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April
Jul 3, 2006



This thread is all about peer-to-peer lending! Iíve had some success with it, and would like to share with my fellow goons. Iíve only been involved in Lending Club, however, so if anyone has knowledge/experience with other sites, such as prosper, Iíll be happy to update this post to include the info.


So, first a brief tutorial:

What is peer-to-peer lending?

Iím glad you asked! We all know how banks and credit card companies make their money - they loan someone money, then collect monthly payments made up of both principal and interest. With peer-to-peer lending, YOU get to be the bank. You contribute to loans in increments as small as $25.00, then collect a share of the monthly loan payment for the duration of the loan. In Lending Club, the duration is either 3 years or 5 years.

Hereís how a typical loan in Lending Club might look:

quote:

Loan Summary

Issued Date 10/16/12
Loan Fraction $25
Loan Amount $18,450
Rate B5 : 14.09%
Term 36 months
Status Current
Credit Score Change No Change


For this particular loan, I contributed $25.00, and my share of the monthly payment is $0.85. Over the life of the loan, I will earn $30.60, or slightly over 20%


Ok, how does it work?

With Lending Club, there are several steps involved.

-- Open your account, and link your bank account to it.

-- Transfer money to your Lending Club account. There are no fees associated with the transfer, so you can start with as little as $25.00.

-- Once the transfer goes through, which usually takes 3-4 business days, you can select the loans you want to fund. Your buy-in is called a note. So, you can invest as much as you want in a single loan (anywhere from $25 to the full amount of the loan), and your contribution is your note.

-- You can create portfolios to sort out your notes however you like. I only have three - not issued yet, open notes, and fully paid.

-- If the loan is fully funded, it then goes through a review process before it is issued to the borrower. If a loan is not fully funded, or doesnít pass review, it is not issued, and you will get your money back into your available cash. You can then fund a different loan.

-- If the loan is issued, you will start getting payments one month from the issue date. When the payment is received, it goes to your available cash. If your available cash goes over $25.00, you can buy more notes, for super-mega-ultra compounding possibilities!!

Wow, there are thousands of loans on here! How do I pick one?

This is the tricky part. LC gives you a fair amount of information on the borrower - a typical profile looks something like this:

quote:

Borrower Profile


Gross Income:$4,000 / month
Current Employer:Werner Enterprises
Home Ownership:RENT
Location:Beaumont , CA
Length of Employment:1 year
Debt-to-Income (DTI):20.48%
(as reported on credit bureau on 11/16/12)Borrower Credit History


Credit Score Range:730-734
Accounts Now Delinquent:0
Earliest Credit Line:09/2007
Delinquent Amount:$0.00
Open Credit Lines:12
Delinquencies (last 2 yrs):0
Total Credit Lines:14
Months Since Last Delinquency:n/a
Revolving Credit Balance:$4,363.00
Public Records on File:0
Revolving Line Utilization:40.80%
Months Since Last Record:n/a
Inquiries in Last 6 Months:0


There is also a list of questions you can pose to the borrower, such as ďwhat will the loan be used for?Ē or ďPlease explain any delinquencies in your credit history.Ē

Really, the biggest determining factor in choosing notes is your own risk tolerance. If you are more risk-averse, and happy with lower interest rates, for example, go for A & B rated notes. There are also a number of sites, such as interestradar.com that do a more in-depth analysis of the available notes and their risk factor.

So whatís the down side?

There are actually three possible negatives on LC. The first is that people are people, and itís possible for a borrower to not pay off their loan. I currently have 246 notes, and 2 of them are late and looking like they will default. To me, thatís less than a 1% loss, and since the average interest rate on the rest of my notes is just over 15%, I consider it acceptable.

Second, your funds are not liquid. There is a trading platform where you can sell your notes, but I donít know how much activity it really gets. I think itís mostly a way for people to try to unload their notes that are likely to default. So, if you think youíre going to need your money in the short term, donít do it! (The flip side if that is that by building up a large note collection, you can get a decent monthly income.)

The last is a much smaller issue, but in the interest of full disclosure, I am noting it. LC DOES charge a service fee of 1% on all payments. In my case, because I only put $25.00 on every note, it works out to a penny per note per month, or $2.46. Itís a tiny amount, but to someone who has thousands of notes, it could be an issue.

What about your personal experience?

I started in LC on November 18, 2011, with $250.00 (10 notes). For the first 6 months or so, I let that ride, and bought more notes from the payments. In May of this year, I got serious, and have been putting about $500/month into LC, with substantially more in October, November, and (projected) December, and then back to the $500/month in January. As noted above, I have had 2 notes that are less than 120 days late, and no full-on defaults or charge-offs as of yet. Iíve had 5 notes paid off in full during the first couple of months, and was able to turn around and buy new notes immediately.

My biggest complaint is that the whole process can be slow at times. I request a transfer of funds to LC, wait almost a week for the funds to be available, order my notes, then wait up to 2 weeks for them to be issued, and a month after that for the first payment. If the note doesnít get issued, it goes back to order notes, wait for review, etc.

The upside is that as I am getting more and more notes issued, and therefore more payments coming in, I am getting ďbonusĒ notes more often. My average payment per note is $0.71, so every 35 notes I have gives me another note each month, without my contributing any more funds.

Iím obviously a huge fan of Lending Club. You donít have to take my word for it though.

LC has an A rating from the BBB:

http://www.bbb.org/greater-san-fran...cisco-ca-361746

LC notes have outperformed stocks & bonds for 5 years:

http://blog.lendingclub.com/2012/11...ocks-and-bonds/

Forbes thinks theyíre pretty cool:

http://www.forbes.com/pictures/mee45eedm/lending-club/

And a whole bunch of other articles:

http://www.lendingclub.com/public/in-the-news.action

Now that Iíve written way too much, Iím more than happy to answer questions, and Iíd love to hear othersí input.

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Keisari
May 24, 2011



quote:

The first is that people are people, and itís possible for a borrower to not pay off their loan.

I'm interested in what exactly happens if someone flat out refuses to pay their loan. Are you just poo poo out of luck or what? I mean do the same legal aspects apply to this as to regular bank loans?

Harry
Jun 13, 2003


Keisari posted:

I'm interested in what exactly happens if someone flat out refuses to pay their loan. Are you just poo poo out of luck or what? I mean do the same legal aspects apply to this as to regular bank loans?

I think Lending Club has started to go after the people who skip out on the loans more. I looked into this a while ago, but it's not allowed in Texas (you can participate in some kind of 3rd party after market or something but screw that).

April
Jul 3, 2006



Keisari posted:

I'm interested in what exactly happens if someone flat out refuses to pay their loan. Are you just poo poo out of luck or what? I mean do the same legal aspects apply to this as to regular bank loans?

They will use a collection agency. Here's the collection log for one of my delinquent notes:

quote:

Collection Log
11/13/12 (Tuesday) Engaged external collections agency
11/8/12 (Thursday) Sent email to borrower
11/8/12 (Thursday) Seeking to locate borrower using alternative means (skip trace)
11/8/12 (Thursday) Attempted to contact borrower (left voicemail)
11/8/12 (Thursday) PAYMENT Failed
11/4/12 (Sunday) Seeking to locate borrower using alternative means (skip trace)
11/4/12 (Sunday) Attempted to contact borrower (left voicemail)
10/11/12 (Thursday) Sent email to borrower
10/11/12 (Thursday) Attempted to contact borrower (left voicemail)
10/11/12 (Thursday) PAYMENT Failed

I don't know what their next step will be. I suppose, after a certain point, I could lose the $25 I put into this loan. That's why I only put the minimum on every note, so some deadbeat can't run off with a large chunk of my investment.

Keisari
May 24, 2011



I see, I see. I snooped a little bit around their site and this sure is atleast intriguing and the idea is interesting. They're essentially a broker for loans, and that's kinda cool.

A shame it's US only, I probably could've put in 25bux just out of morbid curiosity.

silvergoose
Mar 18, 2006

IT IS SAID THE TEARS OF THE BWEENIX CAN HEAL ALL WOUNDS


So why are the loans themselves a good idea for the borrower? If it's that high a % of return, wouldn't that imply that the loans themselves are pretty predatory?

Fork of Unknown Origins
Oct 21, 2005
Gotta Herd On?

I poked around the available loans for a while and it looks like most of them are people trying to consolidate debt. So if the interest rate on the loan they get is better than the interest rate on the debt they already have they come out ahead.

There are a few home improvement ones too and those tend to be (again, from about 15 minutes of poking around) the really low interest/low risk loans.

Keisari
May 24, 2011



Yeah I saw interest rates vary between 6-27%. While 27% is a lot, 6-7% doesn't sound too bad. Granted, I don't know anything about loans.

Fork of Unknown Origins
Oct 21, 2005
Gotta Herd On?

Most of the people that are getting the ~27% loans look like they'd be better served with bankruptcy. I put $250 on the site and I'm going to put some away on there every month, but I'm sticking to C rated and above loans.

April
Jul 3, 2006



I'm pretty sure the interest rate is based almost entirely on credit score. As someone above said, to some borrowers, the interest rate is less than what they currently have, or by consolidating multiple payments into one, they can lower their monthly payments.

Interestradar.com has a lot of interesting analysis on different types of notes - for example, people borrowing to consolidate debt are less likely to default than people borrowing to buy a vehicle.

April
Jul 3, 2006



Fork of Unknown Origins posted:

Most of the people that are getting the ~27% loans look like they'd be better served with bankruptcy. I put $250 on the site and I'm going to put some away on there every month, but I'm sticking to C rated and above loans.

You really can't go JUST by rating - of my two late notes, one is a B and one is a C. I really, really would advise people to check out interest radar and run a few different analyses, to get a feel for what would work best.

Fork of Unknown Origins
Oct 21, 2005
Gotta Herd On?

Yeah, I haven't bought anything yet and from looking through I might reevaluate the "c and up" thing. You can see how much their payment will be, their income, their employer, etc. I'm seeing some rated C or B that look kind of not good and some rated below that look relatively safe. I'll poke around that site a bit.

April
Jul 3, 2006



Fork of Unknown Origins posted:

Yeah, I haven't bought anything yet and from looking through I might reevaluate the "c and up" thing. You can see how much their payment will be, their income, their employer, etc. I'm seeing some rated C or B that look kind of not good and some rated below that look relatively safe. I'll poke around that site a bit.

Have fun! I love being able to control exactly who gets my money. It gets really fun once you can start compounding.

Oaks
Oct 9, 2007



Fuuuuuck, no Maryland investors. Oh well!

cheese eats mouse
Jul 6, 2007


What are the taxes on this? Is it just simple individual income?

I have some long term savings goals I could use this for. Better than my piddly 1% interest rate at the bank.

April
Jul 3, 2006



cheese eats mouse posted:

What are the taxes on this? Is it just simple individual income?

I have some long term savings goals I could use this for. Better than my piddly 1% interest rate at the bank.

Last year, I didn't earn enough to get a 1099, so I can't really answer that one.

There are several articles out there on the subject, and it appears that you have to report your interest, but LC doesn't do a 1099 on it unless the interest for a note is over $10 in a year.

Here's a fairly straightforward article on the topic:

http://www.mydollarplan.com/lending-club-taxes/

Alereon
Feb 6, 2004

For me but LEFTHANDED

My opinion, based on both experience on Prosper.com and LendingClub, is that one of the most important factors when choosing a borrower is the quality of their narrative answers to questions. If they don't answer, don't use complete sentences, or don't write professionally, don't lend to them. It's important to remember that you don't have to choose between the notes that are available at a given time: if you don't see anything you like, just wait and something better will come along shortly.

My general strategy has worked well for me, but reflects my high risk tolerance, (potentially misplaced) confidence in my own ability to select quality borrowers, and expectations about what will happen to the economy in the next ~5 years. I only fund debt consolidation loans, because as mentioned that class VASTLY outperforms all others (think about it: how financially responsible is someone who resorts to P2P lending for a purchase that is outside their means?). Additionally, always avoid both the riskiest and least risky classes, their risk-adjusted returns are poo poo. My opinion is that if you are considering AA-rated loans, just get a CD, and if you're considering E-rated loans, just go to the casino. Each time I'm investing I generally go in $100 at a time and get one each of the middle classes, this may change as I make more loans and see how I do long-term.

When picking a loan within a risk-class, I start from the highest-interest (most risky) loans and go down the list looking for someone I feel is a better risk than their numbers would suggest. When evaluating a borrower, the first thing I look at is their employment. Do they have a stable job? Is it in a growth industry? (sorry teachers) Is it something scammy/lovely/low-friction? Does the salary they claim jibe with their job/life story? If they say they are an "Executive" making $25k a year they can gently caress right off. In fact, I would essentially never loan to anyone who claimed to be an Executive or said "Other". As I mentioned above, the narrative answers are absolutely critical, if you can't write like an educated professional on a multi-thousand dollar loan application then I don't trust you to hold a job to pay me back.

Finally, I think looking at the credit history and number of open/delinguent accounts compared to the story they tell about their financial and job history is important. If someone has what seems like an unreasonable number of accounts, I worry that they habitually skip out on unsecured loans.

E: Typos.

Alereon fucked around with this message at Nov 22, 2012 around 01:24

Tamgerine
Jul 11, 2006

Fatty Fat Failure!
How is your muffin top, fatty?
Hope those cheetos were worth it.

This is crazy because for the past two weeks or so I have been considering this as an option for my extra money.

So April and Alereon, if you're comfortable saying, at this point about how much do you make each month from this?

April
Jul 3, 2006



I am actually making about $165 per month on my open notes. However, this includes notes that have been issued but have not started paying yet, so it is mote like "this is how much you will make over the next month."

Alereon
Feb 6, 2004

For me but LEFTHANDED

Not much right now. I was into old-Prosper (before the SEC ruined it, I have an awesome shirt!), but I was lucky in that my employment became insecure and I stopped putting money in early enough that my loans finished paying out before all the loans on the site defaulted (if you can't pay your mortgage you sure as hell can't pay your unsecured loans). I didn't feel confident enough in either my personal financial situation or the larger economy to start putting more money in until about the last six months, and right now I'm trying to spread my money between Prosper and LendingClub and establish a diverse base of loans so I can get a feel for how well my selection strategy works today.

The "conventional wisdom" seems to be that Prosper is lovely compared to LendingClub now, and it does seem to be steadily losing marketshare. That said, LendingClub takes forever to do anything as April mentioned. The only real negative point I've heard for Prosper is that collections tends to perform below standard (if at all) on delinquent loans, but frankly if a loan has gone delinquent I would assume I've lost my money. I actually haven't had a delinquent loan yet (just some scattered late payments), but I haven't made nearly as many as April so far. I do think Prosper has an unfairly bad reputation from all the people who lost money from 2008-2010 or so. I don't know how you could see that happen to the economy and not just say "welp, there goes all my money, bad luck," but apparently some people think Prosper should have squeezed some blood from those stones. All of that considered, I think LendingClub is probably the site people would have a better experience with.

Bonus tip: If you use auto-invest or anything that results in you investing in loans you have not individually approved, you are an idiot and will lose your money. In effect you're investing in what's left over after all the good loans have been funded by humans, and being able to individually evaluate borrowers is a critical aspect of risk control.

slap me silly
Nov 1, 2009


I did Lending Club for a while before they got right with the SEC. A bunch of my loans tanked during the crash, and I had overall relatively lovely performance, but I still got a 3% annualized return. I would still be doing it if they would get legal in my state loving already. I'm avoiding the secondary market because (1) hassle oh god such a pain in the rear end and (2) extra expense - I'm pretty sure one of the functions served by the secondary market is to get notes in the hands of people in the non-served states, at a small premium of course!

By the way, don't take Lending Club's word for what your return is - calculate it yourself. They don't account for dead time and some other things so they are over-estimating it.

Edit: Regarding taxes, I think I have filed it differently ever year. Would be interested to hear what other people are doing... I think one year I wrote off defaulted notes as capital losses, but I had to list them out individually, good god, to save about eight dollars.

slap me silly fucked around with this message at Nov 22, 2012 around 04:26

The Jax
May 15, 2004


I'd never heard of Lending Club, but I used to do Prosper back in the day... and had a pretty bad experience. I typically "invested" in loans that paid 10-25% interest (and chose them quite judiciously) and I think I ended up losing about half my initial capital. Maybe they've improved it since, but when people stop paying, they made a token effort to contact them and then just sold the debt off to a collections agency for pennies on the dollar. I didn't like the fact that I, as a backer of the loan, didn't have a say on how that was handled.

Long story short, it seems like a great concept up front, but it likely won't end up panning out like you want it to.

Alereon
Feb 6, 2004

For me but LEFTHANDED

The Jax posted:

Long story short, it seems like a great concept up front, but it likely won't end up panning out like you want it to.
When was your experience? It's important to remember that at the end of the day this is unsecured debt, so people can just walk away from their loans. The hope is that paying off the loan is a person's best option, but if they lose their job and can't find a new one then you probably won't get your money.

slap me silly
Nov 1, 2009


Yeah, it is definitely a high-risk thing to do with your money and you have effectively no control over the loan management. I consider the latter a benefit, actually, but whatever works for you. Back in the day, Lending Club was a lot better because some actual expertise went into setting the interest rates. Prosper's rates were set in a free-for-all bidding war between the impulsive and the clueless. It looks like Prosper is using Lending Club's model now, though... heh.

April
Jul 3, 2006



Here's a quick update. I purchased another 90 notes this week, and here's what my holdings look like at the moment:

quote:

My Notes at-a-Glance (337)
In Funding: 72
Issued & Current: 258
Fully Paid: 5
Late 16 - 30 Days: 0
Late 31 - 120 Days: 2
Default: 0
Charged Off: 0

According to LC, my current monthly income is $191.04, but that doesn't take into account fees, late/missing payments, etc.

slap me silly
Nov 1, 2009


Excel has this handy XIRR function which will measure your annualized return, if you're not familiar with it already. It is flawed but mostly works (just like everything else in Excel).

I'm grieved that lending still isn't available in my state, and at this point seems like it probably never will be. It was the perfect fun thing for me to do with some speculation money. I suppose some bank lobbyist in the state house hosed me over

April
Jul 3, 2006



What's weird for me is that Prosper is not allowed in my state (WV) but LC is.

I actually made a massive spreadsheet for my LC projections that seems to mostly account for the lag time, fees, and notes that "finish", and it seems to be reasonably accurate.

In a nutshell, the account will grow pretty much indefinitely, but it's not likely to bring me enough to retire in 5-7 years.

Keisari
May 24, 2011



It could be just me, but I think you are presuming dangerously much. Considering you have 5 fully paid loans, a lot could still go wrong if people can basically just walk away from the loans and LC makes only a token effort to get anything back. After all, they themselves haven't got that much money on the loans so they don't have much incentive to do so. I mean, from your 337 loans only 1.4% of your investment is fully recovered and cashed out. (If you only dish $25 on each.)

I guess time will tell. I'm certainly interested how this thing turns out.

April
Jul 3, 2006



Keisari posted:

It could be just me, but I think you are presuming dangerously much. Considering you have 5 fully paid loans, a lot could still go wrong if people can basically just walk away from the loans and LC makes only a token effort to get anything back. After all, they themselves haven't got that much money on the loans so they don't have much incentive to do so. I mean, from your 337 loans only 1.4% of your investment is fully recovered and cashed out. (If you only dish $25 on each.)

I guess time will tell. I'm certainly interested how this thing turns out.

You raise a very good point. I know I tend to get over-excited about this stuff, but what you don't see is that the fully paid notes are just that - people who paid off their notes 100%. It does not take into account all of the people who have made their regular payment. My actual pay history looks like this:

quote:

Payments
Payments to Date: $444.91
Principal: $296.35
Interest: $148.56
Late Fees: $0.00

I mean, it could all go tits-up tomorrow. There are no guarantees in life. But right now, I do see my account going up by a couple of dollars every day.

April fucked around with this message at Dec 1, 2012 around 12:01

Keisari
May 24, 2011



True, I didn't account for partly paid loans. You obviously would keep everything you've made so far from interest before your capital tanks, cutting your losses quite a bit. If you put the min. amount as you said on the loans you've made a little over 5% of your capital back at this point. (I think? I've never been a math pro.) Sure it itself doesn't really matter but I'm just gauging the risk factors, and it would seem that the people loaning (Lendees? Not a native speaker here.) don't get much poo poo for not paying back, and the LC doesn't lose much if they don't, so there's not going to be much action going on in case someone refuses to pay. On the other hand, looking back to the previous list, you only have 2 loans that are likely to default as of now, just like you said earlier. For the rest time will tell.

After those loans have gone through you've done enough of this stuff so you could basically create statistical data for yourself, you could list loans that have atleast broken even in profit versus the ones that have ended up making loss (Defaulted before you got to positive.) and then you could basically calculate a statistical chance of making money or losing it and how much, based on your current judgement.

Sparta
Aug 14, 2003

the other white meat


I initially used the 'auto generate' thing, and I am seeing a LOT of late/charged offs. I have since transitioned to vetting each loan. Also, I got access to the API, so I'm going to be building a little script to find me good loans.

pathetic little tramp
Dec 12, 2005

HE IS GLISTEN


So are there requirements? Like, do I have to have 100k liquid to sign up as a loaner?

April
Jul 3, 2006



pathetic little tramp posted:

So are there requirements? Like, do I have to have 100k liquid to sign up as a loaner?

I just signed up, provided basic info (including SSN), and started moving money in. I don't know how much researching they do on the back end. I can't remember if there was a period of waiting for approval or not, it's been a while.

Saint Fu
Sep 27, 2007
hit 'em with the rhythm make 'em feelin alright now

When I signed up originally, they listed a requirement that you have a total net worth of $70k I believe before being eligible to loan. They don't have a system to verify that you have this kind of money and I don't know the implications of signing up if you don't "qualify" but it was somewhere in the TOS agreement. Also you are not "allowed" to have more than 10% of your net worth in loans.

I started with $1k in loans a little over a year ago. I've been adding slowly here and there and now I'm up to $3k in deposits. I have earned a total of $209.43 in interest, paid $9.75 in fees to Lending Club and had one load default with $19.01 remaining balance. I calculate a 13.22% return despite the defaulted loan, a rate I am happy with. I'm getting about $30 per month in interest at this point (not accounting for what I'll owe the IRS since this counts as normal taxable income).

I only add money which I can afford to lose so I am not devastated if a loan goes bad. Most loans which will go bad do so within the first 12-18 months so I feel pretty good about the first batch of loans I made a year and a half ago. I've lately increased my monthly contributions and add loans as I find them that meet my criteria.

SubjectVerbObject
Jul 27, 2009


This sounds interesting. I have a few questions about borrowers.

Does LC somehow make sure that the money that they lend is going to what the borrow says it is going for? If someone is buying a car for example, do they cut a check to the dealer? Do they make any attempt to secure assets being purchased with loaned money?

Are you able to get updated information on borrowers that you are funding? If they say they are borrowing money to pay off a credit card, you should see the credit card balance go down. Similarly, can you see if someone runs up a bunch more debt?

I've just seen way too many people get home equity loans to pay off credit cards and then go on shopping sprees since their card balance was 0.

slap me silly
Nov 1, 2009


The loans are unsecured. As far as I know the only info they update is credit score, which they track over time.

Dead Pressed
Nov 11, 2009

Stay with me in the heart of the Smokies: Knoxville, TN! Perfect for SEC football & motorcycle goons! Discounts for friends of Cthulhu! And there are stairs in my house!

Saint Fu posted:

When I signed up originally, they listed a requirement that you have a total net worth of $70k I believe before being eligible to loan. They don't have a system to verify that you have this kind of money and I don't know the implications of signing up if you don't "qualify" but it was somewhere in the TOS agreement. Also you are not "allowed" to have more than 10% of your net worth in loans.

This minimum net worth value is why I went with Prosper...they had no such requirement (that I could find, and I didn't want to lie to LC). I'm just tinkering with a few dollars ($125, haha), but so far all my payment terms have been met a couple of months into it. I'll slowly keep adding $25 here and there to build a bit of a 'portfolio'.

Personally, I think this system is a great idea. I would not put my entire retirement account into it, but it provides a nice market for somebody who can honestly find a better alternative to revolving credit card debt.

Saint Fu
Sep 27, 2007
hit 'em with the rhythm make 'em feelin alright now

SubjectVerbObject posted:

This sounds interesting. I have a few questions about borrowers.

Does LC somehow make sure that the money that they lend is going to what the borrow says it is going for? If someone is buying a car for example, do they cut a check to the dealer? Do they make any attempt to secure assets being purchased with loaned money?

Are you able to get updated information on borrowers that you are funding? If they say they are borrowing money to pay off a credit card, you should see the credit card balance go down. Similarly, can you see if someone runs up a bunch more debt?

I've just seen way too many people get home equity loans to pay off credit cards and then go on shopping sprees since their card balance was 0.
You can see their total revolving debt before you decide to loan them money but after that all you see is their credit score which is updated relatively frequently (I believe monthly). When looking at a potential loan for credit card refinancing, I usually do not loan to someone who is requesting more money than their current revolving debt. Obviously they are not telling the whole truth regarding the use of the proposed loan.

Jalumibnkrayal
Apr 16, 2008



I'm not good at math, and while I did read a few dozen pages of the prospectus, I didn't really go through it with a fine tooth comb. An example that LC gives:

http://www.lendingclub.com/public/steady-returns.action

quote:

Investors receive monthly cash payments of principal and interest. For example, if you invested $100,000 in 36-month, grade C Notes providing an aggregate 9.5% net annualized return, you would receive approximately $3,200 each month in cash payments to reinvest or withdraw.

Ok, so $100,000 @ 9.5% net annualized return should payout $3,200 each month. That's $38,400 per year, or $115,200 over the three years. Minus the principle, that's $15,200 over three years, or a much less exciting 5% yearly return. What fundamental aspect of interest rates am I not understanding (totally serious)?

Do the A1 interest rates basically work out to 1% per year?

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Nov 1, 2009


Jalumibnkrayal posted:

What fundamental aspect of interest rates am I not understanding (totally serious)?

The fact that you can be reinvesting that $3200/mo in something else. To get that 5%, you effectively averaged the 9.5% return of the lending investment with the 0% return from letting your $3200/mo sit and moulder.

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