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A Beginners Guide to Lendstats.com

by Peter Renton on March 21, 2012

If you have been reading my blog for a while you will have seen many, many references to the p2p lending statistics site Lendstats.com. I use it daily and I have done a great deal of research on Lendstats over the last 18 months.

But I have had a couple of emails lately from investors who feel a bit overwhelmed when they visit Lendstats and don’t really know how to get started. So, yesterday I recorded a video to help people get a feel for the site. The video is long at just under 15 minutes but I really only cover what I consider to be the essential pieces of Lendstats. Let me know what you think.

If you can’t see the video below, you can watch it on YouTube here.

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{ 23 comments… read them below or add one }

CultOfMoney March 21, 2012 at 2:26 pm

That’s a great intro to lendstats, that I think a bunch of people will find useful. Thanks for putting that together. It certainly can be a bit overwhelming for those who are disinclined to just jump in and see what happens. And it’s nice that you addressed both the Lending Club and Prosper sides.

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Neal Smith March 21, 2012 at 5:00 pm

Super job, Peter. I like that you didn’t just show us “where to click,” but also provided excellent guidance such as cautioning about drawing conclusions when the number of loans selected is small.

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Brady March 21, 2012 at 8:15 pm

This is a great overview of Lendstats.

I really like how the tool was able to analyze your portfolio at Prosper (nice ROI). I don’t believe that is available for a loan portfolio on Lending Club or am I just missing it?

Related to another recent post, fine-tuning your portfolio to hone in on an exact type of loan can make building a sizable portfolio a somewhat slow process. I’ve been doing a lot of loan sourcing in the Lending Club secondary market, which I believe allows me to improve my chances a bit. If I’m reading the Lendstats correctly, the projected ROI (and associated default rates) are based on expectations at the time of origination. So, if I can get a loan on the secondary market that shows a consistent on-time payment history, I hopefully am investing in a note that has proven itself a bit. This is somewhat like the idea of looking for repeat borrowers on Prosper – these are folks who have shown they will pay a p2p loan consistently on time.

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Peter Renton March 22, 2012 at 5:01 am

Thanks for the comments everyone.

@Brady, You are correct there is no equivalent on Lending Club to analyze your own loan portfolio. But you can use another tool for your Lending Club portfolio that requires you to download all the notes from LendingClub.com to a CSV. Check this out here: http://nickelsteamroller.com/portfolio

I know several investors who like to use the secondary market for purposes just like you describe. If you can find a 12-month old note that has had 12 on-time payments then your chances of default are certainly reduced over a new note. The challenge is that these notes are often priced at a premium which eats into your returns as a buyer.

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KenL March 22, 2012 at 8:43 am

@Brady,

At lendstats you can filter your LendingClub portfolio just as you can your Prosper portfolio. Just click on the Analyze your portfolio link in the LendingClub filter page or click here http://www.lendstats.com/loansearch/lc/upload.php. I use it on a weekly basis if not more. It has all the same power as the Prosper filter.

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Thomas March 22, 2012 at 11:09 am

Thanks Peter – great video! Have you developed a system to exclude loans that you have already invested in on Lending Club when using Lendstats? I do this manually by only looking at loans listed in the last day or two (if I haven’t invested on LC in the last day or two, this means I haven’t invested in these newly listed loans) – but I haven’t figured out how to do this via Lendstats.

Also – when actually making an investment, do you invest in the active loans by clicking on the link in Lendstats while logged into LC, or do you have another method?

Thanks for all your help!

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Brady March 22, 2012 at 6:42 pm

Excellent, thanks Ken, I see it now and will try it out tonight. Great site.

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Peter Renton March 22, 2012 at 8:09 pm

@Ken, Thanks for pointing out your own Lending Club portfolio analysis tool. That was an oversight on my part.

@Thomas, I invest by downloading the active loans spreadsheet (there is a Download All link at the bottom of the Browse Notes screen) and then running filters in Excel. I have no means of recording what loans I have invested in, I just keep track of the date of when I last invested like you do. I also look for the little icon on Lending Club that tells you if you have already invested in a loan.

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Brady March 23, 2012 at 10:30 pm

Neither Lendstats nor NickelSteamroller seem to be giving me a meaningful ROI calculation on my LendingClub portfolio.

LendStats:
ROI: 21.97% (+–1.45%)
Rate of Loss: -2.41%
Total Lent: 306 loans, $8,267
Remaining: $7,794
Net Gain: $-109 (+-$7)
Credit Grade: C5
Interest Rate: 14.35%
Loan Age: 9.1 months

Nickel Steamroller:
Your estimated ROI for all notes is 20.41%
You are invested in: 306 loans
You own (does not include “In Review/In Funding”): 322 notes
Average Loan Age: 328.2 days
Interest Recieved: $-97.48
Total Investment: $8,266.81
Estimated Loss: $5.49
Average Maturity Date: 11/09/2014

Just to note, Lending Club says:
Net Annualized Return: 13.02%

Playing around with my notes.csv, both LS and NS seem to be giving me “extra credit” for my Payments received. Over the last 2 months of investing (which are my first 2), I have seen 3 loans paid in full ahead of schedule, approx. $150 of payments received. So, I thought that may be it, so I zeroed out my payments received column and re-uploaded my notes.csv to both sites. I get something that looks to make a little more sense:

LendStats:
ROI: 10.28% (+–0.15%)

Nickel Steamroller:
ROI for all notes is 10.13%

Why would I get ROI credit for an early principal payment? That actually works against my ROI.

Here is how I would calculate ROI:

I moved $8k into Lending Club since Feb 1, rcvd payments of $376, of which $61 was interest. My interest accrued balance is $55. $93.68 cash in account. Note, that I purchase exclusively in the secondary market.

So, $8,000 (initial investment) + 376.82 (pmts rcvd) – 92.68 (cash on hand) = $8,284.14 invested

54.71 (accrued int) + 61.88 (int rcvd) = 116.59 (realized int)

116.59 (realized int) / 8279.91 (invested) = 1.41% (return)

I started investing the first week of Feb and have continued to build my portfolio since then over the past weeks. But, let’s just say conservatively, this 1.41% return is on a 7 week old investment even though much of it sat idle over that time period. Now, let’s annualize it…[(1+ weekly rate)^(52)]-1

((1+(.0141/7))^52) – 1 = 11.03%

Lets assume LendStats rate of loss is correct:
11.03% – 2.41% = 8.62% ROI

Interested in other perspectives.

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KenL March 24, 2012 at 11:19 am

Thanks for the feedback Brady.

I have to confess that LendStats was designed for notes purchased directly from folio. Based on your info you certainly may be correct about the usefulness of these ROI calculation.

I doubt the problem is the “extra credit”, but certainly there seems to be a problem. LendStats (and I believe this is true for NSR as well) calculate ROI’s only on notes where payments have been received and accrued interest has no effect on the ROI calculation. So the majority of your notes probably have no effect on the ROI calculation. So if the majority of the loans where you have received payments are loans with very high interest rates, then this could be the reason why the ROI is so large.

The method you propose for calculating ROI would be a good one, but with no dates in the notes.csv file it could prove to be very difficult if not impossible. It would also fall short when considering notes sales since there is absolutely no information in the file on sold notes.

All that said, I actually have no experience working with portfolios of all folio purchased notes. So if you wouldn’t mind I would appreciate it if you sent me your notes.csv file (to: [email protected] ) and hopefully I could get a better idea about how to improve the calculations.

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KenL March 24, 2012 at 11:21 am

Oops, the first line should read…

“I have to confess that LendStats was designed for notes purchased directly from LendingClub.”

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Brady March 24, 2012 at 2:10 pm

Here’s what’s bothering me: is this supposed to be a prediction of future performance or a measure of past performance? Right now it seems to be trying to do both. For example:

It looks at payments received (past) yet discounts my rate on a predicted default rate (future). And the pmts rcvd seems oblivious to whether they are additional payments on principal or interest payments.

I think the simplest and most accurate “return” metric you could derive from a notes.csv is a predictive ROI where you simply use the file to filter the Lending Club stats, matching on the loan id field. Ignore payments received, it is irrelevant, just discount the rate using your predicted default rates. (And of course, no one is paying me additional interest above the IR of the loan.) If I was to purchase a portfolio of loans from someone, this is a metric I would want to see when putting together an offer.

And as we’ve discussed, there is insufficient information in the notes.csv to measure my actual past performance. The file doesn’t tell you how much capital I’ve invested, how long I’ve owned the loans, interest received, etc.

I’ll email you my file.

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KenL March 24, 2012 at 2:35 pm

Thanks again for the feedback Brady.

LendStats actually measures performance to date. It may seem like estimating defaults based on delinquent notes is a future prediction and I guess technically it is but practically it isn’t. The easiest way to explain this is that the loss factors at lendstats are not telling you what fraction of late loans will default, it is actually estimating the amount of late loans that have already stopped paying, which actually is an estimation of the present or of the past but not the future.

Looking at the complete performance of the loans you own also wouldn’t be very practical either, because then you’d be including the past payments with your current performance and that would make your performance look much much better than it actually is.

I think I might try to break out markup/discount that might make things a little more understandable as well.

I look forward to seeing your file, hopefully with its help I can make some improvements.

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KenL March 24, 2012 at 3:07 pm

Brady,

It just dawned on me why the ROI’s look so inflated. There is a bit of a bonus and that is the accrued interest at purchase. When you get your first payment, all that accrued interest gets counted as interest earned at lendstats. So even though you may have only owned a note for 2 weeks, when you receive a payment you get a whole months worth of interest. This will make your interest earned and ROI look very high and it will also make the markup you paid look higher. So for newly bought notes, this will always be the case and there is nothing LendStats can do about it. The best thing I can so is separate out the markup-discount gain-loss from the interest-default gain-loss.

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KenL March 24, 2012 at 3:14 pm

Well, this is still just a theory I guess. I’ll test it out when I get your file.

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KenL March 24, 2012 at 3:59 pm

Scratch that last theory…..

I have found the problem. It is a bug and I will see if I can fix it. It will not be an easy fix so it may take a while.

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KenL March 24, 2012 at 4:00 pm

Thanks for your help Brady, your file helped me find the problem.

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KenL March 24, 2012 at 6:48 pm

Brady,

I’ve managed to break out the markups paid and now the ROI’s seem about right.

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Brady March 24, 2012 at 7:40 pm

Thanks, Ken. Ya, I notice that now the section on the right, “Complete Performance Breakdown”, works. Before I was just getting a bunch of error messages.

So, now:
ROI: 8.3% (+-2.19%)
Rate of Loss: 3.64%
Total Lent: 306 loans, $8,267
Remaining: $7,882
Net Gain: $27 (+-$7)
Markups Paid: $137
Credit Grade: C5
Interest Rate: 14.35%
Loan Age: 8.8 months

Pretty close to my manual calc in comment above of 8.62%.

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Chris S March 25, 2012 at 8:56 am

If NSL, Lendstats, and Microsoft Excel’s “XIRR” function all give you different answers for your portfolio’s performance, could one argue the most accurate/reliable measure of portfolio performance would be XIRR?

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Peter Renton March 25, 2012 at 9:15 pm

@Chris, I have always maintained that XIRR() is the best method of measuring past performance, particularly for long time periods such as six months or a year. The only problem is that if you are doing a lot of cash inflows and outflows it can get a bit complicated. Whether you are a Folio investor or not using your monthly statements and the XIRR() function you should get a very accurate number for your portfolio performance.

Lendstats and NSL will provide an estimate of what your ROI but XIRR() can tell you what actually happened.

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KenL March 31, 2012 at 8:13 pm

@Peter,

I would say that that is a mischaracterization. When I use the XIRR method in excel to calculate a return on a loan and then I use the LendStats equations to calculate a return on that same loan I get the exact same values for rate of return with the LendStats equations as I do with XIRR. So it really is unfair to imply that the LendStats equations do not reflect the reality. It is not the fault of the equations, the problem is the lack of information and that is a problem only when we are talking about notes purchased or sold on folio.

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Peter Renton April 2, 2012 at 1:44 pm

@KenL, I take your point. I think the Lendstats numbers provide an excellent estimate for the loans in your portfolio but it can’t take into account idle cash as well as inflows and outflows (not to mention Folio trading). That is why I always recommend for a complete picture of your historical returns investors should use XIRR() with the numbers from their monthly statements.

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