patrick.net

There was a post on this subject several months ago. You might want to search for it.

I have heard of Korean people doing it. In my job I was involved in a lawsuit where a lot of people didn't get paid after they invested in the lending club, shoddy books were kept. That's the first time I ever heard of it. Sounds risky.

I have money there (initial investment of $2500) and have never had a problem with payouts from lending club. Basically you invest in notes in increments of $25. You can pick from which loans to buy notes. Most of the loans are for debt consolidation. I try not to do wedding loans, home improvements, or business start up loans.

It is pretty risky since you are counting on people paying back unsecured loans. And I think that if the economy really tanks what will people do with their loans. But on the bright side I am getting 13.85% net return.

If you are going to do at least $2500 I can send you an invite so I can get a quick $100. Make sure you read this too https://www.lendingclub.com/info/state-financial-suitability.action

I too have placed a relatively small amount of money ($2500).

I wouldn't count on this as a way to fund retirement, but I figured it'd be an interesting way to keep up with or beat inflation. I've been investing since september and essentially only in prime loans. They're graded from A->G, A being best, G worst and each has 5 or 6 subsets. My rate of return is just over 8% but they don't count the first 3 months in that figure.

No one has defaulted or been late yet.

The other issue is, it's not a liquid investment and the minimum loan term is 36 months. They have a secondary market where you can sell your loans to other investors but I haven't delved into that yet.

It's essentially the same thing the big banks did with mortgaged backed securities but applied to unsecured personal debt.

Facebooksux says

it's not a liquid investment and the minimum loan term is 36 months

Sounds like the right way to do it to me.

You won't have a run on the bank if you know you're not entitled to your money back instantly.

It sounds interesting. It can even be an IRA. Hmmmm

Facebooksux says

it's not a liquid investment and the minimum loan term is 36 months

Sounds like the right way to do it to me.

You won't have a run on the bank if you know you're not entitled to your money back instantly.

Right, but you're stuck should an emergency come up. In that case, you could sell your portfolio through their secondary market.

Based on what I read above, I know it's not for me.

1) unsecured personal debt.
2) illiquid with no upside potential, but downside risk.
3) 8%-14% return.

Given these criteria, why not invest in mortgage REIT, earn 12%-15% return, it's liquid, and call it a day?

The reason I love real estate over other investment vehicles because

1) you can get a decent return on your money (debatable)
2) it's also illiquid but you get both the upside & downside potential
3) you can get north of those returns if done correctly
4) the tenant is paying-off your mortgage.
5) you also get a return on OPM if leveraged correctly.
6) your return is magnified due to leverage, but so is your downside risk.

The list goes on. However real estate is not as passive as lending club or mortgage REITs so it's not for everyone, but definitely for me.