Two of My Lending Club Loans Are 30 Days Late

Apparently, I was a little overstated the status of my Lending Club loans when I updated my loan portfolio and stated that there was no late or default. Somehow, I skipped one page where there are two $50 loans that are already more than 30 days late when I checked last night, both from the same borrower :(

Those two loans (C3 grade loan, 13.16% interest rate) were acquired in late February when I started to invest with Lending Club and they are among the first batch of notes I bought. Back then, I guess I was so eager to get the lending going, and start making money, that I didn’t realize that the two loans are from the same borrower until now. This, of course, is a big mistake because lending more money to the same borrower by funding multiple loans can only increase, not reduce, the risk.

For these two loans, they were both new loans when I bought them back in February and payments were made on time in the first four months from March to June. Then the borrower was late in July, then again in August. Meanwhile, Lending Club appears to be doing what they can to contact the borrower and collect the payment, but failed:

  • 8/7/09 (Friday) Engaged external collections agency
  • 8/4/09 (Tuesday) Attempted to contact borrower (left voicemail)
  • 8/4/09 (Tuesday) Contacted a borrowers relative
  • 7/31/09 (Friday) Attempted to contact borrower (left voicemail)
  • 7/30/09 (Thursday) Contacted a borrowers relative
  • 7/30/09 (Thursday) Attempted to contact borrower (left voicemail)
  • 7/28/09 (Tuesday) Attempted to contact borrower (left voicemail)
  • 7/28/09 (Tuesday) Sent email to borrower
  • 7/27/09 (Monday) Attempted to contact borrower (left voicemail)
  • 7/27/09 (Monday) Payment Failed
  • 7/24/09 (Friday) Sent email to borrower
  • 7/24/09 (Friday) Sent email to borrower
  • 7/22/09 (Wednesday) Attempted to collect payment
  • 7/20/09 (Monday) Attempted to contact borrower (left voicemail)
  • 7/16/09 (Thursday) Attempted to contact borrower (left voicemail)
  • 7/16/09 (Thursday) Payment Failed
  • 4/27/09 (Monday) Borrower contacted Lending Club

Of course, I am quite upset about the possible default of these two loans and the loss of $100 (less than 5% of my total Lending Club investments). The borrower’s credit was quite stable initially, thus there wasn’t a red-flag as far as I can tell, but the credit score dropped more than 100 point in the latest assessment this month.

Lending Club borrower credit history

I was trying to sell those two loans at a discount after noticing payments were late. Unfortunately, there’s no takers, even though I have reduced the price a couple of times. At the same time, I also reviewed my loan portfolio and identified a few more loans that are from the same borrower, all purchased in the early stage of my P2P lending business. Too reduce the risk of my investments so what happened to those two loans will not happen again, I put all the notes from the same borrowers (a few $50 loans and the rest are $25 loans) up for sale at a small discount. Since all loans are still current, some of them have already been taken.

It’s unlikely that I will get anything back from those two loans (I hope I am wrong, but I don’t expect too much even with the involvement of the collection agency). Oh well, that $100 can be the price I paid for the lesson I learned from this:

  • Never lend money to the same borrower;
  • Never fund large loans.

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6 Responses to “Two of My Lending Club Loans Are 30 Days Late”

  1. nickel |  Aug 13, 2009 at 9:03 pm

    I just noticed that two of my notes correspond to the same loan. I’ve been doing $25 notes for everything, but it’s time consuming to spread things out this much if you have a decent amount of money to invest. Do you pick loans individually, or do you use the automatic loan-picking feature?

  2. Sun |  Aug 13, 2009 at 9:19 pm

    Since I can only buy loans on the secondary market (NJ residents are not eligible for direct lending), I have to select loans myself. On the secondary market, there aren’t many options because I don’t want to buy loans with markups. Yes, it is time consuming and bad things can still happen.

  3. Todd @ Personal Finance Playbook |  Aug 20, 2009 at 4:49 pm

    That sucks. A friend of mine is having trouble finding notes he wants to invest in on Lending Club.

    Currently, only the note trading platform is available to me (I live in MO). Most of the sellers are either in the situation you are (who would want those notes?) or they are selling their notes at a ridiculous mark up.