Start earning money again

by Rocket Finance

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I recently heard a fellow personal finance blogger say that at the rate bank savings APR’s were dropping, it almost doesn’t make sense to keep saving money.

Now, no self-respecting personal finance blogger would ever sign his name to such a statement and I am not going to “out” him here, but there is an element of truth in that thought. Savings account APR’s have never been great when compared with the stock market, but online savings accounts have at least kept up with inflation.

This is no longer the case with ING Direct, the leader in online savings, sitting at 1.65% APR and my bank, FNBO Direct at 2.40% APR. The average rate of inflation since the early 1900’s is 3.42%, and the truth is that your money is losing value by sitting in a savings account.

Now don’t go crazy, I am not suggesting that everyone go out and spend their savings. Everyone needs to save money, put as much money as you can in a safe place. However, in the current environment, it is very difficult to earn even a small return on safe investments. I am not an investment professional and I’m not giving advice, I’m just telling you what I think and I think Lending Club is looking better and better all the time.

There have been no defaults or late payments on the loans that I made over fourteen months ago and my return on investment was close to 10% over the past year. My loans have another two years before they are completely repaid, so there is certainly time for things to go south . . . but I am pretty confident that my Lending Club investments will look better than my 401K in a year . . .

Don’t put your life savings into Lending Club, but you need to consider opening an account and exploring this particular investment. P2P lending is not brand new, it has been around a little while and I think it is here to stay. If you open an account through this link, you will get a $25 bonus when you fund your account!

Open an account and start making money again.

  1. 7 Responses to “Start earning money again”

  2. By Lems on Mar 4, 2009 | Reply

    Agreed that saving accounts are, unfortunately, not up to par lately. Banks are trying to survive the economy and the way they thought made sense was to pass their pains to the consumers.

    Now, Lending Club is a great alternative investment, but your results are not typical. i have seen 2-3% default in my account, and people should be prepared for that. Still, I’m making a good 7-8%, which is hella good compared to savings. I do recommend it, but be ready to see a couple of idiots take the money and stop paying at some point. That’s the nature of lending.

  3. By rocketc on Mar 4, 2009 | Reply

    Good point, Lems. I probably should have mentioned that in my post. Even though my returns look good at the moment, my 100% non-default rate probably will not last. Hopefully though, at the end of the three years, I have made more than 3%. I am pretty sure this will happen.

  4. By Roger on Mar 11, 2009 | Reply

    I’ve heard good things about Lending Club, however, I’m currently in a state (Pennsylvania) where they aren’t yet approved for direct sales, so I’d have to buy the loans through their after the fact trading system.

    While I don’t have a problem with that in theory, in practice it seems like every loan that isn’t inches away from default is being sold at a premium, meaning I’d make less off it than the 8-10% that would be my goal (after taking possible defaults into account). Plus, it’d be much more work, and so far I’ve found it more worthwhile to hunt for jobs and work on my blog.

  5. By rocketc on Mar 11, 2009 | Reply

    I had not heard that Lending Club is not approved for direct sales in certain states. Do you know of other states where this is the case?

    I wish it was worthwhile to work on my blog. 🙁

  6. By Roger on Mar 11, 2009 | Reply

    Well, quote their State Condition agreement:

    ‘The Notes are presently being offered and sold solely to residents of the states of California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Minnesota, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming, and not presently being offered or sold to residents of any other state, the District of Columbia, any other territory or possession of the United States, or any foreign country.’

    So, for the other twenty-five states and Washington D.C., you can’t purchase notes directly from Lending club. Which includes me, unfortunately.

    And so far, working on my blog is more about the potential rewards; I’ve made exactly one cent off my blog so far, and gained one subscriber. So, I’ve got a ways to go before I’m even making minimum wage for the time I’m putting into the blog.

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