicions may have some merit.

    • JD November 4, 2014, 6:02 pm

      MAnderson: yet another very quick bankruptcy on a loan only 5 months old. The trend continues. When bankruptcy is filed that quickly, you don’t get any warning to try to sell the loan in the secondary market, it simply notes bankruptcy.

  • Mel November 10, 2014, 1:01 pm

    I read in one of the posts that you use automatic investing with your filter. What investment mix do you use on the automated screen? What percentage is allocated to C, D, E, F, G?


    • Mr. Money Mustache November 10, 2014, 1:41 pm

      Good question Mel – I just checked my account and found the summary:
      My automated target is 30/30/30/10 for each of D/E/F/G

      But due to some earlier manual investments, my overall allocation is:
      A: 0%
      B: 1%
      C: 32%
      D: 26%
      E: 25%
      F: 12%
      G: 3%

      • Mel November 10, 2014, 3:17 pm

        Thanks for sharing. I’m just starting my LC adventure. :-)

        I would think a lot of the F/G loans would default. Does your summary screen show the percentage of loans charged off?

  • JLN January 27, 2015, 8:30 am

    Mr. MMM and Fellow ‘Stachians,

    Are you aware if you can sell notes from your portfolio (i.e. exit your note holdings)? If so, how and where is this done on Lending Club?

    Additionally, I believe we will remain in a relatively low rate environment for 2015, thus LC still is attractive, but when do you see interest rates rising, and how will that impact p2p lending investments?


    • Mike Hardy February 7, 2015, 9:51 am

      You can use their secondary market – “FOLIOfn” to liquidate individual notes, and in fact there appears to be some “gain” (or more accurately, additional loss avoidance) by liquidating notes as soon as they appear troublesome such that you can get a little of the capital back quickly and avoid the long delay while LendingClub attempts to recover the funds (and charges you plenty for the privilege while the cash is in limbo and is usually written off anyway).

      Making predictions is a fools market but at this point with deflation or disinflation taking hold despite being on the tail end of an economic cycle it’s hard to imagine interest rates going up. More likely the economic cycle will continue, resulting in eventual downturn, then rates will actually fall. Not all rosy for P2P lending vs traditional debt investments though, as P2P loss rates will likely be substantial as P2P lenders are unsecured lenders.

      With aggressive liquidation of troublesome notes, might still work out though, who knows?

  • Brandon B March 5, 2015, 11:00 pm

    Hey MMM, You should do an update blog post on your Lending Club adventure. Your last update was in 2013 so it will be interesting to see how things are going now that your initial loans are either finished or near finished.

  • Jim Wood May 5, 2015, 7:04 am

    How about an update on the lending club experiment. I’ve been pushing about 9% – I’m always interested to see how others have faired.

  • TheNewGuy July 1, 2015, 10:18 am

    Hi there. These may seem like naive questions but I need to ask them anyway. Is it better to invest in 36 or 60-month notes? Can you sell notes on the LC site before they mature? What is better?
    I’ve looked through the LC website and didn’t see what they have to say about this. TIA

  • Dave August 24, 2015, 12:30 pm

    You can count another Mustachian on the investor side of the equation. You mention that you have a custom loan filter for delinquencies, home ownership and employment. In the comments you mention not funding loans for things like “Acquire more stuff”. Do you have a filter on loan purpose as well?

  • Dylan August 24, 2015, 7:12 pm

    I’ve been in LC for about a year and half and my adjusted returns are 10.5 percent. I use a filter but it is a pretty broad one. I don’t put much faith in back testing when it is run against all the data available, in my neighborhood this is called curve fitting and has lead many a man to the financial gallows. I started my investment with 10K and I invest in 25.00 amounts for loans so I am very diversified.

  • Mitch Wagoner October 24, 2015, 10:15 pm

    Stopped reinvesting, the return went from 15.23% to 8.72% in 14 months. Continuing drips of defaults with portfolio of over 6000 twenty five dollar loans. Today it has started to eat through the interest gains. The monthly returns had slowed. You have to be careful with this.

    I do not know if this is just as good at having a properly diversified portfolio of MLPS/REITS/Junk Bonds/Corporate Bonds using modern portfolio theory. It is more liquid and you can get a better information on what’s happening with the company compared to people flaking on their loans?

  • Dave February 18, 2016, 6:42 am

    MMM, two things for your consideration…
    1. I don’t think LC’s return metrics on their site are valid…LC only measures returns from the time cash in your account is deployed by LC into a loan. As you know, it takes a while for that to happen (often, a VERY long time) and meanwhile your cash is idle and rotting just as it would in the mattress. That’s a return killer. The other thing LC does which kills returns is they sit on the inbound payments for 4-5 business days before crediting the payments to your account. On a monthly payment, that’s dampening returns by 15% or so. LC doesn’t take this timing into account either, when measuring returns on their site. I am able to crunch this because I am new to LC and my portfolio hasn’t gotten confusing yet. Funded 12/31/15, although LC didn’t let me begin putting the money to work until 1/6/16. Let’s assume that was honest by LC. Automatic investing was selected, and as of today I still have not had my full initial $5000 deployed by LC…and it’s not due to a shortage of loans being available. I select B-F, ready go. To cut to the chase, my annualized return so far ($5020.32 account value) is 3.45%, which my LC page declares it to be 9.87%. Utter BS, since all that matters to the investor is the return on the LC Investment. Not the return on the investments that LC makes on the investor’s behalf. So, just a word of caution when relying on the LC-calculated return.

    2. Are you just planning to roll your LC investment ‘forever’ or what is your plan to harvest some of the LC winnings? This thing is set up to never unwind, if continually rolling, unless an LC investor capitulates and clicks that button to sell the notes to a third party (how do I get in on THAT action…there’s some sweet returns!). I think I will just suck $100/mo out of LC, which would represent a real annualized return of 7% if I’m able to suck $100/mo out reliably for five years based on my $5k initial investment.

    Thanks for the LC endorsement; I am reasonably confident there is money to be made there. Just wanted to raise a flag that the LC rate of return math is flawed in LC’s favor. Investor beware.

  • Thos. March 9, 2016, 4:21 pm

    Thanks for your info, and this forum! 2.5 years later…any updates? It’s hard to find objective analyses of Lending Tree’s investor vs. borrower ratio, but since I inquired a year ago about being an investor all I get is emails offering loans, suggesting they have more trouble finding borrowers than investors. I did read in a few places that older, higher balance investors get first dibs on the juiciest loans, too. Are your returns still 10%+, or have they gone down? I’ve recently put money into two of the higher-rated crowdfunding sites; they’re returning 10% (so far), but I had to jump through accredited investor hoops to get in, and at $5k min., possible defaults seem more dramatic.

  • Slow May 9, 2016, 11:54 am


    Does the recent departure/allegations of the Lending Club CEO change your opinion on the worthiness of Lending Club as an investment? Link below:


  • Mike May 10, 2016, 11:10 am

  • papafoster May 20, 2016, 10:44 am

    Has anyone read this?

    Or watched this?

    Publicly traded company since 2014, now being funded by institutional money. CEO LaPlanche resigns after $22 million worth of loans made to single investor (Jeffries…). Totally against LC’s implicit business principals!

    Down from a high of $30 to $3.

    Has this changed anyone’s perspective on Lending Club?

  • Matt June 16, 2016, 8:41 am

    Thanks for sharing your experience with us. FWIW I have had similar returns using a similar strategy.

    There is a major concern that I have with Lending Club, and I have given the feedback to their team over 2 years ago. As a growing financial services company with billions under management, they should seriously look at offering 2 factor user authentication. If that isn’t something they can do quickly, then at a minimum they ought to add secret questions. Customer/Investor security is paramount, and them not having this makes me feel like security is not a priority.

    For an online company, I find this oversight to be unacceptable and it is the only thing keeping me from investing more with them. Curious if other readers feel the same, or know something I don’t here? It seems like a huge gap. PeerStreet is the same way and, at the moment, this is keeping me from investing more money there as well.

  • Leslie August 22, 2016, 2:57 pm

    Lending Club is actively looking for borrowers. Every week I get spam email marketing from them saying; “you can qualify for thousands of dollars in loans even if you have a low FICO score”. Um, no thanks. FYI: My FICO score is 815. I ask to not be contacted but the hits just keep on coming.

  • Chris December 30, 2016, 4:58 am

    I’m wondering if you still like Lending Club, especially with all of the scandals that have taken place this year with it:



  • Hans December 31, 2016, 12:13 pm

    I wonder what everybody’s experience is now with LC.Over the past year plus I watched the adjusted return rate forecast go down from 10% plus to now under 4% due to write off’s.I am actually concerned that I will not get the invested capital at the end. I stopped reinvesting and am pulling cash out as it becomes available.

  • Matt K March 27, 2017, 1:15 pm

    Well…my summary is as follows: I was about 9 months behind MMM in investing. Put in $30k, invested in average interest rate of 20.5%, C-G class notes. Initially, returns were awesome, then slowly they stepped down with all the collections. I decided to unwind about a 15-18 months ago or so. The unwinding process really gets under your craw…because the charge-off’s keep piling up, and the interest rate you continue to earn on what’s left does not keep up. Thus it seems like you are staying even, but ultimately, I have dropped some. So, in total, my average return has been 9.4% annually, but with the higher tax rate on the gains (as ordinary income), I would personally rather be in the stock market with potential gains & dividends, with a 15% tax rate, instead of 25%. Ultimately, I fault lending club, as they are making cruddy loans to people I would never lend to, and I am a professional banker. The few bits of info. they give you up front to make the decision are nothing compared to the info. available to you if you download your portfolio info. via excel. You find all kinds of more info out, that I wish I had up front. It might be available to you up front, if you had a computer program available to download the database upfront, automatically process it, and automate your investing decisions, like some of the big commercial players do. So…I am down to about $6800 left, slowly getting my last $$$ out as the payments come back in. Bottom line….I made money, but not nearly what I had hoped for or projected. Good to see we came to the same conclusion, but you’re in for a disappointment as you wait for the monies to come back in.

  • Ethan April 5, 2017, 8:51 am

    Looks like I’m late to the party. The lending club is no longer the lending club — scandals, reorganization, plunged stock price. I probably need to check out prosper instead.

  • Frugal-Investor April 26, 2017, 7:16 am

    Crowdsourced renewable energy investments (like TRINE or GridShare) look like they have many advantages of peer-to-peer lending, but favorable entry point.

    I like the whole idea of disintermediation of lending (though I have difficulty spelling the word) and how it takes big banks out of the equation. But, there is all appearances of an imbalance between the number of qualified investors and qualified borrowers, forcing more and more investors/ lenders to chase less qualified borrowers.

    As a consequence, here’s where my research has me headed. I want a triple win: (1) income for me, (2) useful capital for the project and (3) environmental impact. It looks like this area of crowdsourcing for environmental projects is in its infancy. Prior efforts have been led by CarbonFund.org and had offered no investment returns. This new class of entrant offer debt and equity investment options.

    I’m looking at TRINE solar projects (debt only):

    …and GridShare (which eliminates some of the issues with foreign investment accounts):

  • carlos July 3, 2017, 10:18 am

    Is there anybody else having a high default rate? I put this in autopilot, prob a mistake, and I currently have a 1.56% net rate of return adjusting for past due notes. To reduce this, should I manually pick notes or there is a filtering option on auto invest? thanks!

  • Sarah in Longmont October 2, 2018, 11:48 am

    Hi MMM!

    It’s been a few years since we’ve heard about your experiences with Lending Club. Would you be willing to update the post with more recent experiences, or to write a follow up?

    Thanks so much!

    • Ron Cameron December 11, 2018, 7:17 am

      I second this! I think five or so years is a good amount of time to evaluate an investment.


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