After spending most of the last 3 years paying off most of my debt and doing a very small amount of investing, I made a goal this year to start doing a bit of investing. H and I had a joint goal savings account for buying a home, which is technically “investing”, though the return on the account was pitiful and didnt offer us much. I was able to fully fund a Roth IRA last year (and deal with the tax issues), but I wanted to do some investing outside of retirement funds (I have a goal for 2012 to max out my roth IRA again) and that actually earned some interest. Lots of the larger brokerage houses want a few thousand dollars minimum to start, and I didnt really want to use that much money there when I knew H and I would have lots to pay for, like the house repairs and upgrades and the wedding.
After looking around for a while and finding stuff I didnt have the cash for that also had poor returns, I started to look at lending club. Lots of other finance bloggers have been using it for years and I havent really read any stories about anyone getting burned buy it, so I figured that I’d give it a try with a couple hundred bucks and see what happened. The process was fairly straight forward, as was funding your account (I used paypal).
Once your account was funded, you can simply look through some loans and select a grade (given by lending club) based on the borrowers history and filter by that. I chose to do mostly B grade loans, with a few A and C grade as well. You can fund however much you want to a loan, but you have to have a minimum of $25 to start.
The one thing that I did find was annoying about lending club was that if your loan didnt get funded or issued, you had to go back and pick out a new one. While it wasnt that time consuming to fund 10 loans, repeating the same process for 1 or 2 loans was a pain. I had to go through that sequence about 3 times for one $25 loan that I had that kept getting denied, then the other one got denied! It was annoying.
Once everything got invested though, I started to see some returns and I’m averaging about 12%, which I consider to be really, really good. Though I’m sure that it will go down a bit, it’s nice to have a bit of money invested and watching the returns come in every month.
Also, make sure to come back friday as I’ll be holding a cash giveaway!
Readers: Do you use a peer to peer lending provider for investments? If so, which one, and why? Are you worried about the risks, or do you think the risks are the same as investing in more traditional securities, like stocks and bonds?
*I’m not a financial adviser, so please see one before making any investment decisions.