The End of LendingClub?
Jul 14, 2016, 12:05p - Investing
There are 2 parts to this story. The first is about LendingClub's (LC's) actions as a company, and the second is about my returns on the site.
Early on in LC's history (2007-2009), they advertised a 9% return for investors, right on the front page of their website. I was always skeptical of this from the beginning, because I didn't ... more »
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chandl34
- Jul 7, 2018, 8:35a
Another issue with capital losses is there is a limit you can claim per year. If you over-invest in LendingClub (or other similar platforms), you will always have more capital losses than the yearly limit. It seems the only way to claim those carry over losses is to de-invest completely from LendingClub.
Kirk
- Aug 17, 2023, 1:10p
It's sad to watch It. Some companies have the ability to make a lot of money, and they just don't do it properly. It's a shame the truth is. What can you do about it? Unless you create your own company and then you your own 2 diligence. Really wish those numbers would have sounded better, though.
What the LendingClub IPO reveals about its business
Dec 4, 2014, 3:01p - Investing
LendingClub is planning an IPO soon, probably on or after December 10, 2014. In this post, I will discuss why I think the standard view of LendingClub as a peer-to-peer (P2P) finance service will become outdated. Specifically, I will show that a larger portion of LendingClub's loans are being funded not by other individuals but by institutional investors, such as ... more »
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Estimating Lending Club's ROI (a survival food interlude)
Aug 11, 2010, 11:56p - Investing
Some of you may be surprised that my mind is working at all given my limited diet. Since so few have actually undertaken my survival food experiment, I think expecting your mind to give way may be an unrealistic expectation. I believe that most people would recover to some decent level of performance even though they'd only be eating ~1500 ... more »
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Sachin
- Aug 12, 2010, 7:29p
You spend a lot of time doing all this analysis. I'd just let a financial advisor take care of it. Or just stick it in a CD and save myself the headaches and stress.
Or if I want to help people who can't get loans, I'd just give money to Kiva (I do).
nikhil
- Aug 14, 2010, 6:58a
I've worked with several financial advisors, and none of the ones I've met do any of this. Maybe I haven't met the right person yet, but I've looked. Most haven't even heard of Lending Club.
CDs don't get anywhere near this level of return (assuming this pans out as hoped) - the highest rate on bankrate.com is 2.4% for a 3-yr CD (compare to 6% I'm hoping on Lending Club). Of course, this makes sense - Lending Club is riskier, takes more work than a 3-yr CD, and doesn't have the FDIC insurance).
Also, I want to help people AND get a good return, so Kiva isn't the right place for me.
Finally, I actually find doing this analysis fun :) I have a question that pops into my mind, and I answer it. Very satisfying (just like engineering can be). And it only took me 1 day, so not much time at all :) The previous SVM post did take me quite a bit longer, though, but I was learning the whole way through.
Connie
- Aug 14, 2010, 4:45p
Good to see you and B last week :) I came to your website to see how you're faring on Day 21, and here you are ranting about Lending Club again, haha. Anyway, the other site I was telling you about is microplace.com. My preference over Kiva. Microplace used to have more investments for 3%+ (and yes, I've been getting my funds back, no defaults yet after 3 years) so take a look and see if it works for you. Um, no insurance there either.
I would guess that financial advisors would prefer that you either invest in stocks or in mutual funds or other financial instruments as they get to make some money off the transaction. And the back analysis is usually done by someone else. Lending Club = no kickback + too small to be worth it for really rich people.
Two more things on the survival diet front. First, women's diets sometimes go all the way down to 1200 calories - just was reading about a few of the popular diets in a women's mag. Liquid diets are the rage. Also, there are lots of people fasting for Ramadan right now, which apparently may or may not work that well as there are giant parties every night where you (can) gorge yourself silly. Ah, the things we do for religion.
Write again and let us know how you're doing.
Barbara
- Aug 23, 2010, 5:04p
Although I am sure that your analysis has merit, it presumes that an investor invests equally in all loans. I believe that my strategy for investing in LC loans serves to increase return and lower risk for me personally, as opposed to all loans overall. There are many factors that I take into consideration when I evaluate which loans to back but I will give you a very easy example - I never invest in small business loans (even at a min. buy-in of $25, who invests in a small business w/o even seeing the business plan?) Also, I rarely invest in anyone who is applying for the max. amount - $25,000 just happens to be the amount that they need? More likely they are the type who are living in a hole and they are likely to dig it even deeper.
nikhil
- Aug 24, 2010, 3:22p
I agree with you Barbara. I also have various criteria that I layer on top of a borrower's credit grade before deciding to lend money. Expected return under those conditions are a bit harder to estimate, but in some cases also feasible.
Colin
- Sep 19, 2010, 11:21a
Hey Nikhil,
Great idea to take a different perspective on the ROI. Aside from getting into the details of whether your figures are right, it is important to let people know the difference between the advertised ROI and what they might find after 3 years.
I myself have spent a lot of time recently studying into the industry and definitely think it deserves the kind of attention you are giving it.
Cheers,
Colin
Mike
- Dec 13, 2010, 3:51p
I've been looking for something EXACTLY like this..
I've been looking to hunker down $50k or so into LC, but have been suspicious of their high rates and held off...
Please keep updating this post and do you have a website that does so??
Favorited..
Thanks Mike
P2P Lending + SVM = $$$?
Jul 7, 2010, 1:20p - Investing
Since 2004, I've been intrigued by microfinance. It all started when I read Mohammed Yunus' book "Banker for the Poor". In it, Yunus describes how he was able to improve the lives of poor women in Bangladesh by providing them with small loans (as little as $50 or less). Not only did the lenders get a reliable return, the borrowers ... more »
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sundar
- Jul 8, 2010, 11:51p
yes i did get this far - great to see you continue to do interesting stuff, this atleast is much better than those frikking worms you write about:)
Tuomas Talola
- Jul 9, 2010, 5:35a
Have to say, I've never heard of Support Vector Machines. What you've done, I know as regression analysis. Nothing wrong with regression analysis itself, but using it to predict future returns or defaults is little dubious. This has been the case in financial markets over and over again.
However, the work you have done seems quite thorough, I appreciate it. I'd be interested in more detailed results.
asenski
- May 7, 2012, 12:57a
Few questions:
1. Have you tried applying non-linear SVM?
2. Did you make sure you are not using training data that would not have been available for the test data set? i.e. whether a loan defaulted or not won't be known until 3 years from its origination date. You may be cheating unintentionally here!
nikhil
- May 10, 2012, 9:57p
Hi asenski,
1) No, I have not tried using the non-linear SVM. I think I just tried whatever was the default option in libsvm.
2) If I recall accurately (it's been several years now), the training set always included loans issued before the loans in the test set. I defined a default as a loan that's more than 1 month late. So it's possible that a loan that issued several years ago defaulted after a loan from the test set was issued. So if you were doing this analysis in current-time to predict the future, this might be construed as a form of "cheating" - i.e. you wouldn't know that a training set loan would default because it hasn't at the time you're considering making a new loan (which would be equivalent to an item from the test set). Good eyes! If I were to redo this analysis I would try to take care of this caveat, since it might make a difference.
Dave
- Jun 16, 2012, 2:34p
You should really try non-linear. I'd try a radial basis function first.
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