P2P Lending

I signed up with Lending Club in 2013 as a way to generate some additional passive income.  It’s a peer-to-peer lending company, essentially loaning money out to strangers for a percentage back in returns, like credit cards are doing for consumers.  I am able to see the borrowers credit score, job, income, what they need the money for, and other aspects.  Honestly this doesn’t really help much, as most of the income on the site isn’t verified, at least when I was more active in Lending Club.

I read a bunch of reviews on Lending Club and decided to take the leap.  I spent a lot of time when I first began, as I wanted to pick the loans that wouldn’t default.  These loans were classified by letters A-E, A being the safest and lowest percentage return and E the riskiest and highest percentage of return.  I chose mostly B’s and dabbled all over.  There are new options that auto pick for you, so it helps save a ton of time, but I never used this option so I don’t have any results of my own.  I usually only invest the minimum $25 dollars at a time and on some occasions up to $100, so if I were to have a default it wouldn’t be such a big hit, because in the end, you really don’t know who will or will not pay you back.  I’ve had A and B level loans, which are deemed to be the safest default on me.  I was looking at hundreds of loans, which was extremely time consuming.  Since starting, my rate of return has been 10% which I think is great.  This percentage isn’t adjusted for the 1% fee Lending Club takes.

Is Lending Club for you?

I’m not saying Lending Club is bad, as you can see I have had good returns.  I haven’t funded new loans in probably over 3 years, so my return could be much different if I had.  I’ve been slowly getting out of lending club mostly due to the fact it is way too time consuming for me, and I don’t trust the auto picked loans.  Not to mention I feel that we have been in a bull market* for a while now, and I see it turning around soon. My guess is loaners will be paying their mortgages, car bills, electric, etc., before they pay me back, so I would be most at risk of these defaults.  Maybe in the future, I will try it again.

It is not a lot but I’ll probably put the money in a safer-fixed income investment such as a CD or Money Market Account, as Eileen and I have been aggressive with our investments.  If you have any questions about Lending Club let me know and I will try to help as best as I can

Do you take part in P2P lending?  What has your experience been like?

*Bull market – A market in which share prices are rising.

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