My foray into peer to peer lending

by Rocket Finance

I am the bank!

I just made my first loan at Lending Club. I have been hanging around Prosper for a long time – reading loan stories and looking at the set-up, but I had never created an account. I had read a few horror stories on fatwallet and I don’t have a great deal of capital to invest. So, if I put my money somewhere, I wanted to take on as little risk as possible.

Two weeks ago, I came across another P2P (peer to peer) loan company called Lending Club at the DebtKid blog. I spent some time going through their site and eventually opened an account. There are several reasons to choose Lending Club:

  • Borrowers must have a minimum credit score of 640 – Prosper’s minimum score is 520
  • I like Lending Club’s interface – great colors (I am a sucker for orange), good graphics and easy-to-follow intuitive processes. I am not a “geek” so the easier I can navigate, the better.
  • Lending Club is an affiliate of rocket finance.
  • Lending Club bonuses are better (more on that later).

The first lending option at Lending Club is the portfolio option where you indicate how much risk you are willing to accept and they diversify your money over a range of borrowers. You also have the option to choose your own borrowers after looking at their stories, credit rating, loan amount, etc. I chose the latter option because the porfolio plan requires a minimum loan of $500. I may eventually lend that amount, but I didn’t want to commit that much all at once on my first loan. I split my money up between three borrowers who were close to funding their loans. My average weighted rate is 11.52% and the loans will be paid back over the course of three years. Of course you can increase your return by taking on more risk. Lending Club advertizes that their average return is 12%. My loan choices were very conservative.

If you need a loan, peer to peer lending may be an option that you want to consider. For borrowers who want assistance with debt, a consolidation loan is not always the best way to go, but if you take out a loan through Lending Club and make the payments, your loan will be payed off in three years – not like the carrot and stick routine that you may get from a credit card company were you make payments for the rest of your life and never pay off your debt.

The best thing about Lending Club is the bonuses:

  • $25 bonus if you become a lender or borrower. You are not required to lend money in order to qualify for the bonus.
  • $50 if you become a lender with a minimum account balance of $1000. You don’t have to lend the $1K to get your bonus, but it is a 5% return before you lend a dime.
  • if you lend at least $5,000 before February 3rd, Lending Club will credit your account with a 5% bonus – 5% of the amount that you lend. So if you lend $100,000 before that date, Lending Club will give you $5,000. *

I think that I am going to loan a certain amount of money per month – only using money that I do not mind tying up for a while. Savings acount APR’s are falling quickly and Lending Club might be a way to hedge your investment income.

If you sign up through this link, you will earn either the $25 or $50 bonus, depending on your funding amount and I will also make a referral bonus. Try it out!

* Sign up bonus has expired, but you can still Make money online and earn interest rates of up to 19.37%.

  1. 5 Responses to “My foray into peer to peer lending”

  2. By DebtKid on Jan 17, 2008 | Reply

    Hey Rocket, thanks for the mention! Lending Club has been great to work with so far as a blogger.


  1. 4 Trackback(s)

  2. Feb 5, 2008: » Carnival of P2P Lending #3
  3. Feb 11, 2008: Is Peer to-Peer Lending Ready for Prime Time? | Moolanomy
  4. Mar 6, 2008: Another alternate stream of income | rocket finance
  5. Jul 7, 2008: Why I Chose Not To Invest In Peer-To-Peer Lending

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