A snapshot of Ms. Doodles’ weekly peer-to-peer lending investment hits and misses and her near-obsessive account of the not-so-exciting world of Lending Club.
- Lending Club Week 20: P2P Mortgage?
- Lending Club Week 19: Google invests in LC
- Lending Club Week 18: In-funding times
- Lending Club Week 17: P2P Funding Innovation
- Lending Club Week 16: An Ethical Dilemma
- Lending Club Week 15: A snapshot of American debt
- Lending Club Week 14: Forbes’ Best of P2P lending
- Lending Club Week 13: Institutional Risks
- Lending Club Week 12: A lesson in grace period
- Lending Club: 2013 Week 11
- Lending Club: 2013 Week 10
- Lending Club: 2013 Week 9
- Lending Club: 2013 Week 8
- Lending Club: 2013 Week 7
The Doodles is your typical “dual-income, no-kids” household in our early 30s with an emergency fund, an accumulating modest pension from Ms. Doodles’ employer, some retirement savings and minor investments. However, looking back, we could have been aggressive in reasonable frugality. Then again, a mind meandering in “coulda, woulda, shoulda” is unproductive. Hence, a vivid goal in sight: Yes, sirree. Financial independence.
Aside from aggressive monthly saving, I set my eyes on Lending Club, a company enabling peer-to-peer borrowing and lending. While the risks are compared to Junk Bonds, the high yield return is a tempting option. While purchasing low risk Index funds and ETFs, this experimentation with LC takes place.
Ms. Doodles started with a small sum of $250 in Jul 2012. However, technicalities arise. Since this household resides in Texas, ‘purchasing’ notes directly from borrowers is a no-no. The secondary market in FolioFN is my only option. Not the first choice, but acceptable. While learning the ins and outs of p2p lending, notes bought were low risk A and B grade. The accumulated paltry interest is rolled over in addition to the monthly $100 addition.
During the early learning period, a modest 8.0% Net Annualized Return welcomed my sight every login in the site. Comparable to stocks but I realized a few things:
- Even with minimal sum in the account, diversity is king. However…
- C-D grade notes may be the key for better returns. But Ms. Doodles is more comfortable with B-C grades. Of course, it depends on your risk tolerance. And…
- Consider the borrower’s state of residence. Apparently, California, Georgia, Nevada, and Florida borrowers are more likely to default. Also…
- Besides monthly income, look at the borrower’s years of employment. And…
- Spot the red flags when it comes to the motivation behind the loan. Vacations and car payments may denote a serious lapse of financial irresponsibility. Business loans are too risky.
On February 2013, the Doodles decided to give it more room to grow. LC weekly tracks the rise and fall of this lending alternative.