Last year, I wrote an article about peer-to-peer lending and intended to write a followup post. It was recently pointed out by a reader that I never did write about how things turned out.
Rather than the 6 month check-in I intended, this is a year and a half check-in… doh!
So how did Lending Club work out for me? I only put a few hundred bucks in just to see how it worked and here is the result:
I invested in ten different loans with an average interest rate of 18.6%. I had 7 that are fully paid off already, 1 that was written-off (the borrower never paid it back) and 2 that are still being paid. The one that was written off had paid quite a bit back already and I only wrote off around $15.
The rate of return after write-offs and fees is only 3.4% so I have stopped reinvesting into new loans and will withdraw it all as soon as the final note is settled. So, the final verdict for me is that it was a fun experiment but the rate of return elsewhere is much better. Don’t get me wrong, I am not saying this isn’t a good place to invest. To be successful however, you need to continually reinvest as you get payments (as low as $25 each time.) The reason my rate of return is so low is simply that I don’t watch it closely and have the bulk of my principal sitting in a non-interest bearing account waiting for me to find another loan to fund. I have a friend that checks his regularly and continues to put his money back into new loans. Because of his diligence, his rate of return is much better.
Lending Club <— give it a try
by Chris Doelle
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Also published on Medium.