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[Article] Article: lending club - p2p loans for dummies like me
- Thread starter fly
- Start date
So over the last couple of years, I've read on and off about P2P loans. The sites I've always been hearing about are Prosper and Lending Club. As an investor, these sites allow me to invest minimal amounts of money ($25) in a large amount of loans. The loans are generally higher risk loans, so these are people who can't get a loan through a conventional bank. In return for that higher risk, the investor receives a higher rate of return.
These sites have been operating for 5+ years and have a ton of statistical data on every facet of the loan. You can easily filter the types of loans that you're interested (I recommend grades C through E). There are also outside sites that aggregate all the data as well and allow you to play with the filters. The site I used to create my own custom filter is Nickel Steamroller. With these sites, they can tell me that even though I'm earning 18% interest on a group of loans, 6% of those loans will eventually default giving me ~12%. The math is more complex than that, but whatever. The end result is that an investor is able to spread a large amount of money across a large amount of loans, therefore reducing the risk somewhat.
So here is my plan. I've decided to invest $5,000 with www.lendingclub.com and see what happens. I started a couple of weeks ago and have been slowly buying into loans $25 at a time. At this point, I have about 164 loans and am on my way to 200. Assuming I invest in enough loans, statistics says that I should earn around 11-12% back on my money this year. I then plan on reinvesting that money back into LC.
I plan on updating you guys in a couple of months and letting you know what has happened. Hopefully I'll be earning a nice chunk of change.
Anyone else doing this? If not and you're interested, I've got a referral link that will give you an extra $100 when you fund $2,500 or more. I don't think I get anything, which sucks, but oh well.
https://www.lendingclub.com/landing/invest.action?reg_referrer=Member_4150675&progId=2005
Note: I thought I would add a couple of data points for loans that I found important
These sites have been operating for 5+ years and have a ton of statistical data on every facet of the loan. You can easily filter the types of loans that you're interested (I recommend grades C through E). There are also outside sites that aggregate all the data as well and allow you to play with the filters. The site I used to create my own custom filter is Nickel Steamroller. With these sites, they can tell me that even though I'm earning 18% interest on a group of loans, 6% of those loans will eventually default giving me ~12%. The math is more complex than that, but whatever. The end result is that an investor is able to spread a large amount of money across a large amount of loans, therefore reducing the risk somewhat.
So here is my plan. I've decided to invest $5,000 with www.lendingclub.com and see what happens. I started a couple of weeks ago and have been slowly buying into loans $25 at a time. At this point, I have about 164 loans and am on my way to 200. Assuming I invest in enough loans, statistics says that I should earn around 11-12% back on my money this year. I then plan on reinvesting that money back into LC.
I plan on updating you guys in a couple of months and letting you know what has happened. Hopefully I'll be earning a nice chunk of change.
Anyone else doing this? If not and you're interested, I've got a referral link that will give you an extra $100 when you fund $2,500 or more. I don't think I get anything, which sucks, but oh well.
https://www.lendingclub.com/landing/invest.action?reg_referrer=Member_4150675&progId=2005
Note: I thought I would add a couple of data points for loans that I found important
- You WANT delinquencies in the last two years. It slightly increases the default rate, but increases the interest rate paid more
- Stay away from people who own their own homes. No idea why, but they default a shit ton more.
- Stay away from loans originating in Florida, California, Nevada, and New York. Again, quite a bit higher defaults.
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Amstel
The Hoarse Whisperer
Ya know what the beauty of these loan sites are? the owner(s) of the site can aggregate the players with the top returns & sit back & just follow their lead. They can also aggregate what it is that the top players have in common. Pretty sweet deal.
Mean Mr. Mustard
Always shouts out something obscene
No, there is nothing predatory about it. People seek these loans out because the bank won't give them money and paying 18% interest is better than 24% on their credit cards.
Amstel
The Hoarse Whisperer
No, there is nothing predatory about it. People seek these loans out because the bank won't give them money and paying 18% interest is better than 24% on their credit cards.Originally Posted by Drool-Boy
This sounds like youre investing money into the predatory loan market.
Is that what this is?
kind of. Since all costs are discussed up front, two legal entities enter into an agreement by their own choice. Sometimes a credit card isn't even available to these guys.
'predatory' lending is a misnomer for someone who makes a commitment & then changes their mind afterward.
I get this shit all the time. 'you charge too much. . . ' bla bla bla. Hey, it was just fine when you wanted the $$ and decided to sign the dotted line. If getting the money didn't work out on your end, it doesn't mean it's my fault for giving it to you.
it could just as easily be giving your neighbor kid cash in the fall if he agrees to shovel your driveway all winter. You don't get to whine about or change the terms when it starts snowing!
Well, predatory lending is more aimed at institutions lending out amounts that never should have been lended out in the first place.
Giving a couple with a combined income of 50k a year a $300k home loan is retarded, and happened way too often. People were told 'If you do this as an ARM, with how the housing rates are skyrocketing, you can save money on this interest only loan, and make a killing off the resale of the property in 5 years'...
Granted, the people who believed this were stupid, but these loans were called predatory for a reason, it was easy to sell them to stupid, and stupid was their target. Just like those Cash Cards aimed at minorities with their over the top per use fees, and that should-be-fucking-illegal western sky loans.
Giving a couple with a combined income of 50k a year a $300k home loan is retarded, and happened way too often. People were told 'If you do this as an ARM, with how the housing rates are skyrocketing, you can save money on this interest only loan, and make a killing off the resale of the property in 5 years'...
Granted, the people who believed this were stupid, but these loans were called predatory for a reason, it was easy to sell them to stupid, and stupid was their target. Just like those Cash Cards aimed at minorities with their over the top per use fees, and that should-be-fucking-illegal western sky loans.
Mean Mr. Mustard
Always shouts out something obscene
I paused their commercial one time to read the fine print at the bottom of the screen.
118%
I shit you not.
The majority of the loans I see ARE for debt consolidation. Those also have some of the lower default rates too.
Right from their website, just another neath a busty chick with a handful of cash and a big ass smile on her face.
[h=2]OUR CURRENT RATES[/h]
| Loan Product | Borrower Proceeds | Loan Fee | APR | Number of Payments | Payment Amount |
|---|---|---|---|---|---|
| $10,000 | $9,925 | $75 | 89.68% | 84 | $743.49 |
| $5,075 | $5,000 | $75 | 116.73% | 84 | $486.58 |
| $2,600 | $2,525 | $75 | 139.22% | 47 | $294.46 |
| $1,500 | $1,000 | $500 | 234.25% | 24 | $198.19 |
| $850 | $500 | $350 | 342.86% | 12 | $150.72 |
Their 10k loan' the 'cheapest' of their loans, is insane. Once all is said and done, you paid a total of 65000 over 7 years for that 10 grand...
Mean Mr. Mustard
Always shouts out something obscene
It isn't in the US.
But Indian Land isn't US territory. How they skirt US interstate finance laws is beyond me, but that's how they get away with this.
You had confused me. I thought, Lending Club doesn't even have loans that long. Then I realized you weren't talking about LC.
Sorry, we got off topic regarding predatory loans, and Western Sky floated right to the top like a turd in salt water.
BTW, here are a couple of the most important filter points I found.
* You WANT delinquencies in the last two years. It slightly increases the default rate, but increases the interest rate paid more
* Stay away from people who own their own homes. No idea why, but they default a shit ton more.
* Stay away from loans originating in Florida, California, Nevada, and New York. Again, quite a bit higher defaults.
* You WANT delinquencies in the last two years. It slightly increases the default rate, but increases the interest rate paid more
* Stay away from people who own their own homes. No idea why, but they default a shit ton more.
* Stay away from loans originating in Florida, California, Nevada, and New York. Again, quite a bit higher defaults.
Amstel
The Hoarse Whisperer
The deal is, if you're not in a position to get $$ any other way, it's usually because you're doing something risky. It's fine for an applicant to apply for and accept that loan. I have countless customers that say they're in business successfully today because they got that type of loan. It's the ones who default that look for reasons to minimize their damage by shifting responsibility.
I have people tell me all day long I have fine credit. These people have filed BK, have no current credit, and advise me that because of this, they can dedicate ALL of their efforts to my payment. In my position I advise the applicants that they've had the occasion to tell all of their creditors, "hey, I know I agreed to X, but I'm only going to pay you X minus a whole lot, K?" And now they're telling me, Uh, yeah, I'll agree to X.
I get equipment suppliers who call me all the time & say, "DUDE! If you'll get them the financing, I can close this $100,000 deal by the end of the week." in my industry, that's a ginormous red flag.
Amstel
The Hoarse Whisperer