Learning from my past mistakes
As a peer to peer investor, when no one else is around I would find myself a loan. 😀
I’ve been investing with Lending Loop (LL) for over 3 years now. My first year in 2017 ended with a 10% return net of expenses. Then last year I made 11%. But in the meantime I was accumulating an unhealthy amount of delinquent loans in my portfolio. This hidden risk was not good.
So at the start of 2019 I decided to adopt a more strategic approach to choosing loans. I came up with the 10 Rules for Choosing Better Loans, which you can find here. New defaults have been in decline since I started using this more selective method. 🙂
In today’s post I’ll dive into my portfolio’s 2019 performance and explain my plans moving forward with this platform, including withdrawing my money.
LL as a platform has come a long way over the years. It hit a major milestone in 2017 when it helped fund over $10 million in total loans. By the summer of 2018 it had surpassed $20 million. And by the end of this year, over $60 million. Tighter lending restriction at traditional banks is pushing businesses to find alternative lending sources.
But with Canadian delinquencies on the rise, and higher expected inflation in 2020, it remains to be seen how LL lenders will do in the foreseeable future. There are also internal issues with the platform which I’ve blogged about in the past that have not been fixed.
In today’s post I’ll be going over the following:
- Breakdown of my 2019 return.
- My increasing number of loans in default.
- Recent changes to the platform.
- What I liked and didn’t like.
- My plans for Lending Loop in 2020.
For a general overview of how Lending Loop works, its pros and cons, and whether it’s right for you, please see my original review.
Liquid’s 2019 Portfolio Performance
Assuming all the scheduled payments over the next week are made on time, I will earn a total of $4,135 of interest in 2019. Luckily there were no loans written off this year.
- Interest earned $4,135
- Servicing fees -$443
- Bonuses $87
- Net earnings $3,779
Altogether my income for 2019 is $3,779 net of fees. By comparison last year I earned $3,369 net. So things are going in the right direction.
I began 2019 with $33,563 in my account. By the end of the year I’ll have $37,205. So my annual return is 11%. 🙂 Not too shabby. Despite using a more conservative approach choosing loans this year, the return ended up being about the same as in 2018. The new companies I’ve been lending to appear to be more diligent paying on time. 🙂 Here’s a snapshot of my current dashboard.
And here is my total earnings summary.
I’ve contributed a total of $28,000 into this platform, and it has made me over $9,100 of profit so far. 🙂 In the graph below, the difference between the purple and grey lines is my net earnings. It’s really satisfying to see a portfolio growing by itself. 😀
On the surface everything looks pretty rosy. But the devils are in the details. Behind the headline 11% annual return hides a slough of bad loans. Since there is no secondary market for Lending Loop loans, investors are often left holding toxic debt that are still marked at their original value, but are actually worth much less.