After the TSP, I invest my money in Betterment and Vanguard. I track all of my investments with Personal Capital. I also wrote a short, 2 hour book summarizing this site. You can buy it here.

Over the next few weeks I’m publishing the entirety of my free report on “How to Make Money with Lending Club” as blog posts, so you can access them without having to download the report. If you’d like to read everything ahead of time, go ahead and download the report today! Last week’s topic was “What is Peer to Peer Lending?

It began in January 2011. I had started my first “real” job after college 6 months earlier in June 2010. I was frustrated with the up and down returns of the stock market and looking for a way to expand my monthly cash flow.

Real estate in the area I was stationed was not an option, plus I knew I’d be moving within 18 months. Certificate of Deposits and savings account interest rates were abysmally low. None of these investment vehicles produced monthly payments or had a rate of return above 2%. Then I found Lending Club.

Lending Club is the New Kiva

lending-club-is-the-new-kiva
This is Melito, an ice cream salesman in the Philippines. I helped expand his business with a $25 loan on Kiva.org

The peer-to-peer lending concept was familiar to me from Kiva, another P2P lending site. Kiva is focused on charitable investments in businesses in the third world. This is commonly known as microfinance: loaning money to people who don’t have access to traditional financial institutions. People who need loans but can’t get them from banks or can’t get a reasonable interest rate apply for loans that are funded by people from around the world.

Most investors have only $25 in each loan, meaning that they have very little to lose on each defaulted loan. I knew the default rate for Kiva was as low as 1%. Could Lending Club provide similar low risk with high return potential?

At first, I was apprehensive. The returns seemed too good to be true.

  • Who was borrowing money at such a high interest rate?
  • What was the default rate like?
  • How much data did the company have to backup that people would actually repay the loans?

lending-club-after-three yearsAll of the questions and more were clearly explained on the website. The transparency of the lending process and the amount of data available to the investor is fantastic. You can find lots of stats here. There’s even more data once you sign up for the service.

I’ve been investing in Lending Club now for over two years. In that time, I’ve only invested roughly $1100 into the service. Up until this year, I took a very lazy and uneducated approach to selecting which loans to invest in. Now I’m taking it much more seriously.

My Results After Three Years of Lending Club

After nearly three years of investing in Lending Club, here are my results. Remember, this was with almost no research and a very relaxed approach to selecting which loans were invested in. Had I taken more time to research, I’m sure my returns could have been much greater. I am now filtering much more aggressively and being very selective with the loans I invest in.

Loan Performance Summary – generated from NickelSteamroller.com

ROI 6.56% (+-0.43%)
Rate of Loss (Default/Charge Off) 5.36%
Total Lent 90 loans, $2,207
Remaining $1,294
Net Gain $136.25 (+-$10)
Markups Paid (secondary market) $2
Average Loan Grade C1
Average Interest Rate 14.89%
Average Loan Age 18.7 months

A 6% return is not negligible, especially when there was no work done on my part, CD and savings accounts interest rates are so low, and this is an investment very uncorrelated to stock market or property value performance. In an era of low FDIC insured interest rates and an extremely volatile and possibly overpriced stock market, Lending Club offers just one more way to diversify your income and investments.

So how does Lending Club work? And, more importantly, how can you get it to work for you?

Tune in next week to see How Lending Club Works. If you can’t wait, download the free report here now!

2 Websites I Use to Achieve Financial Independence Faster

I have investment accounts all over the place. To keep track of all of them in one place I use Personal Capital. It combines all of my accounts, shows me where I may be overpaying in fees, and provides beautiful charts showing my overall asset allocation and performance.

I use Personal Capital to track my Roth and Traditional TSP, Vanguard IRAs, banking accounts, SDP, and my Betterment taxable account, all in one place. It's free, secure and presents me with a one-stop dashboard so I can see all my money on one site.

Read my full review of Personal Capital and see how easy it can be to manage your investments in one place. Trust me, once you try it, you'll love it.

P.S. - If you have over $100,000 of assets and a 401k, you really need to run the Personal Capital 401k Fee Analyzer.

The best way I know to achieve financial independence is to keep your investments simple, diversified, automatic, and low-cost. Costs eat into your returns like you wouldn't believe! A 1% difference in expense ratios can mean $100,000s lost to fees over a lifetime of investing.

Even if you're a DIY (do-it-yourself) investor like I am, you need to check out Betterment. You can read my full review here, but the bottom line is for only $250 per $100,000 invested (0.25% expense ratio) you get simple, diversified, and automated investing. In addition every account now gets free Tax Loss Harvesting+ features, which should increase returns for the average investor more than the minuscule management fee.

If you're not a DIY investor or are just getting started with investing, then you definitely need to check out Betterment. It's what I recommend to my family and friends who aren't strong investors or don't care to learn about asset allocations, diversification, or rebalancing.

My Lending Club Story
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3 thoughts on “My Lending Club Story

  • September 20, 2013 at 09:15
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    I’ve always been interested in joining Kiva or Lending Club for about 2 yrs now but never pulled the trigger because I was unable to locate a blog that provided insight or experience from using either site. Finally I found one and I am very interested in continuing to follow this blog and read more about your Lending Club experience. Great Job and keep em coming!

    Reply
    • September 20, 2013 at 10:11
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      Kiva is a great way to support your fellow man in developing nations around the world. Lending Club can also be viewed as a socially responsible platform, as 80% of the loans on LC go towards debt consolidation and paying off high interest credit cards. If my P2P loan can help someone become debt free, I view that as a win win for everyone.

      Reply
  • October 9, 2013 at 22:26
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    Its good to see actual results with P2P rather than theoretical rates. 6.56% ROI is pretty good!

    Reply

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