Last week’s problem note is still not in the the clear. In fact, it falls into 15-30 days Late category. Although inevitable, I would not want a repeat of this problem note. Or most likely, lessen the chances of a late payments, in grace periods, and lastly defaults. While there haven’t been a default in Ms. Doodles’ Lending Club’s notes, the possibility is HUGE.
Even with proper research and planning, several things may arise from a simple misstep. Ms. Doodles needs to assess other areas to improve my knowledge and expertise in P2P Lending. Learning other risks involved may translate to better choices and investment decision down the road.
Lazy traders offered possible scenarios on other risks involving LC investing: Default, call, institutional, liquidity, and concentration risks. He also adds the confusing tax forms and paperwork involved in this relatively young industry.
Amongst the risks involved, my biggest concern is the Institutional risk. Lazy writes:
“Institutional Risk: In years past, P2P websites have been shut down or put on hold by entities like the SEC while legal issues were sorted out. There is always the risk that a change in laws or some kind of internal corruption will put your entire investment portfolio of notes at risk. Unlike CDs, there is no FDIC-style insurance here. Unlike many mutual fund companies, your claim to underlying notes may become muddled, or at least need to be mediated should the P2P service fail. It is the unknowns, regardless, that should worry you here – the institutional risks that may not even be obvious at this moment.”
Will LC be staying for the long haul? Can it withstand economic problems? (On a side note: Then again, the proliferation of P2P lending became more viable because of the economic downturn.) Will it still be a good investment during economic recovery? These are only a few of the questions I need to find answers.
As for the call risks… Ms. D has a moral dilemma on this area. It deserves to be addressed in another update.
Weekly Lending Club stats:
2303.14 2368.06 (+60 deposit)
Notes Issued & Current:
Full Paid: 9
Late 16 – 30 Days:
Late 31 – 120 Days: 0
Charged Off: 0
Expected Monthly Payments (Principal + Interest):
Important Note: I’m not a financial adviser. Consult your own financial adviser before making any investment decisions.