Lending club just became available in my state

[riverwed070707]

Tried to sign up for lending club a while back only to find out it wasn't available for my state. Got an email today that its now available but when I look at the map it appears my state is authorized for trading only, not investing and trading. Anyone know what that means?

Anyone care to share why they love LC? Good success with it?

[Spiffster]

That means that you can buy issued notes from other users, but cannot invest in new notes, which seems like a crappy option to me. The only situation in which I would sell an active note would be if I think it will default or its performing poorly. I suppose some may use the trading feature to liquidate their account.
I am only 6 months in and my NAR (Net Annualized Return) is 13.5%... so far on 350 notes. I anticipate that this will drop to around 10%, which I would still be very happy with.

[Spiffster]

Your question prompted me to look into note trading further and I was kinda amazed by how many notes are available on this platform. There are even deals to be had from some of my queries on the foliofn(?) interface. Perhaps this is not a bad way to get into the game. This guy is doing pretty well:

http://www.lendingmemo.com/reader-story-4-introducing-jason-detroit/

[riverwed070707]

Your question prompted me to look into note trading further and I was kinda amazed by how many notes are available on this platform. There are even deals to be had from some of my queries on the foliofn(?) interface. Perhaps this is not a bad way to get into the game. This guy is doing pretty well:
http://www.lendingmemo.com/reader-st...jason-detroit/

Thanks for that! Good article. Think I'm going to give it a try!

[kv968]

If you're looking to buy previously issued notes you want to make sure you know what the yield to maturity is before you buy the note since that will differ than the stated interest rate if you buy it at a premium or discount. Here's a good calculator to figure out what the price of a note should be:

Loan Calculator

The only drawback is it only allows for original terms of 36 or 60 months so if the loan has a different maturity it really won't work.

I would imagine Lending Club has something similar, if not better, on their site where you buy them.

[JulieAlbright]

That means that you can buy issued notes from other users, but cannot invest in new notes, which seems like a crappy option to me. The only situation in which I would sell an active note would be if I think it will default or its performing poorly. I suppose some may use the trading feature to liquidate their account.
I am only 6 months in and my NAR (Net Annualized Return) is 13.5%... so far on 350 notes. I anticipate that this will drop to around 10%, which I would still be very happy with.

Well no, that's actually not true at all. People trade notes on the secondary market for a variety of reasons and not only because they fear a note is headed toward default. There are several people who actively "churn" notes in that they look for good values either on the main Lending Club page or at the Trading Platform and then they hold them for 3 to 4 days and immediately liquidate them at a slight profit.

I would estimate I do around 25% of my Lending Club investing on the secondary market. My filters look for notes that have at least 12 payments made on time, no drop in FICO score and a minimum score of at least 750, and then a minimum return on investment percentage. I've been doing this since 2013, I've never had a note from the Trading Platform default although I occasionally get one slip into late payment status.

[Spiffster]

Well no, that's actually not true at all. People trade notes on the secondary market for a variety of reasons and not only because they fear a note is headed toward default. There are several people who actively "churn" notes in that they look for good values either on the main Lending Club page or at the Trading Platform and then they hold them for 3 to 4 days and immediately liquidate them at a slight profit.

I would estimate I do around 25% of my Lending Club investing on the secondary market. My filters look for notes that have at least 12 payments made on time, no drop in FICO score and a minimum score of at least 750, and then a minimum return on investment percentage. I've been doing this since 2013, I've never had a note from the Trading Platform default although I occasionally get one slip into late payment status.

You are right, the trading platform is a lot better than thought. My original comment was based mostly on assumptions. I am using the trading platform regularly now.

[tcatsninfan]

For those of you that have been using Lending Club for awhile, is it a difficult thing to file on your taxes? I looked into LC about 6 months ago and liked what I read, but then there were people saying that filing it on your taxes is a big hassle because it's a new sort of thing in some ways so the IRS doesn't know exactly how to address it. LC's website doesn't provide any advice because they don't want to be held accountable for anything being misfiled.

I'm no expert on taxes so I try to keep things simple. I'm contributing to a Roth IRA right now, but I thought it might be good to invest some of my money in other ways so that I could have access to the money earned before retirement.

[Jsteinkruger]

I would like to know about the taxes as well. I looked into this 1-2 years ago and I am sure things have changed by now, but I was concerned with how to claim taxes and it wasn't a risk I was wanting to take at the time. Would be curious if anyone is able to explain it.

[cooliemae]

Lending Club sends out a 1099-OID which is easy to input into Turbo Tax or other software products...everything is treated as simple interest, except for loans that have been written off..these are included in the 1099-OID, but not reported to the IRS. You simply need to fill out the capital gain or loss (Form 8949) to include them in your tax return.


I wouldn't worry too much about the tax aspect.

[tcatsninfan]

Lending Club sends out a 1099-OID which is easy to input into Turbo Tax or other software products...everything is treated as simple interest, except for loans that have been written off..these are included in the 1099-OID, but not reported to the IRS. You simply need to fill out the capital gain or loss (Form 8949) to include them in your tax return.

Ah I see...that sounds a lot easier than I was led to believe. When I looked into this before, people made it seem like you had to log in to the website and do some extreme math based on the number of loans you'd made, the ones that had defaulted, etc.

How long have you been using LC? What are your thoughts on it?

[cooliemae]

I've been using it for about 2 years now. I've only (knock on wood) had about 4% of my notes default and about half of those I've seen some of the money collected on the back end (after 120 days late the loan falls off the books, but LC or a collection agency continue to try and get the money back). Ironically, the first loan I had default on was considered an 'A' quality loan. Goes to show that ratings are tendencies and not absolutes.

The most inconvenient thing for my about LC is the fact that I can't have money DD like a checking or savings account. Transfers have to be scheduled through LC, which takes about 4 business days to complete. Other than that I've been pretty happy.

I've fairly conservative in my risk (20-40-20-20 split - A-B-C-D+), but my return this year is close to 9%, but if you want to be more aggressive then the returns are there.

[tcatsninfan]

I've fairly conservative in my risk (20-40-20-20 split - A-B-C-D+), but my return this year is close to 9%, but if you want to be more aggressive then the returns are there.

You'll have to forgive me (I don't have a trading account or anything like that), but roughly what do you end up paying in taxes on the money you earn from LC? You say your return this year is around 9%, but how much of that do you have to pay in taxes later? 3%? 5%?

[JulieAlbright]

What you pay in taxes will depend upon your tax bracket. The general rule is you will pay taxes based upon your marginal tax rate but there are a few wrinkles such as a possible capital loss for any charged off loans. I have a feeling the OP was seeing some of the discussions from a couple of years ago when the tax status reporting from Lending Club wasn't nearly as informative as what the tax guide they currently issue.

Lending Club does offer IRA and 401k rollover accounts if you wish to invest tax deferred.

[Jsteinkruger]

cooliemae, you say you are returning 9% is that after the capital gains taxes you pay or before?

It sounds like the LC Tax situation has become more transparent than it was when I last looked into it.