Jul 132017
 

Lending Loop Update

Earlier this year I blogged about investing $20,000 in a peer-to-peer lending platform called Lending Loop. My goal was to make 8% return overall, net of fees and write-offs. To be frank I was a little apprehensive at first when I learned about the high interest rates.

I wondered if it was really possible to earn 15% or higher rates of return consistently. Being greedy, I decided to give Lending Loop a try. I primarily invested in B and C loans because they are relatively safer, although the returns are lower than loans in higher risk categories.

Here’s what my Lending Loop portfolio looks like after half a year of investing. This screenshot was taken at the end of June.

As we can see I have made about $846 so far. Yay! πŸ™‚ That’s about 4.2% return, or 8.5% annualized return. This is very much in line with my expected 8% return I had initially set as my goal. I have invested in roughly 30 different loans so far on the platform, each loan averaging $700 of principal. Thankfully none of them have missed a payment yet so I’m really pleased about that. πŸ˜€

If this trend continues I should be able to earn a double digit return by the end of the year! But this rosy picture assumes there are no defaults on my loans for the next 6 months. πŸ™‚ Anyway, I will update again at the end of the year so we shall see what happens.

Unlike investments in a tax advantaged account, my Lending Loop returns will be taxed at my marginal tax rate, which is about 30%. This means if I earn 8.5% from the P2P investment, I will only end up making roughly 6% return after tax. To me 6% after tax is pretty good and certainly beats many alternative options out there. πŸ™‚ As interest rates are starting to climb slowly in North America, fixed income investments such as Lending Loop should continue to be attractive for investors looking for yield.

 

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Random Useless Fact:

Due to the lower surface gravity of Mars, if you weigh 100 pounds on Earth, you would weigh only 38 pounds on Mars.

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14 Comments on "Lending Loop – 6 Month Update"

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Norm
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Good luck. I’ve been a lender at Lending Club for many years. The results were great (12-14%) while the loans were new, but once I stopped goosing the returns by adding new funds, I saw the real results, which is that as they get older, the better the chance that people stop paying. This year the tide has turned and I’m losing month every month. The early years more than make up for it, but my average return at the end of everything (I’m slowly withdrawing everything) will probably come down around 6 or 7%. Big whoop.

Harry
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Harry

Interesting points. Do you think you would have been better off (less effort/risk) by just buying preferred shares? A bunch of them are being issued in the 4.5%-5% range which after the dividend tax credit would give a return equivalent to 6%+.

Matt
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Matt

I use the Lending Loop platform currently. My concern however still remains the same. How do we know that Lending Loop is assigning the correct rating for each loan. Maybe that B+ company is really a C+ and I have inadvertently taken on more risk unknowingly. Any thoughts? Or simply loaner beware?

Harry
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Harry
Long time reader. Thank you for your posts. I will apologize ahead of time as I have not read your initial post on Lending Loop. Above you show a loan rating to interest rate grid. I assume this is a direct draw from the site. This type of lending peaks my interest. I do have a bunch of questions however. Hopefully someone can assist. Thank you in advance. Questions: 1. Is there any info on how the ratings relate to loan probability of default and loss given default? These would help in risk mitigation. 2. Are the ratings dynamic or are they point in time based on their initial issuance? 3. If they are dynamic, is there opportunities to sell your loans on. i.e. reduce or increase your loan based on transactions with other holders or the wider Lending Loop Audience. (ex. Loan rating goes down and you want to sell your position or loan rating improves and you want to sell the position to walk away with your money as well as an interest rate spread)? 4. How does the term of the loan (# of years) fit into your planning? 5. Not knowing this market, is there a… Read more Β»
Personal Alpha Investments
Guest

Long time reader. Posting this for the first time, in fact your blog motivated me to start mine.

What do you think should be the ideal portfolio allocation given the risk here for contributing to Lending Loop? I am contributing to Lending Loop but am hesitant on increasing my portfolio allocation.

GYM
Guest

Interesting I haven’t heard of Lending Loop before but I have heard of P2P lending. That’s a pretty decent return, even with it being taxed at the marginal rate. I agree I am also weary about P2P lending but a lot of PF bloggers seem to add this to their portfolio. I’ll definitely have to give it a closer look!

Andrea
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Andrea

I was just reading about P2P and thought it was a great idea. I signed up for it and going to put in 1K to start. I was wondering if you set up the Auto-Lend option or did you choose the companies individually yourself? Thanks!

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[…] 35 Blog (aka Liquid Independence) shares his 6 month Lending Loop Update, on his investment with Peer 2 Peer (P2P) Lending, which has made him 4.2% so far in the first half […]

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[…] Income – To generate dividend, interest, RoC, or other types of income instead of capital appreciation. The peer to peer lending platform, Lending Loop, is a good example of this. My effective annual yield on the platform is currently over 10%. […]

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