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Investment advice for Dave
David V. asked:
Matt, With the exception of my house in Michigan, I don’t have any outstanding debts. I refuse to invest in anything involving the stock market. Other than having an emergency fund, what other short term investments are good? What about brokering debt consolidation for others….obviously this could be risky when your dealing with individuals that have demonstrated poor past performance with money.
What would you recommend for short term investments without large capital amount…..10-15K?
– Dave
Brokering debt consolidation as an investment option…
Dave, I think you answered your own question here but are just missing the last piece of the puzzle… a brokerage house to facilitate your lending while paying you excellent returns. Well… I just so happen to have experience with a great company who is doing just that.
Here is what I would do Dave:
Take your $10 – $15K and invest with Lending Club and broker debt consolidation as an investment.
Check out my personal experience as a borrower with Lending Club along with a few testimonials from friends who are Lending Club investors by reading my Lending Club Review.
One of the best things about investing with Lending Club is your ability to pick and choose the types of loans you fund, so you can choose to fund all debt consolidation loans or any other type of loan you feel comfortable funding. I do very little investing with them at the moment because I am currently focused on aggressive debt reduction, but when I do fund loans… I usually go with debt consolidation loans for people who are passionate about breaking free from the bondage of debt but need a helping hand.
Here are Lending Club’s reasons for brokering debt through them…
Lending Club’s seven reasons to Invest:
- You can earn better returns – Since June 2007, Lending Club investors have earned an average net annualized return of over 9%. Read the report by Javelin Research.
- It’s straightforward – The money you invest funds loans made to creditworthy borrowers.
- We’re selective – Many borrowers apply, but less than one in ten are accepted. Lending Club approves only creditworthy borrowers as members.
- It’s easy – Lending Club makes it easy to build a portfolio based on your criteria. Most lending members spread their investment across tens or hundreds of qualified borrowers.
- We set fair and fixed rates – Their rates are based on historical trends and the current economic climate. Borrowers pay a fixed rate for the 3-year life of the loan.
- You get flexibility – You can reinvest any interest and principal payments each month or withdraw them like an annuity. You can also put your notes up for sale on the Note Trading Platform.
- Do good while doing well – Many Lending Club lending members find it rewarding to help others meet their financial goals. Especially in this economic environment, Lending Club members come through when big banks do not.
I say Dave should definitely, without a doubt… move forward with brokering debt via Lending Club as a solid investment option.
What do you think?
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As a Prosper lender, I say that your staunch advocacy to lend via Lending Club should be tempered a bit. As a financial asset, the value of these cashflows is still unknown, and therefore only speculative. Funds invested in this manner must be funds that one is will to place totally at risk, and consequently, lose.
My advice would be to lend cautiously, until one has a good feel for the P2P climate, and not lend on the basis of a favorable experience from a borrower. (That’s not a jab at the author, btw.)
(And, TBH, one should avoid Prosper altogether… loans originated these days aren’t owned by the lender, and if Prosper ceases operation, which is a non-trivial possibility, the lender becomes an unsecured creditor.)
Dan is right Dave… always be cautious and calculated in respect to your investment strategies.
My Lending Club Review does include testimonials from 4 active investors, so be sure to read about their experiences to help formulate your decision.
Also remember… if you are seeking higher returns, you must also take on more risk. At this point the total risk involved in being a Lending Club investor is not fully known (due to the age of the social lending itself), although it currently appears very stable.
I agree that there is risk involved with P2P lending. In fact, anytime you’re earning significantly more than you can get with a “riskless” investment, you have to assume that you’re putting your money at risk. That being said, Lending Club has been pretty transparent through all of this, as they make their data regarding historical repayment rates, etc. publicly available.
I think the key here is in Dave’s final sentence: Short Term. Money intended for Short Term periods should be invested in very safe (read FDIC insured) plain savings accounts or short-term 1,3,6 month CDs.