Dec 262017
 

Year In Review

It’s been a year since I began investing in the peer to peer lending platform Lending Loop. I was anticipating a return of 8% when I first wrote about it. However things turned out better than I expected. I started the year with $20,000 and have earned just over $2,000 in interest now. So my year to date return is currently about 10%. I’m really happy with that! ๐Ÿ™‚ Here’s a recent snapshot of my account.

Here’s what my account looked like back in June.

I currently hold about 40 different loans. I usually commit about $500 to $1,000 per new loan. Each company has a different credit rating based on its likelihood to pay back debt. The table below shows how Lending Loop categorizes the risk bands.

I generally invest in the range between B and C rated loans. The interest rate I receive on the investment should be high, but I don’t want super risky loans with high rates of default. I do my research on a company before I invest so I do not automatically put money into every C+ loan that Lending Loop offers. I don’t have any A or A+ rated loans because the rates of return on those after fees are too low for me.

The reason I was expecting only 8% annual return is because I had factored in loan defaults that would cut into my gross interest earnings. However, across my ~40 different loans not a single one has defaulted yet. ๐Ÿ˜€ Phew. Thank goodness for that. *Knocks on wood*ย But I’ve only been on this platform for 12 months. Most loans in my portfolio have a lifespan of 24 to 36 months. So as time goes on I should probably expect to see some defaults, but hopefully not a lot.

 

10% Return Goal For 2018

Here are my portfolio expectations for next year. ๐Ÿ™‚

  • Average yield after 1.5% fee to Lending Loop = 12.5%
  • Estimated loan loss due to defaults = 2.5%
  • Total return after fees and defaults = 10%

So my 2018 goal is to earn a 10% return on Lending Loop. My portfolio is held in a regular taxable account so after income tax (roughly 30%) my net return should be about 7%. Hopefully I will make more than this but I would consider 7% after tax to be a decent return for a fixed income investment. ๐Ÿ™‚

Overall I am very happy with my returns on Lending Loop so far. My plan going forward is to deposit $8,000 of my savings into my Lending Loop account at the start of the new year. This way I will have about $30,000 in 2018 to lend out. I hope there will be no defaults in my loan portfolio again next year but we shall see. ๐Ÿ˜‰

 

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Random Useless Fact

Ultrasound for a cat usually cost between $200 to $400.

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PhilDag DavidMarcusP2P lending as an alternative for investing? – ็Ž‹ๅฎถๅ›ญๅญJanuary 2018 Fiscal Update | www.wealthinvestingdaily.com Recent comment authors
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Fuscratch
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Fuscratch

Hey Liquid,
Canโ€™t complain with those numbers. Iโ€™m also invested in lendinloop and my results were very similar to yours for the year. I invest a smaller amount in more loans. Iโ€™m invested in 70+ loans with only one loan currently in default. Looking at adding more to my account as well after a good first year.

Fred
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Fred

The economy in general is doing fairly well at this point in time. Obviously the default rates will soar when the economy slows or enters recession. Do you plan to time your exit according to the economic cycle or hold on and ride right through the ups and downs?

Ross
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Ross

I don’t think it’s really possible to exit this type of investment quickly. Your money is locked in for several years.
Best you could do is stop re-lending money that gets paid back; reducing your exposure gradually.

By the time we see a downturn it’ll be too late for your loans.

AlW
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AlW

This depends on the maturity rate of the loans Ross. Many have maturity rates in 12-24 months and several borrowers pay back early without penalty.

Tom @ Dividends Diversify
Guest

This is interesting Liquid. It is not an area I have participated in, but I’m always intrigued with the free flow of capital in the economy. Tom

Dividend Earner
Guest

That’s a really good way to generate another stream of income. Well done.

john
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john

Looks like in the US and Canada the lending platforms are in a much better shape.

In Finland, they are a total scam as majority of people only lose money because of high default rates. You could even experience a 33% default rate, 33% late payments and only 33% paid on time. This even with a highly diversified loan portfolio.

Anyways I have still determined to try one platform out to see how it goes with a 1000โ‚ฌ irrespective of the fact that every person I have asked have told me that they only lost money in the platform.

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[…] discussed in my post last week this is my newest investment with only one year of return history. I think national GDP growth will […]

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[…] [Update 2018] I have been using Lending Loop for over a year now. The platform now has 15,000 investors, more than twice the amount when I published this initial article last March. They’ve added an auto-loan feature which is very convenient. So far I’ve invested in a few dozens loans and none have been delinquent so far. My annual return is double digits for 2017. To see more, here’s my 1 year Lending Loop update.ย ย [/Update] […]

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[…] In January I earned about $1,000 from interest income alone; a new record for me. $230 came from my Lending Loop portfolio, $370 from mortgage investment corporations, and $400 from two individual high yield bonds in the […]

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[…] In January I earned about $1,000 from interest income alone; a new record for me. $230 came from my Lending Loop portfolio, $370 from mortgage investment corporations, and $400 from two individual high yield bonds in the […]

trackback

[…] Lending Loop – One Year Update […]

Marcus
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Marcus

Those are very good results but there are no tax benefits or tax shelter for interest income so the ROI that you are getting will be cut by 50-60% even more. The more more interest income you make the more tax. you are taxed at your marginal rate with this type of income stream. That’s no good, it makes it a poor investment choice.

Phil
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Phil

I agree that if you have maxed out all your registered options (e.g. TFSA, RRSP) then you should probably do something there first. However, if you have maxed those out then this is a reasonable thing to invest in.

Dag David
Guest
Dag David

Hi there bud. So I’ve been thinking about joining lending club and testing it out. However, I want to understand how to handle the taxes first. You stated that you keep your portfolio in a “regular taxable account”. I’m guessing that means your tax payments get deducted automatically right? That is what I’m looking for.

Phil
Guest
Phil

If you are referring to Lending Loop then no, tax payments do not get deducted. However, they do issue you a T5 which should make filing taxes pretty easy.