A while back, I wrote about a new investment that I’d been making – P2P loans (peer-to-peer) at lending club. I started using the service in april with about $300 invested over 12 different notes, each of $25. During this first run, I chose only A and B grade notes, and 1 C grade note. Very cautious about losing my money, because with that small of a balance, 1 default can kill your return. Since April, I have steadily upped my investment, and now I’ve got over $1,000 of my own dollars in lending club. I’ve had no defaults since april, and I’ve actually had one early payoff (I think the person needed some sort of bridge loan, because they paid it off within 2 months). I’ve also never had a late payment, which honestly I’m kind of shocked by, but in a good way.
Each month, between principal repayments and interest earned, I get almost $36 back. With that, I invest in more notes, to continue the cycle going. With these notes, I take on a bit more risk than I did initially, but still nothing that I deem over the top. Right now, I’m sitting at around 11% ROI, which I think is pretty good. I’d take those rates any day of the week, and even if I have a person default, my ROI would still be better than any of my savings accounts or any CD rate, so right now I’m fine taking on the risk. Below are my stats from lending club.
Personally, I think the return is pretty good so far, but about 3 months ago (after I reached 1k) I stopped investing in lending club. There’s lots of other factors to consider when investing, and one is the liquidity. Right now, I’m trying to get a few things done and need some spare cash, and I didnt want to lock my cash up for the 3 years that is the minimum on lending club. Of course, I could try the secondary trading platform, but that comes with more fees and more hassle. At this time, I think I’m just going to let what I have ride, and continue to re-invest the profits that I’m seeing.
Aside from the liquidity issue with lending club, I still find it cumbersome to pick new loans, note by note and pick new ones. Here’s a few of the categories that I use to grade loans before I invest in them:
- Depending on the return that I’m after, I filter out so that I only see notes of B, C D and E grade. If I’m looking for a bit more security, I throw the A grade notes in there as well.
- I usually filter it so it only shows me notes that the listing expires in less than 7 days. This isnt for any specific reason, mainly so that if the note doesnt get funded, I can pick a new one asap.
- I also winnow down the loan requested to 15,000 or less. For some reason, I’m not comfortable with someone borrowing that much money at one time. I’ll let the banks handle that crap. For me, 15k is just fine – but you should set your own limit.
- I always keep the “exclude loans already invested in” box checked.
- I also usually move the Funding progress bar up to 70%+. I dont want to wait forever to see if my loan has or has not gotten funded. This, along with the 7 day or less filter usually ensures that.
- Sometimes, I feel like helping out people from my state (wyoming) or other mountain west states. This usually puts a pretty thick filter on and doesnt leave you with many choices, so be careful with this one.
I’ve talked to a few people about lending club while at work and with family, and lots still seem skeptical (rightly so, it’s their money). This is how I use the site and it’s gotten me an 11%+ return.
Readers: Do you use lending club? If so, how long have you used it for, and if not, what are you waiting for?!