Lending Club Review – 1.5 years, 8.35% return, 2 Defaults

Check out my latest update after 2 years of investing in Lending Club.

Lendingclub.com may sound like a too good to be true scam when you first read about it. 9% average return? 100% positive returns for investors with 800+ notes? Isn't this exactly what Berni Madoff was promising his investors in his Ponzi scheme? Lending Club is certainly not a scam, and the risks are as real as the rewards. After over 18 months of investing through Lending Club, I have seen returns 8 times better than any bank account or CD, with a better cash flow than the stock market.  Let's start with how I got involved in the LC.

My Story

Back in January 2011, I was frustrated with the returns I was getting in the stock market. I was looking to diversify my investments and I also wanted to increase my monthly cash flow. I looked at various options, such as stocks, bonds, CDs and other investment vehicles. None of them really provided the returns I wanted while also spinning off monthly dividends. Then I found Lending Club.

The peer-to-peer lending concept was familiar to me from Kiva. 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 small time investors. 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 1.04%. Could Lending Club provide similar low risk with high return potential?

Getting Started

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? All 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 lender is fantastic. You can find lots of stats here. There's even more data once you sign up for the service.

I decided to put $1000 into LC to test it out. Over the next few months, as I started to see excellent results, I put a few more dollars in there. The results continued to be great. So how does Lending Club work? And, how can you get it to work for you?

Read MORELending Club Review – 1.5 years, 8.35% return, 2 Defaults

ATM Surcharges Skyrocket – No More Free Checking?

Two recent articles have really gotten me worked up. The first is about the end of free checking. The second is about the rising cost of ATM fees. To summarize:

  • only 39% of checking accounts are free (meaning they don't charge a monthly fee or have a minimum balance)
  • the average ATM surcharge has risen to $2.50 on the ATM side and $1.50 on the customer's bank side, to a total of $4.00 per withdrawal

Both of these articles make me cringe, but NOT because of what the banks are doing. Some people read these articles and think “those banks are totally dicking over their customers!” While a good knee jerk reaction, it's wrong. Banks are businesses that must seek to maximize profits for their shareholders. So you can't fault them for trying to make as much money as they can. When I look at these headlines I think: WHAT THE HELL ARE THE CUSTOMERS THINKING?!

A long, long, time ago, in a time called the 1980s, there was no Internet (okay sure there was ARPANET and such, but the average consumer did not have the access that we do today). In this dark era, you had to use a local bank or credit union. Maybe you could do some telephone banking and banking by post, but really it only made sense to bank locally.

Fast forward to the dystopian future, THE YEAR 2012! Now we have access to the Internet and Internet banking! You are no longer constrained by time or distance. Banking can be done online, over the phone, by mail, at ATMs, in grocery stores, in Wal*Mart. You no longer have to settle for crappy banking service or fees! Here are four banks that offer fee-free checking:

Read MOREATM Surcharges Skyrocket – No More Free Checking?

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How I Used My USAA Career Starter Loan

I applied for the USAA Career Starter Loan in November 2008. At the time, I was a junior in college and about 18 months from commissioning. It was quite the rush to see $25,000 deposited into my checking account. From start to finish it took about a week to complete the loan application and have the cash deposited into my USAA checking account. I moved the money into a savings account within a day or two, and then began to think about what I wanted to do with the money.

I knew I wanted to invest most of it. At 2.99% interest, I was convinced that I could use the low interest rate to profit from arbitrage. I researched for a few days and then went into action.

Read MOREHow I Used My USAA Career Starter Loan

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How to Send Money Instantly Between USAA Members (Pay Someone Mobile App)

USAA offers many easy, cost effective, and outstanding financial products and services to military members and their families. Their mobile banking app is one of the best in the industry. They were also the first US bank to offer mobile deposits through scanners and then iPhones and Android devices. These kinds of innovations make it easy to use USAA as an “online only” bank (although I have been to their San Antonio branch and done a few transactions in person, which was a bizarre experience, having never been in a physical bank in so many years).

I recently was able to use a new feature on their mobile app: “Pay Someone.” This is an awesome financial tool and it was astounding how easily it worked. Doesn't it bother you that in the days of iPhones, wireless electricity, and Google Glasses, there is still no easy and free way to electronically send money to your friends to, say, split a bar tab or a restaurant bill? It really bugs me!

The “Pay Someone” feature is located under the Transfers/Deposits section of the USAA app. I'll walk you through my experience on an Android device:

Read MOREHow to Send Money Instantly Between USAA Members (Pay Someone Mobile App)

Should I take a military pay advance when I PCS?

For many situations, yes. Taking a pay advance when you PCS is a great way to help yourself out get ahead financially and stay out of debt while you PCS. There are many costs associated with a PCS, not all of which are reimbursed.

A pay advance is a 0% loan to your present self from your future self. You can usually get a month's pay (BAH + Basic Pay, no BAS or incentive pays usually) advanced to you (with the taxes taken out) and then pay it back over the next 12 months. It's a fairly painless process that can usually be accomplished through your online finance office or in the finance customer service area on one form. If you only take a month's pay out and repay it over 12 months, you don't even need a commander's signature: it's automatically approved.

Read MOREShould I take a military pay advance when I PCS?