Just looking over my portfolio of Peer To Peer investing accounts. I have to admit, I let them slide for a while and build up some cash. I wanted to see what they would produce and to be honest, I didn't know if I was going to keep going because of the way they let you filter your loans. I'll admit, I was a little tight on my filters, returning very few.....if any results. Well, I jumped back in and loosened up a little, now allowing people who have held the same job for less than four years, rent instead of own and will lend to people asking for a max of 22k (up from 18k)

We've done some threads on them before, and a few guys here, like me, got into this quite a few years ago.

It's a very interesting venue to pick these "high yield bonds" and once you get used to what you are looking for, you can scan a loan and make a decision in about 20 seconds.

In Lending Club, I have funded 368 loans and have had 14 defaults with a loss of only $234 total. Not too shabby a percentage.

In Prosper, I have funded 236 and have had only 2 defaults, due to me only lending to previous borrowers, which was one of my filtering criteria. I can't seem to find any of these loans anymore and consider them a "bonus" when I do. I always fund at least $25 to previous borrowers.

All in all, I am at 8.91% return in Lending Club and 10.38% in Prosper.

Overall, It's been a good investment and a whole lot of fun. I haven't put money into these for a few years now and have taken some $ out. I still have more than I ever put in. I'm now thinking of throwing another 1k in each this year to mess with, since it does so well.

Anyone else doing this? What has your experience been like?

intereseting OP.  Very intersting.  

do you consider there to be any sort of social value to this or is it just the return and the...amusement.

What kinds of loans are these for?  LIke small business, school, car loans???  Do you become the sole lender or do you like like spread out the risk or something by giving a fraction of a loan along w/ other lenders??

Thx

tag for answers..

I have a friend that borrowed money this way..   cheaper than credit card interest rate for sure


Brian

Last I checked some states (including mine) don't let people participate in these

No real "social value" in the way I see it, but is a nice little way of "sticking it" to the banking industry. It's always healthy to see a little competition. I have talked with people who do this and some of them see it that way. For me....I started small and gave it a few years before considering it as a viable source of return on investment. It's working so far. I couldn't get that in a bank, but I am assuming risk, of course to get it.

The loans can be used for anything really, remember, these are unsecured. One of the things I look for is if the loan amount is close to what the revolving balance of their debt is. I also look at the rate they get and think...."Could they do better somewhere else?". I like the fact that you can see if they have inquired anywhere else which tells me they have been fishing for a rate.

And yes, you would fund just a fraction of the loan up to the whole thing if you wanted. I do $25 to $75 per. never over that and rarely even $75.

well, after the banks had their do-boys declaw Dodd-Frank a few weeks ago so our bank deposits are basically collateral now against  the bank's derivatives our money is not pariicularly safe in the banks either, so as long as its not like your emergency fund why not.

for anyone that hasnt heard of these, this is how my friend (who borrowed money) explained it..  

May not be the same everywhere but im sure similar idea

the company charged $400 processing fee and loan had an interest rate of like 10% to 12%

The company kept 2% of the interest and the individual lender(s) got the other 8 to 10%

Not sure how much my friend borrowed, but it was on a credit card so the interest was probably almost half


TO THE OP - as a lender - do you have to finance all of a loan or can you choose to just finance a part of it?  Is there any recourse for your 'losses', such as liens or small claims court?  I see you prettu much answered that above...  My friend had to fill out an application and provide references, etc.. So there is still no recourse for non-payment?


brian

well, anyone can sue anyone at any time, but if someone is judgement proof (broke) or the amount is too small than its not worth bothering with

That's the whole thing. It's an unsecured loan.

I've been in it long enough to ride out the risk as long as I stick to the stuff I am comfortable with. There are people with bad history, delinquencies, etc. with some shaky credit that are applying at rates of high 20's (maybe more, I usually don't pay attention to them) and many more that are looking for loans at rates in the 5.5% range with stellar credit. I shoot for the 7-9% primarily and add a few 12-13% loans if I like the digits and it looks believable.

The companies (both of them) screen before we even get a crack at the loans. They filter out a full 80% before they ever hit the market. There is also verification stages of length of employment, Debt to Income ratio, Revolving debt balances, past delinquencies, etc. I'm not saying that there's no risk. Like everything, there most certainly is. However, historically, these marketplaces see default rates much lower than the average bank and my results show just that also. maybe I'm just lucky.....who knows? But, I have been doing this a few years now and my pattern seems to be holding with my own personal conservative approach. I know two others who went after bigger returns and did not fare as well. They seemed to chase the 14-20 plus % loans.

I'll be honest and tell you what I look for. It's just the stuff that I am comfortable with. Of course, YMMV:
-Past borrowing history (Prosper only)
-Verified employment of at least two years
-Loan amount is about the same as credit card balances (for loans listed as consolidation loans)
-Recession proof jobs
-Low debt to income ratio
-No public records for the last ten years
-Low and manageable monthly payment
-Loan amount under 22k
-"Own home" or "mortgage" status

Only then do I care about what the possible return could be.

I've also been playing around with Lending Club for a few years.   I've funded 332 loans, 11 charged off and 4 in various states of delinquency. Overall return is 7.9%  However as of late I have only been doing "A" grade loans as when the number of defaults started rising I got very conservative.  Tight filters will show no loans.....especially if you use the verified filter.   It's amazing how many people are the "president" or "ceo" that are looking for a loan.    I like that it gets me a better rate than the banks, just have to be careful who you lend to.  

What other tips would you like to share OP?  Did you start a thread on this a few years ago?  I think that is what got me to try it out,  been pretty happy so far.

We've done a few of these. The guy who started the thread actually posted screen shots of his investments. It was really helpful. Or maybe it was me that started one.....all I know is....we've done about three or four here.

I have to admit, I kind of let things ride for a while because the loan parameters I had set up started to come back with no loans. I wasn't about to "loosen up" on my "formula". I have since jumped back in and am really cautious. I also fund mainly A loans and I see my return going down to that 7-8%, kind of where you are at.

However.....I have to say that your default rate and my own are about the same. It sounds like you and I look for the same things.
Better than any bank would give me....I'll keep up with it.

Great thread, thanks for the tips OP. Couple questions though.



1) Which of the lending sites do you prefer over another for some reason or do each have their positives and negatives?



2) What is the normal term of the loans you fund?



I'm interested but don't think I'd want to get into something that wouldn't be paid off for a long time.



Thanks!

I prefer Prosper, because you can see who has borrowed before and look at their payback records right there on how many on time or late payments they have made.
I love this search, because people who like credit cards always come back to the place where they can once again unbury themselves with a loan rate lower than the next credit card and know if they keep a stellar record, they will be funded quickly again. These loans almost always function flawlessly.

Thank you for the info!