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.