Lending Club: Anyone Invest?

[Bailey Guns]

I've been thinking about trying it out for a while and finally did. A whopping $250. Just wanted to get my feet wet a little and see if it was for me. i don't have the time, patience or knowledge (much less money) to really do the stock market other than mutual funds and I already do that with the work retirement account. I wanted to try something a little different without risking a lot of money...just a little bit to learn on, I guess.

Anyone else invest in Lending Club? If so, what do you think about it and what's been your experience?

For those who may not know Lending Club is a peer-to-peer lending club where people loan other people money.

www.lendingclub.com (http://www.lendingclub.com)

(I briefly searched the GD forum but didnt' find anything on this topic specifically.)

[StagLefty]

What is this money thing you speak of ?

[Bailey Guns]

You did notice the $250 part...right? I'm kind of a high roller...

[hahhah-no]

[Irving]

Have you completed a transaction yet? Does the site provide contracts? What steps do you take if someone skips out on payment? Are there limits (upper and lower) to lending amounts? Tell us about it.

[jerrymrc]

Have you completed a transaction yet? Does the site provide contracts? What steps do you take if someone skips out on payment? Are there limits (upper and lower) to lending amounts? Tell us about it.

take a look at the site. I get offers in the mail from them wanting to loan me $$$. After looking it might be something to get in on since you can go as low as $25 per loan. Diversify and spread it around to mitigate the risk.[Flower]

[Bailey Guns]

My first investment of $250 won't post until next week. I decided to start out by allocating my investment in $25 blocks by various grades of loans, weighted towards the borrowers with better credit. But I threw in some higher risk loans as well...about 15% of my initial investment. Initially I opted to just let the site pick the loans for me automatically by grade (A - G...A being the borrowers with the best credit). I'll probably start to pick the loans myself once I'm a little more familiar with how the whole thing works.

Basically, once you and a sufficient number of investors invest in a loan and the loan is fully funded, the borrower gets his money. The borrower then makes payments just like he would to a bank. Once the borrower makes a payment your portion of the principal and interest for that payment is returned to your account.

Loan terms are either 36 or 60 months. The 60 month loans carry a higher interest rate for any given borrower. The borrower's interest rate for the loan is determined by their credit rating, length of the loan and other factors, just like a bank would.

If a borrower defaults Lending Club attempts to get the loan back to current status. If that's not possible then obviously you loose your investment (in my case, for now, that's only $25 per loan...but obviously it could be much higher for some investors). If the loan goes into a collection status then Lending Club charges fees to collect the money, pay lawyer fees, etc, and the fees are taken out of the collection payment(s) received prior to repaying the investors. They also charge a management fee just like any other investment firm would....I think it's 1% right now.

So my initial $250 investment will be spread out in $25 increments over 10 loans of various grades. Interest rates will range from around 5 or 6 percent to 18 to 22 percent. According to the way I set up my account I *should* see an average ROI of around 8.5%. Apparently this is getting pretty big and some big shots are investing heavy money into these peer-to-peer operations.

I'm anxious to see how it turns out.

[Bailey Guns]

A lot of good information here: https://www.lendingclub.com/public/steady-returns.action

Prosper is another peer-to-peer lending group. I just chose Lending Club because I'm more familiar with them.

[Irving]

Peer-to-peer is important for the economy when loans are hard to come by. That's basically how we got our apartment building last year. Thanks for posting about this and trying it out. I had no idea you could start so low. This is basically like a money market with better interest and corresponding risk. I like it.

Are there paths set-up where you can pull your money if you need it in a hurry? Like basically transferring your portion of a loan to someone else for a fee or something? If there IS, then one might be even better off picking up discount loans from new investors that get cold feet.

[Bailey Guns]

Yeah, there is a way to sell your loans. I don't know how easy or quick it would be. It explains everything on the site. Also, any money in your account that isn't invested is yours to do with as you like. Otherwise, your money is tied up for 36 or 60 months.

ETA:


How do I exit my investment?

The solid returns, monthly cash flow, and low volatility of Lending Club Notes come with less liquidity relative to other asset classes. Currently, Lending Club Notes mature 36 months or 60 months from the date the Note was issued, and investors should be prepared to hold any Note through to its maturity. As payments of principal and interest are received each month, investors may withdraw available cash through an ACH transfer to their bank account or through other means.

Folio Investing operates a Note Trading Platform that may provide additional liquidity in certain circumstances for Lending Club investors prior to the maturity of a Note. The Note Trading Platform is a marketplace where Lending Club investors may buy and sell Notes from one another.* Learn more about the Note Trading Platform (https://www.lendingclub.com/public/mainAboutTrading.action).

*The Note Trading Platform is not available for all account types and investors must be granted access by Folio Investing before transacting on the Note Trading Platform. FOLIOfn Investments, Inc. (“Folio Investing”) is a registered broker-dealer and member of FINRA and SIPC and operates the Note Trading Platform. Folio Investing is based in McLean, VA and is not affiliated with Lending Club. Folio Investing has no role in the original issuance of the Notes and is not responsible for and does not approve, endorse, review, recommend or guarantee the Notes or the accuracy, reliability, or completeness of any data or information about the Notes. More information about Folio Investing is available atwww.folioinvesting.com (https://www.folioinvesting.com/).

There's also an option for using your investment account as an IRA.

[Irving]

Interesting. I'll have to check this out some more. Keep us updated.

I wonder if you would irritate investors if you paid loans off early (they'd get less interest). I'll check the FAQs to see if there are early payment penalties.

[OneGuy67]

I invested a couple thousand back in 2008 in prosper.com. Took some hits during the recession and have had a steady small amount of loss due to non-payers over the years. I've lost the equivalent of what I've put into it and I have made in profit about half of what I put into it over the years. I have gotten wiser as to who I'm willing to lend money to and am only willing to lend to the safer (better credit) people and take a lower interest rate rather than gamble on a higher return with a riskier person.

[Great-Kazoo]

Interesting. I'll have to check this out some more. Keep us updated.

I wonder if you would irritate investors if you paid loans off early (they'd get less interest). I'll check the FAQs to see if there are early payment penalties.

Not if you invest with the right places

[Irving]

I invested a couple thousand back in 2008 in prosper.com. Took some hits during the recession and have had a steady small amount of loss due to non-payers over the years. I've lost the equivalent of what I've put into it and I have made in profit about half of what I put into it over the years. I have gotten wiser as to who I'm willing to lend money to and am only willing to lend to the safer (better credit) people and take a lower interest rate rather than gamble on a higher return with a riskier person.

It doesn't sound like your experience has completely turned you off to the idea though.

[asmo]

A while back I did Prosper for a few years. I made 36% ROI. Mainly large chunks for A grade stuff, and a metric fuck ton of low grade/low dollar. Only loan I ever got fucked on was the A paper.

[OneGuy67]

It doesn't sound like your experience has completely turned you off to the idea though.

My money is still there and I still actively invest. On top of it, I have received three loans from the site for progressively higher amounts to pay off higher interest rated items in a timely manner. The interest I make on my investment is higher than what I would get at any banking or stock institution, but there is risk to it.

[Irving]

With negative interest rates from banks becoming a possibility, I could see this becomming more popular.
Now I'm curious how people are using smaller loans. I think I might start suggesting this as a means for people I know with poor credit as a way to repair their financial lives and credit. Paying off a series of small loans has got to effect you positively.

[hawk1]

I've used TRADE KING (http://content.tradeking.com/trading/stocks-options/online-brokerage.php?ADTRK=SGO0912BRGPriority_Branded_Tra deking_ExactT0160&PV=D000-G001-Q001-R004&ADV=A&ADID=49213545911&c3apiks=KENSHOO_KEYWORDid&gclid=CMj079GS1cICFcGGaQod6ycAZQ) online trading company (similar to eTrade) since 2007. $4.95 per transaction... They stay out of your hair and let you make all your own decisions. You win on your own and lose on your own. Bought FORD stock at $1.16, held on to for a while and sold it all at $15.43... Not a bad return!

Check 'em out!

[OneGuy67]

Yeah Irving, it can help out with your credit profile. All the interest rates I've received on the loans were in the low 12-13% and I was paying off credit cards with 18-21% interest attached. Plus the 3 or 5 year loan type helps out too. I always have paid them off early.

I'm happy to have invested and borrowed money there.

[Dave]

I got a loan from them almost a year ago to pay off CC debts and lawyers fees that were charging me about 22%. Got a 5 year loan to cover everything at 15%, I'm paying about the same per month as the CC balances but I'll be done in about 1/4 of the time. Having a family member steal your identity gets very expensive. [Mad]

Once I'm clear in a couple of years (I make extra payments) I plan to be an investor in Prosper instead of sending my money to USAA's 0.1% interest savings account.

[Bailey Guns]

Follow up:

So I initially invested a whopping $250 into 10 different loans about a month ago. The loans have started paying back and this is what a typical information sheet on a loan looks like:

56193

Keep in mind this is on a $25 investment.

I think I'm going to start investing at least $250 per month into this and see what happens. The potential returns are much better than any traditional savings plan, CDs or most other investments. I'm sure some stocks and/or mutual funds might do better but this seems pretty good to me. And I can diversify into many different investments and take as much or as little risk as I'd like. By breaking up the investments into $25 increments it really minimizes the risk I'll lose a lot of money if someone defaults on their loan.

[ChunkyMonkey]

I just put some fund in this.. cool concept.. New to me. Thanks for the post.

[Irving]

Thank you for the follow up.

[Bailey Guns]

It's been a little over 4 months since I initially invested $250. I've earned about $14 in interest to date. I've received enough in payments and interest to reinvest another $50...mostly from one loan that was repaid early (I got my entire $25 plus a little interest back on that one). As of today, no late/non-payers. The average weighted return for all my investments is over 12%.

[TFOGGER]

I went in for $2500. Averaging 12%+/-, currently managing 105 notes, well diversified.

[Bailey Guns]

I went in for $2500. Averaging 12%+/-, currently managing 105 notes, well diversified.

Nice! I'm working my way up to that amount but I have a ways to go.

[Bailey Guns]

Figured I'd revive this and give an update. I reinvest any interest and principal I receive as soon as I have accumulated enough funds to do so. Lately, though, I've kind of ignored investing any more into this until I get the house sold and the move out of the way but here's a snapshot of my initial investment performance so far:

61847

So far, so good.

[TFOGGER]

I use the automated investing, set to a comfortable risk level. My current annualized return is at about 9 percent, down significantly in the last couple of months due to 6 loans that are either late or in default (mostly higher risk borrowers). The nice thing is that even if all 6 go completely south, I'm still only out about $100, and I'm still well ahead on the other 127 notes.

[Bailey Guns]

I've been lucky...no defaults, no late payments yet. But I'm not invested in nearly as many loans.

[TFOGGER]

Interestingly, I had only one before last month, suddenly there's about half a dozen.

[lex137]

Asian people have been doing this for a really long time mainly with just family/friends so you don't worry about not getting money interest back! That's why we can drive around in new luxury cars, either that or the liquor/ laundrymat are doing well. I'm Chinese so that's why I made that comment some of you might laugh or not...

[brutal]

I'm going to give this a try. Certainly can't do much worse than my 401K this year.

I had a banner year 2014 and apparently I'm paying the price now.

[ray1970]

I'm going to give this a try. Certainly can't do much worse than my 401K this year.

I had a banner year 2014 and apparently I'm paying the price now.
Investing is a long term thing. You just have to hope everything is on an upswing when it's time to cash out.

My 401K has been up and down with the market like everyone else's but overall it is has earned 16.5%. Not where I really want it to be but could definitely be worse. I like when the market goes down. It means my money buys me more so that I have more when things turn back around.

[brutal]

Investing is a long term thing. You just have to hope everything is on an upswing when it's time to cash out.

My 401K has been up and down with the market like everyone else's but overall it is has earned 16.5%. Not where I really want it to be but could definitely be worse. I like when the market goes down. It means my money buys me more so that I have more when things turn back around.

No doubt. I've been in it for a long time. Company ESOP stock too. However 2008 really took a toll although post bubble I did make up a lot of ground.

I was looking last night at what-if's. Like if I said F-it and "retired" @55 in 2016. Not gonna happen. :-(

[BushMasterBoy]

I know a Korean gal. She lent out a $100K. The other Korean gal that borrowed disappeared. Good luck with lending.

[Grant H.]

I have dabbled a little on these, personal outlay is basically $500, but I have leveraged that to be more by re-investing my returns.

I decided to take $500 from my hobby account and play around with it, so if I lost it, it only post-poned the next rifle, dirtbike, or truck part...

Peer to peer lending is a neat concept, because it provides a path for people if they don't get the banks to approve, or even if they do. We have done a fair amount of that in our family, and it's a huge benefit to the family. All the interest stays in the family, and if someone gets themselves in a really tight spot, no one loses their home over a few months payments.

[Aloha_Shooter]

http://www.latimes.com/business/la-fi-lending-club-layoffs-20160628-snap-story.html

Short story: LC is laying off people because they are making fewer loans. The liberals will somehow find a way to blame this on Trump or Brexit ...

[roberth]

http://www.latimes.com/business/la-fi-lending-club-layoffs-20160628-snap-story.html

Short story: LC is laying off people because they are making fewer loans. The liberals will somehow find a way to blame this on Trump or Brexit ...

Shady, shady.

[68Charger]

Somebody in California that's in the financial industry that may have shady business practices? say it isn't so!

[Bailey Guns]

People can find a way to screw anything up. My account is still doing pretty well so far. But I think I'll pull my available funds and put into another investment.