While I didnt write about it for quite a while on the site, I joined lending club a while back. For those of you unfamiliar, lending club is peer to peer lending, where people put up an amount they want to borrow, which is then graded by the site, and assigned an interest rate. Investors like me can then look over the notes, read what each person wants to borrow for (the majority that I’ve seen are for credit card consolidation) and loan them an amount of money in $25 increments.
For my trial run with lending club, I decided to invest $300 the first time, and decided that if I didnt like it or had a lot of charge offs, I’d write it off as a failed investment and expensive lesson and just close my account and walk away. Thankfully, it didnt work out that way, and I can now say that this is the highest return account in H and I’s very tiny portfolio (which mostly consists of savings accounts). H and I have savings accounts with balances much larger than this, and lending club account is still generating 10x times the interest. I guess that will just be what it is, then.
I after about 3 months and nothing really went sideways on me, I decided to put more of my cash stash in there, and started up a second portfolio in lending club. This one has been fairing a bit worse in terms of interest generated, but it’s larger so it throws off more cash each month. At this point, i’m very close to being able to use my repayments and interest payments to purchase a new note every month – which will be super cool!
As you can see, everything has gone relatively smoothly with the lending club in terms of the return im getting. The one complaint that I do have with the service is that it takes up a lot of time. When you make the first investment, they’ll pick out some sample portfolios, tell you the interest that you’ll get, and you can easily place all your notes. However, once you’re purchasing them one at a time, it seems like it takes a lot longer than I feel like it should. It takes time to select a note, etc and then once all that is done, sometimes the notes dont get funded/issued for whatever reason. At that point you’ve got to go back into the service and pick out a new borrower for the money. While not the worst thing ever, sometimes I wish it was quicker – I swear I’ve had to repick a borrower about 6 times for the same $25.
Readers: Do you use lending club? Have you considered giving it a try? Given the small returns you’re getting from a traditional savings account and the returns from the stock market that seem all over the place, I’ve found this is a good place to store a portion of my capital.