P2P Lending - Anyone try it?

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BV3273
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P2P Lending - Anyone try it?

Post by BV3273 » Thu Oct 22, 2015 6:27 pm

Hello Everyone!

I have a friend who is currently investing in P2P loans on Lendingclub. He swears by it and says he is making some great returns. Have any of you tried it? I poked around and it seems legit.

Thanks,
BV

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Re: P2P Lending - Anyone try it?

Post by Jack FFR1846 » Thu Oct 22, 2015 7:06 pm

I started just about a month ago. I am going VERY slowly and only put in $100. I invested in 4 notes from A to C grade at this point. After I see first payment for all, I'll put in another $25. Like I said....very slowly. I do know that to be more diversified, I'd need more in, but I'm not ready to do that yet.
Bogle: Smart Beta is stupid

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BV3273
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Re: P2P Lending - Anyone try it?

Post by BV3273 » Thu Oct 22, 2015 7:15 pm

Hey Jack,

My friend started slowly also. He only invests in big dollar loans (15K and up). I think I'm going to give it a try with $100 also.

-BV

kazper
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Re: P2P Lending - Anyone try it?

Post by kazper » Thu Oct 22, 2015 7:19 pm

I considered it, but it is apparently illegal in my state :( probably for the best!

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BV3273
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Re: P2P Lending - Anyone try it?

Post by BV3273 » Thu Oct 22, 2015 7:21 pm

What state do you reside in Kazper?

sawhorse
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Re: P2P Lending - Anyone try it?

Post by sawhorse » Thu Oct 22, 2015 7:29 pm

My Lending Club account has lent out around $1000 and gotten $30 in interest. I only put $25 on each loan. I've had it open less than a year. Jonathan at My Money Blog has a series of posts about how returns have changed over the years.

Peer to peer lending isn't really peer to peer anymore. Institutional lenders have gotten into the game and are using algorithms to automatically grab all the "good" loans before individuals have the opportunity. The loans that remain are probably riskier than what the pure ratings would suggest. If institutional investors thought they had good risk adjusted returns, they would have taken in the loan rather than left it for individual investors.

JZinCO
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Re: P2P Lending - Anyone try it?

Post by JZinCO » Thu Oct 22, 2015 7:32 pm

Kazper, it may worth considering the secondary mark if you're so inclined.

I started last month with 1k and have only 58 notes, so it is way too soon to tell.. I'm about 2/3rds in primary market, 1/3rd in secondary buying at discount, and using LendingRobot to keep it passive.
I won't feel that I can really evaluate it well until 18mo in or so, so until then I am buying a new note a week until I get up to 200 notes. At that point, I will evaluate and decide whether to let the notes mature with, or without reinvestment, or keep depositing in funds.
I feel it is hard to get a fair evaluation on LC or their peers because everyone has either drank the kool-aid or swear against it.

I also recommend this podcast for those interested: http://moneytreepodcast.com/mti006-peer ... er-renton/

sawhorse
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Re: P2P Lending - Anyone try it?

Post by sawhorse » Thu Oct 22, 2015 7:36 pm

JZinCO wrote:I started last month with 1k and have only 58 notes, so it is way too soon to tell..
How did you get 58 notes with $1000?
BV3273 wrote:What state do you reside in Kazper?
Here is a list of availability as of April 2015.
http://www.lendingmemo.com/lending-club ... er-states/

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Re: P2P Lending - Anyone try it?

Post by Crimsontide » Thu Oct 22, 2015 7:40 pm

Whenever I feel the temptation to join the P2P ranks I just go out back and burn a stack of Benjamin's. Same results with the bonus of getting to indulge my pyromaniac tendencies :happy

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Re: P2P Lending - Anyone try it?

Post by JZinCO » Thu Oct 22, 2015 7:44 pm

sawhorse wrote:
JZinCO wrote:I started last month with 1k and have only 58 notes, so it is way too soon to tell..
How did you get 58 notes with $1000?
Secondary market. At first I was purchasing any secondary note with a good pymt history and a flat or upwards trending credit score. I ended up purchasing <5$ notes. Given the amortization of notes, those returns are sub-par. I've since tweaked my purchasing rules to address this. I'll add though, giving those <$25 allotments a home is still better than cash drag.
The secondary market is nice in that, when notes are scarce on the primary platform, you can purchase older notes (essentially lowering default risk) for a discount (increasing ROI). With LendingRobot, I can avoid the tedious amortization math to figure out what ROI I need to earn in order for myself to purchase secondary notes.
Last edited by JZinCO on Thu Oct 22, 2015 7:47 pm, edited 1 time in total.

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BV3273
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Re: P2P Lending - Anyone try it?

Post by BV3273 » Thu Oct 22, 2015 7:44 pm

I'm going to give it a shot. Start small and give it a few months.

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Re: P2P Lending - Anyone try it?

Post by sawhorse » Thu Oct 22, 2015 7:47 pm

Crimsontide wrote:Whenever I feel the temptation to join the P2P ranks I just go out back and burn a stack of Benjamin's. Same results with the bonus of getting to indulge my pyromaniac tendencies :happy
Why, did you have a bad experience?

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Re: P2P Lending - Anyone try it?

Post by JZinCO » Thu Oct 22, 2015 7:50 pm

BV3273 wrote:I'm going to give it a shot. Start small and give it a few months.
The smaller you start, the higher probability that you have of being in the extremes (very high or low returns). It's riskier in that you're more reliant on the payment from any individual. Sort of analogous to buying one corporation's bond or buying an index of those bonds*.

*Before anyone jumps on me, I'm not characterizing p2p as corp bonds.

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Re: P2P Lending - Anyone try it?

Post by moshe » Thu Oct 22, 2015 8:00 pm

My p2p portfolio is the best performing asset i own this year and has handily beat the market so far.

Rick of loans going bad? Sure! so diversify (where have we heard this before?!?) minimum of a 100 notes @ $25 to start and then compound. Stick to higher interest rate loans with good borrower FICO scores and look at ALL the details of the borrower. (public files = BAD, late payments, D2I, length of employment, etc.) Find out what all the items means and setup a filter you are comfortable with. My portfolio currently has a 8.54% expected yearly return and have had one loan go bad this year (yes, the borrower had a very good FICO score (700+) so i assume something personal happened, an accident, sickness etc.) Such is life.

Risk of not being able to cash out due to insolvency of lendingclub (LC)? Of course, but they seem to be doing well so far. Also, they claim that we own the right to the income streams on the notes, not LC!. No Risk, no Reward.

Don't go crazy but for one (me!) who loves to tinker it meets my do something without doing anything really bad to my portfolio. Well less than 3% so I refuse to worry about it.

~Moshe
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Re: P2P Lending - Anyone try it?

Post by pondering » Thu Oct 22, 2015 8:07 pm

How is the data about the loans distributed?
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Re: P2P Lending - Anyone try it?

Post by moshe » Thu Oct 22, 2015 8:10 pm

pondering wrote:How is the data about the loans distributed?
Anonymously but with enough financial and borrower data points to differentiate between notes.

Is this what you mean?

~Moshe
My money has no emotions. ~Moshe | | I'm the world's greatest expert on my own opinion. ~Bruce Williams

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Re: P2P Lending - Anyone try it?

Post by JZinCO » Thu Oct 22, 2015 8:16 pm

pondering wrote:How is the data about the loans distributed?
LC provides those data in a csv, or some other easily parsable format.
alternatively, one can go here: https://www.nsrplatform.com/
That's regarding loan performance.
If you're asking about the data used for underwriting, an investor can view these on their platform on a per loan basis or via API.

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Re: P2P Lending - Anyone try it?

Post by JonnyDVM » Thu Oct 22, 2015 8:48 pm

Whitecoatinvestor has done a few blogs on the topic. He's doing pretty well with it last update. I believe the major downsides are the time it takes to buy enough pieces of good loans and the risk of economic downturn causing an abrupt high rate of default. I was going to invest in lending club a few years ago and sniffed around it. Wife thought it was a dumb idea so I let it go.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

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Re: P2P Lending - Anyone try it?

Post by lack_ey » Thu Oct 22, 2015 9:27 pm

I had $2,000 at Prosper to poke around and see what the interface and marketplace were like. Not anymore, though, now that I've seen it for myself. I don't want to use IRA space for it now, I don't want to keep it in taxable, and I'm probably moving states somewhat soon (and I don't care to figure out what happens if I move into a state where it's not legal), so I'm out of it now.

If I have IRA space for it one day, I think I'll keep an allocation. It's not hard to imagine scenarios where the rate of return beats bonds and stocks for some years at a time.

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Re: P2P Lending - Anyone try it?

Post by pondering » Thu Oct 22, 2015 9:30 pm

I'm trying to find out if all the people looking at the loans have the same access to the information, or is some data distributed only to certain privileged parties.

I'd also like to figure out why one investor or another has a time advantage.

How is fraud handled?
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Re: P2P Lending - Anyone try it?

Post by White Coat Investor » Thu Oct 22, 2015 9:39 pm

I've been doing it for about 4 years, primarily at Lending Club. Long term XIRRed returns still at nearly 12%. High risk/high return type investment but seems to have low correlation with stocks, high quality bonds, and real estate. I've been happy with having 5% of my portfolio in it so far.
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Re: P2P Lending - Anyone try it?

Post by mindboggling » Thu Oct 22, 2015 9:51 pm

I have a $600 account at Lending Club. All $25 loans. All rated A or B. It takes almost a week to transfer money to your account from a linked checking account. It takes a week or two to get your money lent out. And of course your principal is not liquid. If you need money for an emergency--forget it.

I've only been involved in it for a couple of months, but I don't think I'd be willing to make a big commitment to it. It's just something to play with to pass the time.

Hope this helps,
steve
In broken mathematics, We estimate our prize, --Emily Dickinson

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Re: P2P Lending - Anyone try it?

Post by small_index » Thu Oct 22, 2015 11:08 pm

I've had a Lending Club account for years. When I started I could make criteria I felt would reduce the risk of default. I used a tool to analyze their database (freely downloadable) and gain insights (higher income dramatically lowers default risk, business loans dramatically increase it). A few years ago institutional investors were allowed in, and the inventory of notes vanished. It instantly went from a good market for buying notes, to a poor one. Lending Club may have met that demand with lower quality borrowers, but in any event I couldn't pick and choose loans anymore. I stopped buying notes when I got tired of that, so now I'm just waiting for payments of existing loans to finish.

I can't sell off in the secondary market without losses and complexity. The secondary market is far riskier than it appears. I experimented with dozens of heavily discounted notes, and the risk of default was nothing like the Lending Club database or overall numbers. The secondary market has very poor notes. As a result, you can't sell there without a discount. Finally, if you deal with the secondary market, you'll have really annoying tax entries for tiny amounts.

Keep in mind if a note goes into default, you are likely to lose everything left. Instead of yielding 8%, you can lose 80% of that note. It takes a lot of notes to make up for a defaulted note. Default rates were reasonable, but for me slightly higher than I expected.

Someone asked how someone could buy 58 notes with $1000. The answer is time. You invest in 40 notes, and they pay back both principal and interest over 3 years. Within a year you have maybe $350 which lets you buy an additional 14 notes. If you invest $1000 gradually, you can buy new notes with the proceeds of prior notes.

One annoying thing, Lending Club takes the 1% service fee off your principal and interest. You give out $100, and you get back $99 of principal. So your yield might actually be 1% lower than you expect owing to the service fee being collected on both principal and interest.

Ultimately I felt there were too many annoyances and things working against me, so I stopped. But it wasn't a negative enough experience to discourage other people from trying it out. But I would discourage people from the secondary market, which is riskier than it looks.

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Re: P2P Lending - Anyone try it?

Post by Morik » Fri Oct 23, 2015 12:57 am

I must be living under a rock. I somehow never heard of this until this thread. (And I'm both young and work in the software industry!)

Decided to play around with bluevestment & lendingrobot. (From reading around it seems that since the big institutionals came in, non-robo lending isn't very efficient...)

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Re: P2P Lending - Anyone try it?

Post by jimmo » Fri Oct 23, 2015 11:07 am

small_index wrote:I've had a Lending Club account for years. When I started I could make criteria I felt would reduce the risk of default. I used a tool to analyze their database (freely downloadable) and gain insights (higher income dramatically lowers default risk, business loans dramatically increase it). A few years ago institutional investors were allowed in, and the inventory of notes vanished. It instantly went from a good market for buying notes, to a poor one. Lending Club may have met that demand with lower quality borrowers, but in any event I couldn't pick and choose loans anymore. I stopped buying notes when I got tired of that, so now I'm just waiting for payments of existing loans to finish.

I can't sell off in the secondary market without losses and complexity. The secondary market is far riskier than it appears. I experimented with dozens of heavily discounted notes, and the risk of default was nothing like the Lending Club database or overall numbers. The secondary market has very poor notes. As a result, you can't sell there without a discount. Finally, if you deal with the secondary market, you'll have really annoying tax entries for tiny amounts.

Keep in mind if a note goes into default, you are likely to lose everything left. Instead of yielding 8%, you can lose 80% of that note. It takes a lot of notes to make up for a defaulted note. Default rates were reasonable, but for me slightly higher than I expected.

Someone asked how someone could buy 58 notes with $1000. The answer is time. You invest in 40 notes, and they pay back both principal and interest over 3 years. Within a year you have maybe $350 which lets you buy an additional 14 notes. If you invest $1000 gradually, you can buy new notes with the proceeds of prior notes.

One annoying thing, Lending Club takes the 1% service fee off your principal and interest. You give out $100, and you get back $99 of principal. So your yield might actually be 1% lower than you expect owing to the service fee being collected on both principal and interest.

Ultimately I felt there were too many annoyances and things working against me, so I stopped. But it wasn't a negative enough experience to discourage other people from trying it out. But I would discourage people from the secondary market, which is riskier than it looks.
This pretty much describes my experience. I started 2-3 years ago. It was fun, new and interesting for awhile. And then became mostly a hassle. Returns are decent. Doing taxes on this is a real pain. I'd suggest not having it in a taxable account if you're getting started.

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Re: P2P Lending - Anyone try it?

Post by kazper » Fri Oct 23, 2015 12:00 pm

BV3273 wrote:What state do you reside in Kazper?
Maryland.

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Re: P2P Lending - Anyone try it?

Post by Starper » Fri Oct 23, 2015 12:12 pm

I am considering investing in p2p lending, probably lending club. Can I just invest my Roth Ira allowance in it next year? Is it allowed?

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Re: P2P Lending - Anyone try it?

Post by FelixTheCat » Fri Oct 23, 2015 1:01 pm

I have a 1 year old Lending Club account. The account is making an adjusted return of 10.4%

If you are going to try it, I suggest
  • Minimum of $2,500 investment.
    Buy notes in $25 increments so you get 100 loans. Do not bulk your money in a few notes.
    You can get 36 or 60 Month term notes. Focus on 36 months to get your money back faster.
    Reinvest money into new loans.
    Use LendingRobot to write YOUR OWN automated investing rules. LendingRobot picks better loans due to extra loan criteria Lending Club doesn't provide. Picking your own notes will be time consuming (fun at first but the fun wears off).
P2P isn't for everyone.
  • The money is unsecured. People will default on their loan if they get in a bad situation (job loss) just like in a bank. This is another reason why I recommend $25 notes. I've had 4 people default on me on 274 notes.
    The money is not liquid like a mutual fund. If you need to get your principal back, you will have to sell the notes on a secondary market.
Last edited by FelixTheCat on Fri Oct 23, 2015 1:08 pm, edited 1 time in total.
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Re: P2P Lending - Anyone try it?

Post by FelixTheCat » Fri Oct 23, 2015 1:04 pm

small_index wrote:I've had a Lending Club account for years. When I started I could make criteria I felt would reduce the risk of default. I used a tool to analyze their database (freely downloadable) and gain insights (higher income dramatically lowers default risk, business loans dramatically increase it). A few years ago institutional investors were allowed in, and the inventory of notes vanished. It instantly went from a good market for buying notes, to a poor one. Lending Club may have met that demand with lower quality borrowers, but in any event I couldn't pick and choose loans anymore. I stopped buying notes when I got tired of that, so now I'm just waiting for payments of existing loans to finish.
This is why I recommend LendingRobot to invest your notes. It is a tool like the institutional investors use to invest in LendingClub. If you manually invest your notes, you will get tired of the venue.
Felix is a wonderful, wonderful cat.

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Re: P2P Lending - Anyone try it?

Post by JZinCO » Fri Oct 23, 2015 1:17 pm

jimmo wrote: I'd suggest not having it in a taxable account if you're getting started.
The difficulty however is that if one is just starting out to get a 'feel' for it, they would need $5000 in yr 1 and $10000 in yr 2 to avoid IRA custodian fees. Kind of a big amount just to dip your toes in.

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Re: P2P Lending - Anyone try it?

Post by pondering » Fri Oct 23, 2015 9:32 pm

Can I use my IRA to do this?
--Robert Sterbal | 412-977-3526 call/text, I find speech easier than writing

JZinCO
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Re: P2P Lending - Anyone try it?

Post by JZinCO » Fri Oct 23, 2015 9:56 pm

pondering wrote:Can I use my IRA to do this?
This is a great question. To my knowledge you need to open an IRA through Lending Club/SDIRA brokerage. If I could self-direct in a pre-existing IRA.. that would be gold.

See this: http://whitecoatinvestor.com/peer-to-pe ... -ira-fees/

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Re: P2P Lending - Anyone try it?

Post by amarone » Sat Oct 24, 2015 5:36 am

I've been using Lending Club for over 4 years and have about $17k in there now. I have made about 9% annually.

I invest very passively - they have a feature called Automated Investing which automatically reinvests interest according to criteria you set. I do not monitor notes for going bad. I invest $25 per loan and currently have just under 1,000 notes. Some people monitor their notes actively and sell them when they think they might be going bad. They may boost their returns that way, but it is more effort than I am interested in undertaking.

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Re: P2P Lending - Anyone try it?

Post by jhfenton » Sat Oct 24, 2015 8:38 am

kazper wrote:I considered it, but it is apparently illegal in my state :( probably for the best!
It's same for me in Ohio. Both initial funding and the secondary market are illegal in Ohio.

If it were legal, I would probably test it out with it a small amount of IRA money. I would probably enjoy the process.

But our security regulators in Ohio don't think I can be trusted with P2P lending either. :beer

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Re: P2P Lending - Anyone try it?

Post by YttriumNitrate » Sat Oct 24, 2015 9:25 am

deleted.
Last edited by YttriumNitrate on Sat Mar 12, 2016 1:04 pm, edited 1 time in total.

miles monroe
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Re: P2P Lending - Anyone try it?

Post by miles monroe » Sat Oct 24, 2015 10:32 am

its legit, but that doesn't mean its a good idea.

this is just chasing yield.

no free lunch here, any "extra" yield comes with an extra helping of risk. probably more risk than yield.

seems to me that the percentage of ones portfolio that should be put into P2P would be so small that any "extra return" would not be worth the time spend researching.

high yield corporates makes more sense than this.

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Re: P2P Lending - Anyone try it?

Post by Blue » Sat Oct 24, 2015 10:45 am

YttriumNitrate wrote:Online peer-to-peer lending was still very much in its infancy during the last recession so I am looking forward to seeing how it fairs during the next one. My sneaking suspicion is that these loans are going to be among the first things people stop paying when things get tough.
Image

Agree - and likely a high correlation to equity returns when it hurts the most.

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Re: P2P Lending - Anyone try it?

Post by amarone » Sat Oct 24, 2015 5:27 pm

miles monroe wrote:seems to me that the percentage of ones portfolio that should be put into P2P would be so small that any "extra return" would not be worth the time spend researching.
What time spent researching? I spend no time at all and have my spare cash automatically invested into a diverse range of notes.

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Re: P2P Lending - Anyone try it?

Post by JZinCO » Sat Oct 24, 2015 6:41 pm

Blue wrote:
YttriumNitrate wrote:Online peer-to-peer lending was still very much in its infancy during the last recession so I am looking forward to seeing how it fairs during the next one. My sneaking suspicion is that these loans are going to be among the first things people stop paying when things get tough.
Image

Agree - and likely a high correlation to equity returns when it hurts the most.
What is the correlation?
I have found most claims are to the contrary:
http://www.lendingmemo.com/p2p-lending- ... set-class/
http://peerfinance101.com/avoid-3-inves ... r-lending/
viewtopic.php?t=133307
https://daraalbright.files.wordpress.co ... -final.pdf

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Re: P2P Lending - Anyone try it?

Post by YttriumNitrate » Sat Oct 24, 2015 7:01 pm

deleted.
Last edited by YttriumNitrate on Sat Mar 12, 2016 1:04 pm, edited 1 time in total.

JZinCO
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Re: P2P Lending - Anyone try it?

Post by JZinCO » Sat Oct 24, 2015 7:08 pm

YttriumNitrate wrote:
It looks like most of those studies of peer-to-peer lending have maybe 6 or 7 years worth of data, and I my guess would be that only the last 2-3 years are actually relevant because the numbers from the first few years reflect a cohort of more-tech savvy early adopters.
In some cases yes, in other cases people use a consumer debt index because of high collinearity.
In case where p2p returns are used, you can't help that the data are limited. Also, why would the characteristics of individual investors between 2006 and 2012 alter how two asset classes covary?

The onus is on blue to provide evidence for their contrarian claim. Theycould be correct, but we wouldn't know..

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Re: P2P Lending - Anyone try it?

Post by small_index » Sat Oct 24, 2015 8:24 pm

FelixTheCat wrote:
small_index wrote:I used a tool to analyze their database (freely downloadable) and gain insights (higher income dramatically lowers default risk, business loans dramatically increase it). A few years ago institutional investors were allowed in, and the inventory of notes vanished. It instantly went from a good market for buying notes, to a poor one. Lending Club may have met that demand with lower quality borrowers, but in any event I couldn't pick and choose loans anymore. I stopped buying notes when I got tired of that, so now I'm just waiting for payments of existing loans to finish.
This is why I recommend LendingRobot to invest your notes. It is a tool like the institutional investors use to invest in LendingClub. If you manually invest your notes, you will get tired of the venue.
When I said "I got tired of that", I meant: having no notes to invest, institutional investors getting first pick, default rates higher than expected, and realizing I was paying a 1.00% expense ratio.
amarone wrote:What time spent researching? I spend no time at all and have my spare cash automatically invested into a diverse range of notes.
You literally spent zero minutes researching your automated investment, zero minutes setting it up, and zero minutes checking out Lending Club? I think you're ignoring the time you spent when you first started, which is what this thread is about.
FelixTheCat wrote:I have a 1 year old Lending Club account. The account is making an adjusted return of 10.4%
After watching some secondary notes default, I found it strange my adjusted return plunged rapidly towards zero. It only made sense if Lending Club assumed I lost $25 per note, despite buying notes for about 90% off. I spent $2.50 on a note, and Lending Club thought I lost $25 when the note defaulted. I think I wound up with "-2%" and yet made money each year. If you purchase in the secondary market, the annual return might not be trustworthy - it wasn't for me.

I think the best test of Lending Club results is how much you put in, and how much you pull out. That kind of calculation includes defaults and Lending Club's 1% expense ratio.

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Re: P2P Lending - Anyone try it?

Post by amarone » Sat Oct 24, 2015 8:43 pm

small_index wrote:
amarone wrote:What time spent researching? I spend no time at all and have my spare cash automatically invested into a diverse range of notes.
You literally spent zero minutes researching your automated investment, zero minutes setting it up, and zero minutes checking out Lending Club? I think you're ignoring the time you spent when you first started, which is what this thread is about.
If you include the initial research, that was maybe 2 hours. I am getting about $1,000/year more income than from my bond funds. Your initial statement was that the extra time was not worth it. A one-time two-hour research for $1,000/year is well worth it for me.

If we expand beyond research time into total time, I also have to spend about an hour extra at tax time. But for $1,000/year, that is still worth it.

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Blue
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Re: P2P Lending - Anyone try it?

Post by Blue » Sat Oct 24, 2015 9:01 pm

JZinCO wrote:
YttriumNitrate wrote:
It looks like most of those studies of peer-to-peer lending have maybe 6 or 7 years worth of data, and I my guess would be that only the last 2-3 years are actually relevant because the numbers from the first few years reflect a cohort of more-tech savvy early adopters.
In some cases yes, in other cases people use a consumer debt index because of high collinearity.
In case where p2p returns are used, you can't help that the data are limited. Also, why would the characteristics of individual investors between 2006 and 2012 alter how two asset classes covary?

The onus is on blue to provide evidence for their contrarian claim. Theycould be correct, but we wouldn't know..
I think you're deluding yourself if you believe there won't be defaults in a recessionary downturn leading to a period of poor returns at the time you'd least prefer. In bad times, correlations head towards one.

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unclescrooge
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Re: P2P Lending - Anyone try it?

Post by unclescrooge » Sat Oct 24, 2015 9:23 pm

I tried prosper back when it started and gave up after two years.

Too much of a hassle, taxation sucks, unsure of principal safety in a recession.

I can get similar (or better) after-tax returns with closed-end muni funds, and they're liquid.

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Re: P2P Lending - Anyone try it?

Post by JZinCO » Sat Oct 24, 2015 9:31 pm

Blue wrote:
JZinCO wrote:
YttriumNitrate wrote:
It looks like most of those studies of peer-to-peer lending have maybe 6 or 7 years worth of data, and I my guess would be that only the last 2-3 years are actually relevant because the numbers from the first few years reflect a cohort of more-tech savvy early adopters.
In some cases yes, in other cases people use a consumer debt index because of high collinearity.
In case where p2p returns are used, you can't help that the data are limited. Also, why would the characteristics of individual investors between 2006 and 2012 alter how two asset classes covary?

The onus is on blue to provide evidence for their contrarian claim. Theycould be correct, but we wouldn't know..
I think you're deluding yourself if you believe there won't be defaults in a recessionary downturn leading to a period of poor returns at the time you'd least prefer. In bad times, correlations head towards one.
First, I never said a recession wouldn't result in poorer defaults. I just asked for you to back up your claim re: correlation.

Second, sure, in 'bad' times most asset classes will go down, as we saw in 08-09.
But, What does that matter? By the logic, why diversify? Why not own all bonds? All stocks? All REITs?
You know the answer to that. In today's market disparate assets are moving in unison more than ever. However, assets move in the same direction but at different rates. If you consider r<.2 correlated.. alright I guess you're right. The only assets I can think of that are less correlated with the total stock market are natural resources, cash and long-short positions. I don't feel as comfortable with those.
In other words, p2p is as about as non-correlated as you can think of for the buy-and-hold investor looking for wealth growth.

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Re: P2P Lending - Anyone try it?

Post by small_index » Sat Oct 24, 2015 10:43 pm

amarone wrote:
small_index wrote:
amarone wrote:What time spent researching? I spend no time at all and have my spare cash automatically invested into a diverse range of notes.
You literally spent zero minutes researching your automated investment, zero minutes setting it up, and zero minutes checking out Lending Club? I think you're ignoring the time you spent when you first started, which is what this thread is about.
If you include the initial research, that was maybe 2 hours. I am getting about $1,000/year more income than from my bond funds. Your initial statement was that the extra time was not worth it. A one-time two-hour research for $1,000/year is well worth it for me.
That's impressive, and I'd agree almost no time spent.

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Re: P2P Lending - Anyone try it?

Post by reason-logic » Sat Oct 24, 2015 11:53 pm

I have been in Lending Club for 2.5 years and currently have account with 200k invested (about 1% of my portfolio). My life to date return is 8.14%. I only invest in 36 month notes and only with borrowers that own their homes. I am happy with the returns given the risks.

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Re: P2P Lending - Anyone try it?

Post by White Coat Investor » Sun Oct 25, 2015 7:42 pm

miles monroe wrote: high yield corporates makes more sense than this.
Why? They have reasonably high correlation with publicly traded equities as well as with higher quality bonds. Whereas P2PL seem to have very low correlation with both. Sure, the data is limited, but at what point would you judge it to be enough. 20 years. 30 years. 100 years?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: P2P Lending - Anyone try it?

Post by Blue » Sun Oct 25, 2015 8:50 pm

EmergDoc wrote:
miles monroe wrote: high yield corporates makes more sense than this.
Why? They have reasonably high correlation with publicly traded equities as well as with higher quality bonds. Whereas P2PL seem to have very low correlation with both. Sure, the data is limited, but at what point would you judge it to be enough. 20 years. 30 years. 100 years?
High yield corporate doesn't have single company risk like p2pl does. Somewhat analogous to the single company risk of an exchange traded note vs an etf. P2pl is dependent on the financial viability and non malfeasance of a single entity - high yield corporate does not have this same dependence on a single private company.

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