I am pleased with my small investment into Lending Club as my loans are generally doing well. I invested the minimum $25 in each loan that I funded so that I could spread the risk around. I will continue to invest only $25 in each loan so that I have less to lose if one person defaults on the payments.
Here is the breakdown of my 25 loans as of this month:
- 3 fully paid off
- 1 charged off
- 21 current
My net return is 6.22% which is a bit low but is currently higher than what I could be earning even with my online savings from ING. The main reason my net return is so low is that I have chosen loans with very low risk because I am very risk averse.
I broke my loans down into portfolios based on the interest rate as follows:
- 10.4% or less: 9 loans (Low)
- 10.5% to 14.9%: 9 loans (Medium)
- 15% or more: 5 loans (High)
Expected payments from loans are as follows:
- Low: $6.31 (weighted average 8.68%)
- Medium: $6.64 (weighted average 12.12%)
- High: $4.47 (weighted average 17.50%)
This gives me a total of $17.42 in expected payments for the month. My goal is to have enough loans to generate $25 in repayments for the month so that I can use the repayments to fund new loans instead of having to include that investment amount in my monthly budget.
The loan that went into default cost me $21.80 because the person had only paid back $3.20 before heading into default. The loan that was fully paid off gave me $27.01, resulting in a profit on my investment of $2.01.
I will be getting four new loans at the beginning of next month because I decided to use some of the money I got this month from advertising on the blog to set up new investments.
I do hope that all my loans continue to do well so that I can start to build up a nice income stream that will give me extra money to put towards paying off my debts.
Like I always say, the most important thing in life is progress and persistence and it really seems like you have both down. Congrats on paying off 3 loans. That’s a huge load off your shoulders for this month! 🙂
I have been using Prosper for about two years now. They went through a period where they weren’t accepting money from lenders for a few months. In that time, I took all the money that was being paid to me and kept it for myself. That has almost been enough of a return to cover my initial investment. Now I’m “playing with the house’s money” so to speak. All of the money generated from my current loans fund new ones. So it’s all pretty much free money!
Good for you. I am working on getting towards that goal right now. I mentioned that I am getting about $17 back in repayments now so once I start to get $25 then I will use that to fund new loans and just take the extra.
I’m really loving LC and I think it’s really safe too. How many loans would have to default for your return to go below 1% (the savings account rates now)? It would have to be a lot and the chances of that happening are minimal.
I think I’m an LC lifer.
Austin @ Foreigner’s Finance
I am an LC lifer too….glad you are getting good returns to balance out the bad loans.
This is the first time I have heard of lending club. Seems a lot of folks are using it as a way to get a better return on their money. I just want to make sure that the risks don’t outweigh the returns.
Well since you are lending to people it means you are taking a risk…so there is no way to guarantee your returns. I think the best safeguard is to spread out your loans as much as possible and stick to lower interest rates and higher credit score listings. If you need a referral to get started let me know….Lending Club is now giving $60 to prospective investors.
You are right if you are risk averse. But If you are giving loan to people then it means that you are taking risk.
LuluGal, I think i should bookmark this website in my online favorites and put it in my weekly checklist. When it comes to saving $$ u r the boss. Keep on my friend, keep on. U got a new reader now. Content is immaculate.
Go ahead and subscribe to the feed that way you don’t miss out on anything!!!!
I looked into a few of these but I’m in UK and I can’t use some sites. Which one do you use? I think there is zopa I can use here but I’m not sure how trustworthy they are.
I agree…I have seen these sites but I am not sure how much I can trust them. It certainly sounds like a nice way to get a better return than then bank.
I did some further research into this and did my first bit of lending today. I will try and spend my disposable income on it every now and then and see if I can grow it into something big.
If you decide to take the plunge just go easy. Make sure you don’t lose all your cash or at least try to diversify your risk.
I don’t know…now that the market is turning around I’m not so sure. Just make sure that you make a wise investment and stay diversified. That is the only way you will have success in the end.
Yah…the returns on these are great compared to CD rates. Just be diversified and you will be fine in the end.