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

(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...

[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.

[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/s...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.

^*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.

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.