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Lending Club: One of My Loans Defaulted

Buzz kill time! After five on-time payments, one of my Lending Club loan borrowers has just stopped paying the bill. I’d hoped this wouldn’t happen (of course I hoped this wouldn’t happen!), but it is sort of interesting to see how Lending Club handles it when someone stops returning their phone calls (literally).

When I logged into my account, I noticed it no longer listed my loans as “Issued and Current (2),” but rather “Issued and Current (1)” and below that, “Late 31 – 120 days (1).” Uh oh! So I checked in on it – August’s payment hadn’t gone through, and the one at the end of September had just “failed” as well. I’m not exactly sure what it means for a payment to “fail,” though. I suspect it might mean that my borrower had their payments set up as automatic withdrawals from a checking account, and when Lending Club went to take the money, there just wasn’t enough in the account.

At the bottom of the loan page, Lending Club helpfully listed the actions they had taken, in reverse chronological order. Here’s a screenshot (if it’s too small to read, click on the image to view it full-size):

lending_club_default

Of course, that “Engaged external collections agency” at the top doesn’t thrill me one bit. But it’s really nice to see that Lending Club has been doing a lot to try and get payments out of my defaulted borrower. It’ll be interesting to see what happens from here. If a collections agency buys the debt, will I get a portion of my money back? Or will the collection agency try to collect without buying the debt, and so maybe I’ll have to wait?

If the collection agency buys the debt for pennies on the dollar, I could be out 22 bucks in free Lending Club opening-bonus money. I guess I can’t feel too bad about it, especially when I know people not paying their bills is simply a part of life. But… dangit!

Defaults happen.

23 responses to “Lending Club: One of My Loans Defaulted”

  1. Adam Luptak

    I’ve got a little more ‘skin in the game’ at Lending Club, and I’m nervously waiting to see what happens with 2 of my loans that are late – but they’re still in the ‘Late 16-30 days’ category. Hoping that they can get it together before it goes to collections, of course.

    Regarding your questions, I got an email from Lending Club about a free online roundtable discussion about Credit and Collections at Lending Club that is occurring tomorrow evening at 7 – if you didn’t get that email and are interested, shout at me.

  2. Jesse

    I’ve yet to have a missed payment on any of my 5 loans but I hope I never have to experience it. Keep us posted Stephanie

  3. Lee

    That sucks.. but I guess that’s part of the game we play. I use Zopa (The UK version of TLC). If the debt collection agent buys my defaulter, I get about 20% of the outstanding amount if I recall. Not great, but better than a total wipe-out.

  4. F

    What were the specs on that note… A grade? I’m going out on a limb and will say C or less. Sorry about your loss. Glad you understand it WILL happen from time to time but that LC at least gave the borrower many opportunities to get back on track, come up with a payment plan, etc.

  5. Douglas

    That is a shame to hear. At least you know that persons credit score is going to tank because of this. But none the less it is a total bummer.

  6. RobG

    Stephanie:

    I’m happy you took the time to write about this topic. The reality is that, as you said it, “defaults happen”. It’s a natural and normal part of the concept and that’s why we put so much emphasis on diversification.

    At Lending Club, we are really methodical (and effective I must say) about collections.

    In fact, we are about to talk about Collections tomorrow on our weekly webinar that I recommend you attend:
    http://www.instantpresenter.com/AccountManager/RegEv.aspx?PIID=E957DF8685

    Check it out.
    Rob Garcia from LendingClub

  7. her every cent counts

    So far only one of my Lending Club loans has defaulted, my Prosper loans are performing worse. Eh. I think I’m probably done with P2P lending, too many defaults. But I’ll leave the $1000 or so I have invested and see how it performs over the long run.

  8. RobG

    @Stephanie:

    Indeed, we’ll post a recap within 24 hours of it happening for all to access.

    Rob Garcia from LendingClub

  9. Miss M

    That sucks! I’ve only been with Lending Club a few months and have about 25 loans right now, so far all are current but I know it’s just a matter of time before someone defaults. Had they made many payments before defaulting?

  10. Ibrahim | ZenCollegeLife.com

    I was afraid that this might happen. Are there repercussions in place that punish the non-payer?

  11. Financial Samurai

    Hey Stephanie – Sorry to hear about this. Given your experience, would you recommend a potential new lender like me lend?

    Your deadbeat borrower could still decide to pay, so don’t give up hope!

  12. Financial Samurai

    Hi Steph – Thanks for your thoughts. What about more money, such as $20-$50,000? Is this just too much to risk, if all your savings retirement etc stuff is in place?

    I would love to get 10%/annum returns, but I also don’t want a binary goose egg!

  13. Financial Samurai

    Sounds good Stephanie. I feel that there are a lot of other blogs out there pushing Lending Club… and I am very wary that Lending Club has gone out and decided to pay publishers money to hock their site and victimizing some folks.

    Perhaps in 1 year, I’ll revisit and see how things go.

  14. Yolan

    I hope you get your money back soon.
    The screen shot is actually helpful. Lets others know good steps to follow in recovering money.

  15. Yolan

    Then again, someone who has defaulted for so long is unlikely to just show up and say,”Sorry, here’s your money”.