We're closing in on our first month investing with Lending Club. As an initial test investment, we invested the minimum $250 in ten different loans, with $25 "loaned" to each borrower as part of their larger loan amount. You can see my initial post here about the entire Lending Club investment process.
Now that our first month as lenders is over, how are we doing? So far, so good. All borrowers have paid on time and Lending Club sent us an email note letting us know that our current return on investment is 19.63%.
If this seems high, remember that we chose to invest in high-risk loans for this test investment, mainly to exaggerate results either way for the sake of the experiment. Plus $250 is a small amount of money and my risk threshold for the test was pretty high. Investment in lower risk loans will obviously result in lower returns, as the money is loaned at a lower interest rate (though it is worth noting that even the lowest risk loans have returns that dwarf CDs and many other investments).
For a closer look, let's take a look at our portfolio of ten $25 loans:
As you can see, I've received confirmation that six out of ten loans have begun to be repaid on time, with some of the loans that were funded later in the month of June not yet confirmed as having been paid on time (let's hope they do!).
I'll continue to report back with my Lending Club experience, but so far all is well and proceeding smoothly. Once I reach additional $25 increments in returns, I'm simply going to reinvest them into new loans, snowballing my loan portfolio over time.
I'd invest more, but our plan right now is to aggressively pay off our own debts, so it doesn't make sense to invest more into Lending Club until we've achieved that goal. Furthermore, I've also established an account with Prosper, another peer-to-peer lending service, and intend to do a similar investment there and compare the experience to Lending Club. More to follow on Prosper as I'll do a detailed look at their service within the next couple of months. When we've eliminated all of our non-mortgage debt, we will be using both Lending Club and Prosper as one of our primary asset-building opportunities, with significant investments in both.
From LTNE's perspective, Lending Club is demonstrating that it is a serious investment opportunity. (<-- Click here to Tweet this!)
If you are interested in trying out Prosper, clicking any of the Prosper links and then signing up will return a small amount of affiliate earnings to LTNE. I have set up our initial account there and their service seems remarkably similar to Lending Club's, but I'll follow up in a couple of months with more information about our experience there. So far, it has been good.
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