Lending Club Update: First Default

Investing isn't all gold bars and roses as we all know and losses will be incurred. My first loss has occurred in my Lending Club account and there may be another on the way but the account overall remains in the positive territory.

Default

Unfortunately I've had my first loan "Default" on Lending Club. Lending Club provides some information regarding contact attempts and responses for late loan payments on the "Status" link for the loan. Sadly this borrower has declared bankruptcy meaning that in all likelihood I will not see any of the outstanding $21.62 of principle. This marks the first loss of principle at the 1 year 4 month mark. There is also another loan that is currently in "Late" status as that could default.

Accounting for Losses

On the Lending Club home page it lists both the "Adjusted Net Annualized Return" and the "Adjusted Account Value" at the top. Lending Club adjusts these amounts based on a custom formula that they use to predict "actual losses" versus notes that will become current again. I like to adjust this filter to make all late loans a 100% loss. This allows me to quickly asses the impact of late loans as they become late and also not have any false sense of hope that late loans may come back.

Overall: Lending Club is Still A Good Investment For My Portfolio

Defaulted notes aside my Lending Club portfolio is still earning a pretty great 6.3% profit overall. Should any of the late notes become current then that number will increase though I'm not counting on it. This is part of the reason that Lending Club pushes the idea of having 100+ notes issued. When one note fails the others will more than make up for it. Eventually I'm aiming to have at least 200 notes issued at any one time. The better diversified I can become the less a single loss will sting. A word of warning to be mindful not to issue sub-par notes just to increase your numbers though. Holding your money for the right opportunity is much more important in my opinion then getting your money in fast. As always, do your own research prior to investing in any vehicle so you can make your own informed decisions.