How to Account for Lending Club Defaults in Quicken

As a followup to my previous article on tracking Lending Club investments in Quicken, I wanted to share how I account for defaults. If you’ve been reading my updates, then you’ll know that I had a borrower default last fall. It wasn’t until recently, however, that I decided how best to tackle this situation in Quicken.

Tracking notes in Quicken

As a quick refresher, I track my loans under a mock security name of “LC Loans, ” and with a stable share price of $1. If I invest $25 in a note, I “BUY” 25 shares of LC Loans. As principal is repaid, I “SELL” the appropriate number of share. Interest payments are recorded as dividends (DIV), and so on. I do this on a monthly basis with a single, aggregated BUY, SELL, DIV, etc. transaction. But I hadn’t figured out the default thing until this past weekend.

How to record defaults

As it turns out, the solution is very simple. In this case, it was a $25 note that went into default, and the borrower never made a single payment (nice, huh?). Initially, I thought I’d simply record a “SELL” transaction in Quicken for 25 shares of “LC Loans” at a price of zero. Unfortunately, Quicken wouldn’t let me assign a share price of $0.

My workaround was simply to leave the share price at $1, and to record a $25 “commission” in the commission field. The end result is that I deducted 25 shares of my investment without adding any cash value to my account. This has the same net effect of selling them for $0/each, or just magically erasing them.

As for timing, I recorded this transaction during the month in which the loan was finally declared a lost cause (November 2009). Quicken now gives me a completely accurate picture of my true portfolio performance, including the effects of both idle cash and loan defaults.

Any other suggestions?

If you have any tips or tricks for tracking your Lending Club investments, please share them in the comments. While the above approach doesn’t allow you to track things on a note-by-note basis, it’s very easy to implement, and gives you accurate numbers for your portfolio as a whole.

4 Responses to “How to Account for Lending Club Defaults in Quicken”

  1. Anonymous

    Does Lending Club provide a break up of the interest and principal received as repayment from borrower? Can anyone share the statement format sent by LC to lenders?

  2. almost there: Just to be clear, I aggregate everything in a BUY, SELL, etc. transaction on a monthly basis. In other words, if I buy 10 x $25 notes in a certain month, I record a single $250 BUY transaction. You should click through the first link for full details if you’re interested.

  3. Anonymous

    That method of tracking would drive me bonkers keeping track of each time interest and principle were paid per note each month. Then each day there is a payment there is also their 1% fee taken out. I just use quicken to track what I have invested, adding interest each month and subtracting their service fee. I have had all interest reinvested, but am having second thoughts on that as the defaults are starting to mount.

  4. Anonymous

    Is the $25 signup bonus for new lenders still happening at LC? I’d be interested in investing with my “fun money”, but having an extra bonus would be nice. I’d also rather give the referral bonus to a blogger I follow than one I found by googling.

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