My Lending club experience

[fezwhy]

For those that haven't heard of it.  Lending club is peer to peer lending. 

I was looking for something different and that wasn't too difficult or that I had to pay all kinds of crazy fees.

I am not affiliated nor do I work for lending club.  This is just my experience on what I have learned in the past year of investing my own money.

You can invest as little as 25 dollars.  

Over the last year I invested a total of 350 dollars.

I had 1 loan get charged off and 2 people pay early.

I am on schedule to make 10% with 2 years left on all my initial investments yet.

I don't guarantee anything these are just some things I picked up on over the last year that may give you a starting point.

I only invest in A,B, and C loans.

I will only do 1 or 2 C loans with the majority being A or B as those are less risky.

You must diversify to even out the losses because there will be some losses.  If you put all your money in just a few you are more prone to lose more money

The nice thing with lending club is you can setup your own search criteria and save it.

here is my search criteria in case you were wondering.

No Public records

Loan amount up to 15k

debt to income ration no more than 35%

no delinquencies in the last 2 years

revolving balance utilization 30%

credit score 660 and up

no more than 3 inquiries in the last 3 months

One other thing to keep in mind is gross income.  Someone only making 2k a month with a loan taking up over 50% of their income probably isn't going to follow through.  So just be aware of that and make sure the monthly income and what the payment is going to be makes sense.  Put yourself in their shoes.  Does the loan make sense financially if that was you?  I usually take 40% of the monthly income and subtract for taxes to see what income they are at after deductions.  Then compare that to their loan amount, gas, food etc..

Also keep in mind the % funded that it is and how many days that are left.  If the loan is only at 30% with 2 days left the odds are unlikely it will be funded so go through and pick another one.

I sort mine by %funded then go down the list and see which ones I am interested in.  It saves a whole lot of time for me.

Some people are having luck with C and lower loans me personally I don't go any lower than C.  The risk is much higher and so is the payout however I recommend diversifying with some B, A loans to even it out if you go that route.

Credit utilization keep that in mind also.  Someone that has 80% of their avaliable credit used up I would stay away from. 

Also what is their credit card balance relative to their income?  20k on credit cards but only making 3k a month?  Again you have to kind of weigh it out whether you think it's worth it.

My suggestion would be to just put in a few hundred to start out with.  Lending club isn't for everyone.  If you can't afford to lose it than don't invest it.

As with any kind of investment there are risks.  You may make money and lose on others.

If you have any questions feel free to ask.

[BluePoodle]

Very interesting. Thanks for sharing. I just received a pre-qualification letter for a loan.  I had never heard of them before.  

[Shogun]

I can't invest in LC, I don't live in one of the available states.

[meehan22]

I'ev thought about it here and there. I wish they had loans for shorter than 3 years than i'd definitely be on board for investing. 

[fezwhy]

I admit I was nervous about investing but I had to try it and see how it went. 3 years is a long time but that's why I invested 350 as I knew I wouldn't be hurting without access to it. There is a way to sell your investment to someone else if you want out. However I have not dabbled in that so I can't comment on it.
I will probably put 1000 dollars more into it in the next few months. I kind of look at it like a cd and I like not being able to touch the money. I have done mutual funds and stocks but for me this just works better. I am not paying 10 bucks every time I invest. There are no confusing acronyms or charts to review. You look at their financial profile and decide if they are worthy. It's not for everyone but I say give it a try. Put in 100 dollars and see how it goes. Something about helping someone get out of debt makes me feel good about it too.

[meehan22]

I've heard about the secondary markets that you can sell your holdings if you want out. I am waiting for someone to tell me how that goes and maybe i'd invest a little bit. 

I'd think to get out of a 25$ loan after a year lets say.. it'd probably cost ya the interest you've earned and some principle to make it worth it to another investor. 

[Revelate]

Unlike the OP I go loan sharking: the top 3 tranches appear to be a waste of time and money both compared to historical return rates and also what I can get in other investments.

Peer to peer lending is an incredibly tiny part of my portfolio (<1%) and as such I shoot for the moon as a high-risk investment strategy.

My problem is there isn't enough of these loans to go around, Prime really isn't good enough, and I tend to ignore it for periods of time when I likely shouldn't and as such only have on the order of $1150 actually in the field on it.  That said, 31 notes, 31 current: could be doing a lot worse.

ETA: the funny thing about loan-sharking on LC: pretty much everyone is mortgage qualified, this isn't anywhere close to the most high risk investment I've ever had .