Don’t tell my fiancee Lauren this, but one of the reasons I was most excited to move to California was that I was finally able to register for a Lending Club account.
Living in Washington, D.C. was frustrating because there was this great investment opportunity that so many people have been able to take advantage of, but I was left out in the cold. And I hated it. So I moved out as soon as I could and got to work opening my account.
It’s not hard to see why I’m so madly in love with social lending. Everyone who learns about it seems to share my exuberance.
The way peer-to-peer (or social lending) works is that people who have credit card debt or other high interest loans (possibly high interest student loan debt from accredited online colleges) can apply to Lending Club as a borrower, and if approved, can accept money from lenders at a predetermined interest rate.
The rates are typically much lower than bank loans and credit card interest rates and it can be a great way to reduce interest rates and save money!
On the other side, we have the lenders, people like me, who are willing to take on the risk of these loans and can get relatively high interest rates considering the risk (the rate of default is below 3%).
How great of an opportunity was it? Well, since 2007, Lending Club has boasted average returns of 9.64%. That’s across the board, and you can choose the amount type of risk you want to take part in (borrowers with different credit scores, ranked from A to G).
I have too much money sitting in a 1% savings account with ING, so I am PUMPED (to say the least) that I can invest in a safer investment than the stock market (especially with the recent volatility).
I’ve recently opened up a Roth IRA with Lending Club, and I’m excited to start small, spending $25 on many different loans to build up my portfolio. I’ll definitely be detailing my big gains, so if you’re interested in peer to peer lending, stay tuned! And if you’re ready to get started yourself, Lending Club is now offering a 2% bonus on initial investments!
Readers, do you use social lending? Which company do you use? If not, what are you waiting for? What are your concerns?