I'm just starting with tracking Lending Club investments in Quicken and I am looking for some feedback on the approach that I want to take. I would prefer to hear the problem now rather later when I would have to redo the work. I don't want to track taxes in Quicken so I'm not care if the tax aspect is correct.
I plan to track the loans in the following way. Assume a $2500 cash investment.
$2500 = 100 notes x $25/note.
I will create a security called "Lending Club". Whenever I invest in a note, I buy 1 Lending Club security.
So, after I buy 100 notes I will have 100 Lending Club shares.
For simplicity, let's assume a 5% interest (after all fees & stuff), all loans are 60 months and there are no defaults.
After the first month (or some time interval) I get back: Principal: $41.66 ($2500 / 60 months) Interest: $10.41 ($2500 * 5% / 12 months) For principal I sell $41.66 worth of shares (1.66 shares). This leaves me with 98.34 shares (100-1.66). The interest I record and dividend income. Now I have $52.07 cash (principal + interest). After I reinvest the cash, I buy 2.0828 shares ($52.07/$25 per share). This leaves me with 100.4228 Lending Club shares and no cash.
After that, I repeat the process for the following month.
Do you see any issues with this approach? I read some articles about this on the Internet and some suggested having the Lending Club share with a value of $1, I don't really understand why...
PS: For defaults, I plan to sell the note and then record the loss as an expense.