An Article from Aaron's Article ArchiveLending Club
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Tuesday, 02 August 2011 10:13 PM MDT
This evening I logged into my Lending Club account. Lending Club, like Prosper, is a social lending site that lets people lend to or borrow from other people in a peer-to-peer fashion. I've been a member for over a year now but only have about $1,400 invested in 71 different loans.
With social peer-to-peer lending and borrowing, when someone borrows money (let's say $5,000), there may be from 50 to 200 separate lenders participating in the loan. I like to keep my participation in any one loan at the minimum of $25.00. This lets me spread my money out over many loans (I mentioned 71 currently), so that if any single borrower defaults, I only lose a small amount.
So far, I've been quite lucky. No borrowers have defaulted on any of the loans I own a piece of. And that's let me do a bit above the average. According to Lending Club, my account is getting a net annualized return of 13.59% (that's of course before paying any taxes) while the average return for most investors is only 9.64%.
Hopefully this means my filtering and screening methods are valid. But I really can't be sure until I've had more time and owned more loans.
Some might consider me a little odd to periodically post here on my 'blog about my struggles to get out of debt and here I go lending money on a peer-to-peer lending site that may have been more wisely used to pay off my own debts. That's a valid concern. Even though I am earning more interest than I am paying—so far, that is. And that could change quickly should a few borrowers default and cause losses for me. That's not accounting for paying taxes on interest earned, which takes me closer to breaking even, and then when one considers the monetary value of spending 20-30 minutes a month on the site, I'm really losing money.
But it's fun! Sadly, "fun" has been wisdom's bane in my life far too often. *sigh*
Did I mention that Lending Club is running a promotion where if you join and invest $2,500 or more, they give you a $100.00 bonus when I (or another Lending Club) refers you? Yep, it's true. So if you're NOT currently a member but want to join, feel free to click "Contact Me" in the left-hand menu column and send me your email address. I'll send you a referral through Lending Club so you can sign up for the promotion.
Like any investment, there is substantial risk involved when investing. It's been a learning experience for me. I hope I can keep picking loans that give me a great rate of return and minimize my losses, and I hope this remains fun.