Peer to Peer (P2P) Lending - What are the realistic returns?

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teelainen
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Peer to Peer (P2P) Lending - What are the realistic returns?

Post by teelainen » Wed Feb 27, 2019 12:14 am

If someone wants to do Peer to Peer (P2P) Lending, what are the realistic returns?

I'm talking about sites such as:

LendingClub
Upstart
Prosper
Peerform

Please share your experiences. Also, which sites do you recommend? Thanks.

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privatefarmer
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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by privatefarmer » Wed Feb 27, 2019 12:48 am

haven't done it. but from what I understand, they typically charge ~1% in fees. The way I see it, there's no free lunch. If the returns are good, it's because the risk is high. These websites were not around in '07-'08 (as far as I know) so I don't believe they've been tested in a real recession. And if the returns were great with only modest risk, I would suspect that the big banks etc. would have sucked up all these "bonds" before you or I could get to them. There's a reason why people turn to lendingclub instead of going to bank of America for their loan, most likely its because they couldn't get approved at BOA...

I've heard about the success stories but one thing I am certain of is that if this is a promising way to make $$$ it will not take long for the market to correct, $$$ to flood in, and I am skeptical that the long-term risk-adjusted returns would be any higher than equities or high yield bond funds, albeit with a higher expense ratio.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by 123 » Wed Feb 27, 2019 12:58 am

I would think that P2P lending would be likely "rated" the equivalent of "junk bonds" if not (probably) lower. With such risk should come higher returns to the lender. After all the lender may not get their money back.
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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by mhadden1 » Wed Feb 27, 2019 12:59 am

Mr. Money Mustache started P2P lending a while (years?) back and has been reporting his strategies and results. As I recall the returns have been going down. Take a look at the MMM web site, probably useful information, YMMV I expect.
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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by willthrill81 » Wed Feb 27, 2019 1:13 am

I would advise you to steer clear of P2P lending at this point.

I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.

I'm winding down both of my LC accounts.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by Valuethinker » Wed Feb 27, 2019 3:54 am

privatefarmer wrote:
Wed Feb 27, 2019 12:48 am
haven't done it. but from what I understand, they typically charge ~1% in fees. The way I see it, there's no free lunch. If the returns are good, it's because the risk is high. These websites were not around in '07-'08 (as far as I know) so I don't believe they've been tested in a real recession. And if the returns were great with only modest risk, I would suspect that the big banks etc. would have sucked up all these "bonds" before you or I could get to them. There's a reason why people turn to lendingclub instead of going to bank of America for their loan, most likely its because they couldn't get approved at BOA...

I've heard about the success stories but one thing I am certain of is that if this is a promising way to make $$$ it will not take long for the market to correct, $$$ to flood in, and I am skeptical that the long-term risk-adjusted returns would be any higher than equities or high yield bond funds, albeit with a higher expense ratio.
Apparently many of these loans are being used to refinance existing debts.

"Ponzi finance" in the Hyman Minsky language. The phase of the credit cycle when borrowers are borrowing simply to repay other borrowers.

Their survival, and the ability to repay their existing loans, depends on the market staying open.

As and when the credit gets squeezed ("winter always comes" *) a lot of them will fall off the trolley. As I presume these are unsecured loans, they will rank at the back of the creditor pile - and is there anyone actually taking charge of negotiating on behalf of creditors - who has an aligned interest?

The way to play the credit cycle for the small investor is more likely to be the High Yield bond market. That said, the depreciation of investment grade bonds in this cycle has been interesting - half of debt issued is now of the lowest IG rating *at issue*. And 80% of leveraged loans (which rank ahead of corporate bonds, normally) are made at "cov lite".

This may not cause the next economic trainwreck but we will most certainly learn more about this issue, come the next downturn. Winter always comes.

* An allusion to Glen Cook's The Black Company *not* Game of Thrones.

https://www.fantasticfiction.com/c/glen ... ompany.htm
Last edited by Valuethinker on Wed Feb 27, 2019 4:06 am, edited 1 time in total.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by Valuethinker » Wed Feb 27, 2019 3:57 am

teelainen wrote:
Wed Feb 27, 2019 12:14 am
If someone wants to do Peer to Peer (P2P) Lending, what are the realistic returns?

I'm talking about sites such as:

LendingClub
Upstart
Prosper
Peerform

Please share your experiences. Also, which sites do you recommend? Thanks.
If there was a market imperfection there, the ship has probably sailed.

American banks are recapitalized, and lending - so companies can get money by normal channels, and so can individuals. Securitization is back, so the money recycling machine is running again -- banks originate, then sell down to securitization vehicles. Institutional investors have poured in to the asset class.

An interesting question often discussed here. Who have you lent money to? The borrower? Or Lending Club? If you search here you will find an answer that rather surprised me.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by queso » Wed Feb 27, 2019 10:33 am

willthrill81 wrote:
Wed Feb 27, 2019 1:13 am
I would advise you to steer clear of P2P lending at this point.

I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.

I'm winding down both of my LC accounts.
+1 to everything willthrill said. The returns are no longer worth the illiquidity and platform risk. You'd be better off with VTSAX and/or Ally/CapitalOne360. I've been slowly exiting my Prosper account as the notes are paid off or charge off.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by Jack FFR1846 » Wed Feb 27, 2019 10:38 am

Mr. Money Mustache documented investing:

http://www.mrmoneymustache.com/the-lend ... xperiment/

He tended to invest in the big % garbage loans (C,D,E). I invested for a few years in opposite world (A,B). I had one late payment, later caught up and no charge offs. I followed Pete's returns. Mine always matched or bettered his. Especially when the bottom fall out and the investments went down the toilet. I am completely out now and never had a negative month. I would not get back in. You'll lose money.
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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by runner3081 » Wed Feb 27, 2019 11:08 am

willthrill81 wrote:
Wed Feb 27, 2019 1:13 am
I would advise you to steer clear of P2P lending at this point.

I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.

I'm winding down both of my LC accounts.
Same experience, was up around 9-10% for the first few years, dropped between 4-5% over the last few. I ended up selling them all off and being done with it. Never had too much, low 5-figures.

When you add the risk and tax rate, just didn't make sense. Now that money is allocated to index funds.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by ohai » Wed Feb 27, 2019 11:17 am

Hey so. This is an important point that seems to not have been mentioned... When you invest in Lending Club, you receive a note that is an obligation of Lending Club. It is in the prospectus, which you should read before investing in any structured investment like this. This is material, because you are exposed to two tiers of defaults - one if the original borrower defaults, and another if Lending Club, the company, defaults. Lending Club was projecting 5.5% returns the last time I checked (down from 9% in earlier years, which turned out to be too optimistic). Is 5.5% enough to compensate you for 1) poor credit of the borrowers, plus 2) poor credit of Lending Club? Definitely not. A Lending Club default scenario is not included in their return calculation.

In other words, if borrower defaults, you get nothing. If both LC and borrower default, you get nothing. If borrower pays but LC defaults, you get nothing. For LC's projected returns, you can probably find a lot of better high yield debt investments with similar or better credit.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by willthrill81 » Wed Feb 27, 2019 11:23 am

ohai wrote:
Wed Feb 27, 2019 11:17 am
Hey so. This is an important point that seems to not have been mentioned... When you invest in Lending Club, you receive a note that is an obligation of Lending Club. It is in the prospectus, which you should read before investing in any structured investment like this. This is material, because you are exposed to two tiers of defaults - one if the original borrower defaults, and another if Lending Club, the company, defaults. Lending Club was projecting 5.5% returns the last time I checked (down from 9% in earlier years, which turned out to be too optimistic). Is 5.5% enough to compensate you for 1) poor credit of the borrowers, plus 2) poor credit of Lending Club? Definitely not. A Lending Club default scenario is not included in their return calculation.

In other words, if borrower defaults, you get nothing. If both LC and borrower default, you get nothing. If borrower pays but LC defaults, you get nothing. For LC's projected returns, you can probably find a lot of better high yield debt investments with similar or better credit.
I don't believe that you would get nothing if LC defaulted, but you would certainly take a significant hit. Supposedly, servicing of the notes would be transferred to a third party, and the notes would still have to be repaid, but you would no longer be the only one with a claim on the payments.

But the platform risk is still significant and definitely a contributing factor to my decision to exit my position with them. I'm currently in the process of selling my notes, although I'm finding that notes that do not have a perfect payment history must be sold at a significant discount, often a ridiculously steep one.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by renue74 » Wed Feb 27, 2019 11:28 am

I had about $10K in them for a few years. I'm not reinvesting now and taking all returns and putting back into index funds.

Think of it like this, in good times, these loans are at most on shaky ground. These are people who couldn't or didn't go to local banks to get loans. And the loans we get to pick over are those that institutional P2P investors didn't want.

So we are 3rd tier as far as quality of applicants.

In bad times, these types of loans that will be the first to go unpaid. Unsecured loans to some website with people backing them....vs. my home that the bank will take away....which would you attempt to pay?

I would suggest staying away.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by ohai » Wed Feb 27, 2019 11:40 am

Ok yes, there will likely be some non-zero recovery rate if LC defaults. However, what interest rate would LC-like companies need to offer on 3y-5y debt? Conservatively, around 5.5% to begin with. If so, effectively, LC is paying you a zero interest rate for either its own credit or the credit of its borrrowers. Should you consciously lend to either of these entities for around Treasury yield minus 2.5%? No, you'd be insane to do that.

The fact that LC has contracted with 3rd party debt servicers only means the rate of payment from borrowers will continue. It says nothing about LC's obligation to platform investors, or the seniority of investor notes relative to LC's other debt.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by willthrill81 » Wed Feb 27, 2019 11:44 am

ohai wrote:
Wed Feb 27, 2019 11:40 am
Ok yes, there will likely be some non-zero recovery rate if LC defaults. However, what interest rate would LC-like companies need to offer on 3y-5y debt? Probably around 5.5% to begin with. If so, effectively, LC is paying you a zero interest rate for either its own credit or the credit of its borrrowers. Should you consciously lend to either of these entities for around Treasury yield minus 2.5%? No, you'd be insane to do that.
As I said, you would certainly take a hit, but you likely wouldn't lose all of your remaining principal either.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by firedinky » Wed Feb 27, 2019 2:25 pm

I started investing in Lending Club in 2012. Mostly purchased C through F Notes and was very happy with the steady 10% + returns. However taxes were a nightmare the first year so I switched to investing through an SDIRA.

Returns in the first couple years were about as expected - far better than bonds with no stock correlation. So I added funds and had nearly $200k invested at one time. But it became obvious by the increasing number of defaults that LC was lowering underwriting standards. They also reduced interest rates in an apparent attempt to keep growing.

I've been winding down my account for several years now and hope to be out completely in another year. Last year I lost money for the first time and my overall return has dropped to about 6.5% per annum. I agree with the recommendations above. Avoid unsecured P2P lending.

If you are an accredited investor, there are much better options for Alternatives. Some hard money lending funds have a preferred return greater than 10% with fairly good diversification and a reasonably safe LTV.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by willthrill81 » Wed Feb 27, 2019 2:29 pm

firedinky wrote:
Wed Feb 27, 2019 2:25 pm
If you are an accredited investor, there are much better options for Alternatives. Some hard money lending funds have a preferred return greater than 10% with fairly good diversification and a reasonably safe LTV.
Yes, hard money lending for accredited investors seems like a solid investment. Jim, the White Coat Investor, has certainly done very well with it.

Regarding winding down LC, I've been working this morning to list notes I still have in a Roth IRA at LC. It's taking hours to price the notes, and I'll certainly have to reprice a number of them. Then I'll have to do a transfer from LC to Vanguard, pay $25 to Strata (the Roth IRA trustee), and wait for at least a week to get the funds in my Vanguard account. Ugh.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by Rowan Oak » Wed Feb 27, 2019 3:08 pm

willthrill81 wrote:
Wed Feb 27, 2019 2:29 pm
firedinky wrote:
Wed Feb 27, 2019 2:25 pm
If you are an accredited investor, there are much better options for Alternatives. Some hard money lending funds have a preferred return greater than 10% with fairly good diversification and a reasonably safe LTV.
Yes, hard money lending for accredited investors seems like a solid investment. Jim, the White Coat Investor, has certainly done very well with it.

Regarding winding down LC, I've been working this morning to list notes I still have in a Roth IRA at LC. It's taking hours to price the notes, and I'll certainly have to reprice a number of them. Then I'll have to do a transfer from LC to Vanguard, pay $25 to Strata (the Roth IRA trustee), and wait for at least a week to get the funds in my Vanguard account. Ugh.
White Coat Investor: "Our Alternative and Real Estate Investments"
https://www.whitecoatinvestor.com/alter ... vestments/

A "hard money loan fund" appears to be his latest investment.
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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by djpeteski » Wed Feb 27, 2019 3:14 pm

I did lending club and I realized about a 2 or 3% profit. While I tended to focus on loans with good rates, but no deliquinces there were many late payments and many went to collections.

There are several things that are troubling about lending club. The first is the investor never received any portion of the late fees. The second is that money sits idle when you find a loan that you want to fund until it is issued and is initiated. Expect that to last between two to six weeks. The third is the amount of time it takes to find suitable loans to invest in. Forth it generates some specialized tax forms that I did not have any idea what to do with. I just handed them to my accountant that I was already employing for other reasons. If you do turbo tax these could cause problems.

IMHO you are far better off buying brokered CDs or just leaving it in your favorite online high yield savings account. I would play the CC/banking rewards game before doing peer-to-peer lending.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by chw » Wed Feb 27, 2019 5:21 pm

Only familiar with Lending Club, and Prosper. IMO, the ship has sailed on these platforms for potential investment. I invested in LC about 8-9 years ago (mid 5 figures), and am now down to about $100 invested. Overall, I saw about an 8.50% return, however the easy returns were made in the early years before the institutional investors were given first dibs on the "quality" borrowers, and left the "junk" borrowers for the retail investor.

Also, since you are not directly investing in the notes, you also are assuming the credit risk of whatever platform you choose to invest in notes through. In other words, if the platform should go bankrupt, in all likelihood your investment will go to near zero as well. This nuance is missed by most investors, so read the relevant prospectus closely. Many think that these companies have contingency plans to protect their investment, but the reality is that these companies are generally losing money most of the time.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by mancich » Wed Feb 27, 2019 7:49 pm

willthrill81 wrote:
Wed Feb 27, 2019 1:13 am
I would advise you to steer clear of P2P lending at this point.

I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.

I'm winding down both of my LC accounts.
+1000. Similar situation to mine. I never put a lot in ($5000) and the returns were very good at first, but they have steadily decreased. Not worth it to me, so I have also been winding down my holdings with them as well.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by bagle » Fri Mar 01, 2019 3:01 am

mancich wrote:
Wed Feb 27, 2019 7:49 pm
willthrill81 wrote:
Wed Feb 27, 2019 1:13 am
I would advise you to steer clear of P2P lending at this point.

I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.

I'm winding down both of my LC accounts.
+1000. Similar situation to mine. I never put a lot in ($5000) and the returns were very good at first, but they have steadily decreased. Not worth it to me, so I have also been winding down my holdings with them as well.
Similar story here. I´ve invested small amounts in lower-rated loans since 2014, and net returns have continuously declined as charge-offs have increased. I´ve been withdrawing money as loans mature, and can´t recommend it.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by Pu239 » Fri Mar 01, 2019 11:24 am

For a good look at historical returns for P2P lenders, take a look at Peter Renton's returns dating back to 2011. Recent returns have been very poor.
https://www.lendacademy.com/my-returns- ... d-prosper/

Also take a look at discussion on the investor forum. Many older investors are leaving P2P.
https://forum.lendacademy.com/

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by willthrill81 » Fri Mar 01, 2019 9:53 pm

I've been going through the process of selling most of my LC notes. I've noticed that at least two-thirds of the borrowers' credit rating has declined since the notes were issued, which varies between the last 2-18 months. Consequently, I've been having to sell the notes at a significant discount. :x
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by ericcohen » Fri Mar 01, 2019 10:20 pm

I put a small amount (2,500) into LC and used two methods of investing. The first method is yielding 14%. The second method -.15%. I am not putting any new money into the platform because of all the risks specific to the company. I don't entirely trust the company.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by chrisjul » Sat Mar 02, 2019 3:31 pm

I have been investing in Lending Club over 5 years and my returns avg 5-6%. 6% currently. I make all of my own loans and only look at B and C categories.

I'm happy. Most who recommend against it have never actually experienced it.

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by willthrill81 » Sat Mar 02, 2019 4:11 pm

chrisjul wrote:
Sat Mar 02, 2019 3:31 pm
I'm happy. Most who recommend against it have never actually experienced it.
I don't think so. Many individual investors are exiting this asset class due to declining returns. I might be ambivalent if I was earning 6%, but certainly not at 4%. The illiquidity and platform risks are not insignificant and are not being adequately compensated with at a 4% return. The Street Shares Veterans Bonds paying 5% sound more appealing to me than that.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by rj49 » Sat Mar 02, 2019 5:37 pm

I've done it for several years. I highly advise reading the blog at lendacademy.com and the message boards, with most posters leaving Lending Club and Prosper due to lower returns and increased defaults over time. The blog also recently showed with Lending Club's quarterly report that individual investors are only a negligible part of their loan origination now. There were good times for several years, with high returns even after defaults, but starting in 2016, a lot of people simply stopped repaying their loans. You might get excited about initial 'returns' of 10% or more, but over time, as more and more of your notes go into default, they creep lower. The official returns are also not accurate--for the past year I've lost more in charge-offs than I've gained in interest, yet both LendingClub and Prosper say I'd getting 3% or so returns. You also have to look at the unprecedented levels of consumer debt, both for credit, autos, and student loans, and it's just too easy for deadbeats to default, since student loan holders can withhold salary, auto loan holders can repo a car, but the p2p companies can try to collect, but few are successful.

Personally, I'm letting all my p2p loans wind down and have switched to real estate crowdsourcing through Fundrise, which invests in things like apartment complexes, condos, and homes, concentrated in high-demand areas like LA and DC, but also with diversified ereit funds throughout the country. You can choose to automated investment criteria for growth, income, or a mix, and they allocate a percentage to underlying funds. At the same time, they're highly illiquid, so there are penalties for cashing out before 5 years. It also seems a better investment for the next recession, where p2p loans will probably suffer heavy losses.

Another little-known crowdsourcing opportunity is Streetshares veterans bonds, which invests in businesses and government contracts owned by veterans. Accredited investors earn a variable return, but everyone else can buy bonds for a straight 5% interest, which I've gotten for the past several years. They are moderately liquid, since you can only sell the bonds on the anniversary date of your account without incurring a fee. The other negative is that they don't guarantee your money, so I don't put more into them than I can afford to lose, but to me it's a worthwhile trade-off for the 5% returns, compared to the meager yields and fluctuating NAVS of bond funds the past several years.

The author of the Lending Academy blog does posts of his actual returns in various p2p investments, and posters on the site's message boards also graph their returns over time. Make a point of reading SEC annual reports and offerings as well, since they post about the risks and returns.

chrisjul
Posts: 184
Joined: Sun Jan 06, 2008 3:15 pm

Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by chrisjul » Sun Mar 03, 2019 1:42 pm

willthrill81 wrote:
Sat Mar 02, 2019 4:11 pm
chrisjul wrote:
Sat Mar 02, 2019 3:31 pm
I'm happy. Most who recommend against it have never actually experienced it.
I don't think so. Many individual investors are exiting this asset class due to declining returns. I might be ambivalent if I was earning 6%, but certainly not at 4%. The illiquidity and platform risks are not insignificant and are not being adequately compensated with at a 4% return. The Street Shares Veterans Bonds paying 5% sound more appealing to me than that.

I will say this, when I "automated" and allowed LC to select my loans, my returns were a couple of points lower. However, when I began selecting my own loans, instant improvement. I like the process, some dont.

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whodidntante
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Location: outside the echo chamber

Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by whodidntante » Sun Mar 03, 2019 2:06 pm

P2P lending had a golden age due to the liquidity crunch, zero % interest rates, and onerous capitalization requirements that were imposed on financial institutions who nearly destroyed modern capital markets 11 years ago. But I guess now things are cool again, so the P2P lending "premium" has been squished. Also institutional investors (I2P?) are being provided with deals that we chumps can't get from the P2P lenders. But I guess you can lend money to borrowers that institutional investors left behind, if you want.

majiaknight
Posts: 114
Joined: Tue Jan 26, 2016 2:55 pm

Re: Peer to Peer (P2P) Lending - What are the realistic returns?

Post by majiaknight » Sun Mar 03, 2019 2:33 pm

Pu239 wrote:
Fri Mar 01, 2019 11:24 am
For a good look at historical returns for P2P lenders, take a look at Peter Renton's returns dating back to 2011. Recent returns have been very poor.
https://www.lendacademy.com/my-returns- ... d-prosper/

Also take a look at discussion on the investor forum. Many older investors are leaving P2P.
https://forum.lendacademy.com/
+1

I started investing in LC and Prosper around 2015 and had used Lendingrobot services to manage the portfolio. My peak portfolio was ~$70K with all notes combined from the estimation. I started withdrawal in 2017 as I saw the rapid decline in return and experienced a big headache in tax filing for Prosper accounts as they didn't offer auto import to TurboTax (no improvements after filing complaints for years). There were also a lot of negative news headlines about LC and the departure of LC Founder/CEO which made me nervous for a while. Now I still have around $10K left with maybe another 1-2 years to liquidate. IMHO the risk-reward couldn't be justified if those tax inefficient P2P investments stuck at <4-5% real return with those unsecured loans.

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