Tag Archives: p2p

Prosper and Lending Club P2P Investment Update

When I started investing in P2P (person-to-person) lending, back when it got its start, proper regulations weren’t in place. Thus, as you can see above, my returns were kind of crappy in the early days. Now that the P2P sites had to add much more stringent regulations, my returns aren’t that bad at 7%-8%.┬áThis is how my Prosper account is performing:

While I only had about $350 remaining in my Prosper account, given the results to date, I decided to put another $500 in and see how it performs. This is definitely a test and alternative investment while I focus primarily on my stock accounts.

Continue reading Prosper and Lending Club P2P Investment Update

Lending Club: All My Deliquents

I’m back in the positive on Lending Club! That really isn’t that exciting, given I had high hopes for my Lending Club loans. I have 20 loans out at $25 per loan. Thus far one of them has been “Charged off” and 1 is “31 to 120 days late.”

So of $500, $50 or 10% of my original loan is gone, just due to two defaults (the late one is going to default, I’m not going to delude myself.)

The charged off note was a C rating, the only C rating I invested in on Lending Club because I wanted that 13.47% interest rate. The loan that’s 31-120 days late was an “A” rating, though, with a 9.63% interest rate. It looks like on that one I’m still owed $20.70 which I will never see again.

I always liked the “idea” of P2P sites like Prosper and Lending Club but my experience on both of them has not been that great. I’ve pretty much lost money on both. I’ve been careful with my Lending Club account, only investing in “A” ratings except a random B or C when I feel inspired to lose my money. But as my A rated late account proves, even an A rating doesn’t guarantee a return.

My net annualized return on Lending Club right now is a whopping .72%
That’s beating my Prosper account which I’ve all but given up on.

Apparently I’m under performing on Lending Club:

Have you used Propser or Lending Club? What is your return rate these days?

Watch Your Back Lending Club, Prosper is Back, at least in California

It felt like Prosper was in a quiet period longer than George Bush was in office, but the P2P lending site is now back online. I’ve invested with both Prosper and Lending Club, so I’m excited to continue my trial of both services to determine which is better.

The relaunch brings about some changes for Prosper. Most notably, the site has a new service that will help financial institutions take loans they’ve already made and resell them to Prosper investors.

Wait a minute… that kind of sounds like they’re trying to sell US their toxic assets. Hopefully they’re also offering up high-quality loans where personal lenders can get a piece of the action.

According to the Wall Street Journal, Prosper investors benefit with potentially higher interest rates on loans that have already been vetted by a financial institution, are current and have at least three months of payments that have already been made.

Still, risks are inevitable when you’re lending to who knows who, regardless of their credit score (uh, speaking of that risk, an “A” rating loan that I had going on Prosper for a while just went late 4 of My Loans on Prosper are now Late (not counting the one that already defaulted) — 3 of those 4 Loans are “A” rated and one is “B” rated — they were fine before Prosper relaunched – wonder if they hadn’t been updating defaults in their quiet period. Starting to think P2P lending is a bad idea!)

According to the WSJ, the average lender return since the company’s inception in 2006 is 2.8%, after defaults. But since March 2007, when the company starting providing more information about borrowers’ credit and employment histories, average lender returns have improved to 4.8%.

Since Prosper’s Securities and Exchange Commission registration process is still going on, it is operating under an intra-state exemption from the California Department of Corporations. That means that, for now, only California residents and businesses will be able to lend or invest in Prosper loans, although borrowers nationwide can apply for a loan. Once the company completes its registration process, other financial institutions and lenders in other states will follow, says Chris Larsen, Prosper’s chief executive.

Haven’t read anything yet about that ridiculous $100k networth (beyond your home price) to be a lender, like the rules over at Lending Club. I wonder if Prosper has added that in the fine print. I’ll let you know if I find out anything more.

Lending Club: Thumbs Up

I’m liking Lending Club thus far. If you’ve been reading my blog for a while, you already know that I was pretty happy over at Prosper lending out money at good rates to borrowers, but then Propser went into a quiet period and I was left with no where to lend my money… or so I thought. Then I found Lending Club. I have $250 out right now at an average rate of 11% – which is way better than what the stock market is doing.

One thing I haven’t focused on much is how great these P2P lending sites are for people who need to borrow cash. Apparently it’s near impossible to get a loan these days, even if you have good credit. And even if you do get a loan, the rates suck. If I needed cash, I’d definitely look into borrowing through Lending Club. Actually, as a borrower I don’t see a reason not to borrow through lending club if you have a decent credit rating. The risk in Lending Club comes from the lender, not the borrower. Just pay back the money on time and it’s a good deal all around.

The latest deal I read about for those with good credit? Personal Loans at rates as low as 7.88%. Borrow up to $25,000.

Have any of you used Lending Club as a borrower? What have your experiences been?

Lending Club: My 2009 Money Challenge

Each year, I like to try something new in personal finance. I don’t want to waste money, but I don’t mind testing the waters a bit with a small percentage of my income. Last year, my big test was on Sharebuilder… and my stocks obviously have not performed well (except Mickey D’s (MCD) that’s at least not losing money).

This year, I’ve decided it’s Lending Club’s turn for a little game time. I finally figured out how to use the site (phew) as last I was on I thought I had bid on two loans and apparently never made a final order. Oops. So I’ve now made a final bid/order on two loans for $25 each and I transferred in $200 from my paypal account.

While I don’t think Lending Club will make me rich (and I have little faith I’ll do better than break even given my luck on Prosper), I do like that you can lend just $25 per person. So you have a little more room for less costly defaults. Of course, then you also have more loans to default. I’m not mathematician, so I’m not sure which is better.

Regardless, I’ll start out with this $250 and see where it gets me. I’m also going to up my investing on Sharebuilder this year. I can’t resist a good sale. Thinking about purchasing some Proctor & Gamble stock, but not sure. Any stock I buy now will lose money over the coming year or two, it’s just a matter of how it looks in 3, 4, 5 years down the line.

At least with Lending Club I’ll either get my money back in 3 years or lose it in 3 years. With the stock market… I could make money and it could be gone in 10 years… as we’ve seen in the last 10 years. And I don’t really have much faith in banks or the ability of anyone – even Obama – to stimulate the economy. Of course, without such stimulation, even P2P lending is at risk – big risk. If jobs get cut people can’t pay their bills, even if they really want to. That’s just how it goes. So I don’t want to put too much money into P2P… just enough to see if Lending Club is better/worse than Prosper.

Lending Club: First Impressions Part III

So it’s been a couple of days since I signed up for lending club, and put in my bid for two notes. The problem I’m having is that I can’t seem to find where those bids live in this stage prior to funding the loan. I can search for new notes, and I see that I still have $50 in my account that hasn’t been used – but I know I have two bids waiting to go through. I want to check the status on them, but can’t find them. Do any of you know where I can do this on LendingClub.com?

Lending Club: First Impressions Part II

I haven’t made my first loan on Lending Club, but it seems I’m set up and ready to go as soon as the loan is funded. One very distinctly different thing about Lending Club versus Prosper is the lack of “person.” That is, on Prosper you get photos of smiling people (often with cute little kids) to tug at your heart strings and make you want to “invest” in them, even when you shouldn’t.

On one hand, I like that because it makes me feel ok about defaulting every once in a while… I feel like I’ve helped someone out, even if I lost my money. At Lending Club, I’ll probably be a lot more upset if someone defaults… because there it really sets you up to be a bank, not a charity. Which is fine, it’s how P2P lending should be, I’m just not used to it being that way.

So I’ve picked my “notes” — which seem to be set at $25 each (I don’t understand how to put more money into a note yet, or if I need to buy multiple notes at $25) and now I guess I just have to wait for them to be funded for the loan to begin.

Since I’m using “free” money I went for a little more risky loans… a C1 rating and a F3 or something… the rates average to 15% or thereabout. I’ll give these loans a little while before deciding if I want to put any of my tax refund into P2P. I know P2P is going to be big in 2009 and surely Lending Club will profit from it… I’m just not so sure I feel comfortable with the risk, especially as everyone seems to be losing their jobs, houses, and ability to pay off debt.

Lending Club: First Impressions

The Internet is a wonderful place. Thanks to a few tweets back and forth with the CEO Director of Product Strategy for Lending Club, I landed myself a few bucks in my account to test out the growing P2P site. I’ve invested about $500 into Prosper over the past two years, but it’s in a silent period now and I’ve got a hankering for P2P lending, so it makes sense to try out the ever-popular lending club.

I haven’t done much so far. Signing up was easy (then again, I remember signing up for Prosper was easy too. It’s always easy to sign up when the company wants you to give them your money.) The interface is nicely designed and clean… at least from a noob perspective.

I’m about to make my first loan… I just need to figure out how to do that. It seems like the rates are set by credit scores and such, as opposed to somewhat randomly ala Prosper. I guess that’s good? I failed at Prosper by lending $50 to a person with a B credit rating who was looking for money to study abroad. It was her second time posting the listing. Yea, that one defaulted. Everyone else has been paying on time. I’m not seeing the interest rates I’d like… even though the performance is still wayyyy beating all my stocks.

Ok, so I’ll write more about Lending Club once I’ve figured out how to pick my loan(s). They first took me to a page that – similar to Prosper – would set up an investing plan for me based on my desired risk allocation. I never used that on Prosper… I like to hand-pick my loans. So that’s what I’m going to try to do… I’ll report back when I figured it out and get my first loan set up.

Loans Between Friends – Not Always a Good Idea

Have you ever lent money to a friend or relative? In times of economic hardship, more and more often our friends come to us with a request to borrow funds. Or maybe we are at a loss and need a few bucks to get by for the month, and we ask a friends to spot us the dough.

The New York Times reports that it’s best to stop and think before lending money to anyone, even a good friend. The article highlights a professional financial planner who ended up lending her manicurist(!!!) $3000. Her manicurist needed the money to avoid eviction, and tugged on the emotions of a woman who would otherwise advise clients not to lend money to personal acquaintances.

For me, I like to lend money to people in need, but not to my close friends. Instead, I use Prosper’s P2P lending system. At least I can do a credit check on the person before deciding to lend them money, and I can earn a decent amount of interest back in return. (Then again, it looks like it will be a while before I can lend on Prosper due to some legal trouble they’re in.) If I were every to lend money to a close friend, I’d have to think of it as a gift when I part with the funds. If I get it back, all the better.

Q & you A:

What’s the most you’ve ever lent a friend? Did you get that money back, or did it ruin your friendship?

Prosper Update

As the stock market continues to take a nose dive to the depths of despair, making a short term profit in the markets (unless you’re brilliant at shorting) seems near impossible. Meanwhile, getting a loan is getting increasingly difficult now that banks have finally figured out that high-risk lending doesn’t work out so well for anyone in the end (unless the government bails you out with $700 billion, but anyway).

So I’m not surprised that P2P lending is getting a lot of press these days. Just last night, I was listening to CNN and they were touting Propser as an option for a place to invest.

Now, Prosper is a dangerous place to invest too, but it seems a little less risky than the markets for short-term investing, if you’re smart about it. Here’s why…

On Prosper, you can invest just $50 per loan, and that goes into a giant pot of loans from lots of different people. So even if one person fucks you over and you lose $50, you’re still getting a good rate on the other loans. If you’re lucky, and smart, you can come out making a profit in the end.

Right now, I have 10 active loans. 9 are current and one fucked me over. Fair enough. I wasn’t smart about that loan. I learned not to bid on anything that looks like “Help Me Study Abroad ** Relist #2**” — that’s the one that got me into trouble.

I’m not that pained about it, that was a learning experience. I’ve also been fortunate enough to make $50 from Prosper through its referral program (you get $25 a person if someone signs up through you and lends money on the site), which at least helped me break even despite my stupidity.

Don’t get me wrong, I’m nervous about my other 9 investments. With the economy tanking and unemployment rates rising, it won’t be long before someone else may not be able to pay me back. But maybe that won’t be the case. 8 of my 9 remaining loans are to people with good credit ratings (B or higher) who wanted a lower rate on repaying credit cards. If they can pay me at a rate of 18% versus paying their credit card companies 27%+, then it’s a win-win for both of us. As long as they pay. And so far, all of them have paid up.

I think I’ve made about $23 on my loans so far, after canceling out the $50 loss and the $50 I made for referrals. Which, on a $450 investment, isn’t so bad. Especially considering everything I’ve invested in the stock market is losing hundreds of dollars. So Prosper may not be a safe bet, but these days it seems like the better bet. Just be smart about it and you can come out ahead.