Well…I started “contributing” (read: investing) to a Peer-2-Peer (P2P) lending service, called LendingClub. Lending Club is an interesting little operation that sets up borrowers with a group of lenders. I am doing this for two reasons: 1) The “average return” is 9.05% – this is better than my retirement portfolio in the past short-term (in other words, more diversification) & 2) it gives me the warm fuzzies to know that I am directly helping someone achieve specific goals. LC has rather strict criteria for the loan application and as such it makes me less leary of putting my money out there. Every loan is for 3 years (36 months) and they split the loan types into 7 different categories (A-G) based on risk (and obviously reward too).
My plan is to invest $25 per month with a target (goal) allocation of 75% A Notes, 20% B Notes, and 5% C Notes. After the first year, we will see how it all plays out. I am currently invested with the free $25 dollars for being referred by [someone else]. The process was smooth albeit somewhat slow. My only note right now is for someone’s living expenses while s/he completes grad school. This is a B4 note with 11.89% interest being charged to the borrower. I am going to receive $0.82 cents every month for 36 months (my pro-rated share of every payment). Add that up, if the loan doesn’t default, and I will get (minux LC’s charges) $29.85. That isn’t half bad
I know, I know, you might be as skeptical as I was at first. If you want a referral for $50 free dollars to invest and try it out, leave a comment (with a valid email address) or let me know. Part of the referral bonus is a $25 kickback to me. The referral program is actually a pyramid scheme, so I will still make something when you refer people. It looks quite nice. Obviously, LC’s motivation with the referral program is to get more money into the system so more loans are satisfied and so they can make more money themselves.