peer lending Archives - Page 3 of 3

With an investment of only $3,400… my peer lending notes at Lending Club are currently earning returns of 8.8% which, at the time of writing, equates to $25 of income every month.

One of the most important ways to keep your net annualized return (NAR) as high as possible it so watch your notes (loans) carefully and sell them on the note trading platform when they reach a level of risk you’re no longer comfortable with. Don’t worry… using the note trading platform is much simpler than it sounds and today I’ll show you how I do it.

Note trading platform basics

The note trading platform is nothing more than an electronic marketplace for the buying and selling of notes that represent consumer loans issued through Lending Club.

Sellers list notes in hopes of selling for a price of their choosing. Buyers browse available notes, review borrower payment history and credit score, and buy the notes of their choosing at the asking price. Buy orders received before 11am PST on a business day will settle same day, otherwise the transactions will settle the next business day.

Accrued interest

Buyers receive interest payments whether they buy the note on the first day, last day, or any day in between the time the previous payment was made, so be sure to factor in accrued interest to your valuation of a perspective note. You can find the accrued interest since last payment on the Browse Notes page.

Fees

Fees for using the FOLIOfn platform equal 1% of the purchase price, charged to the seller of the note. There is no fee for buyers trades.

Tips for selling notes on the trading platform

You will have to determine your own criteria for trading existing notes, and everyone will do things a bit differently according to their own risk tolerance.

Here are a few strategies I use including a screencast of me selling a note and speaking more on the topic.

I sell late notes. Any notes that have become late or are even in the grace period are watched very carefully and usually sold right away. I do this because I am not comfortable lending money to people who do not think it important to pay their debts on time.
I watch credit scores. Watching credit score drops can help you head off a late payment before it reaches late status. Chances are, if a borrowers credit score drops significantly over a short period of time, they may be in financial trouble. I will sometimes sell the note before it has a chance to go late.
I price notes accordingly. This is a bit of a gray area and will take a bit of practice, but do not charge more for a troubled note than you would be willing to pay, and at the same time be sure you’re not giving it away at a price that is too low. As you sell more notes you’ll get a better feel for pricing them correctly.

Enjoy this screencast of me discussing note trading and selling a note on the secondary market, and invest with Lending Club if interested.

Invest with Lending Club

If these returns interest you and you would like to invest in peer lending, you can sign up to invest with Lending Club and get started.

If you have any questions or comments don’t hesitate to leave them below.

Back in 2009 I was the guy borrowing from peer lending investors. Not anymore baby!

Investing in peer loans is paying me about $25/month… and that number grows with every loan I invest in.

Invest in peer lending

Peer lending is just another term for peer to peer lending, social lending, p2p lending, etc.

Now-a-days I’m the guy getting paid to loan money… and it feels really, really good.

One way I invest – and earn high returns – is by using peer lending platforms to loan money to people who are in the same position I used to be. I enjoy doing this for two main reasons:

I can help them get out of debt.
I can earn high returns on my money.

I usually stay away from loans (a.k.a. notes) being used to finance things, like weddings or automobiles, and stick primarily to debt consolidation loans and sometimes business loans.

How much you earn will depend mostly on the notes you choose, how you choose them, and your use of the secondary market.

How much I earn with peer lending

I currently have nearly $4,000 invested in 90 notes. I have had one note default and am earning a NAR (net annualized return) of 8.55%.

The average peer lending investor earns approximately 10% on their investment… so I’m a little behind the curve, but I’m learning – and will take a 8.5% return any day.

To date I have earned $212 in total interest… and I’m pulling in about $25 in interest a month, and this number grows monthly as I invest in more notes.

Tips for earning higher returns

Here are a few tips for those who want to start investing with peer lending:

Before you choose loans be sure to pick solid criteria then save the criteria search. I will elaborate more on this in a future post dedicated wholly to the subject, but for now just understand that you can filter the loans based on criteria like “no defaults in the past 3 years” and “credit scores of 700+”, etc.
Keep an eye on the notes you invest in and resell troubled notes on the secondary market. Again, I will drill down on specifics later, but just be aware that selling troubled notes on the secondary market is a crucial part of earning higher returns. Don’t be intimidated by this either because it’s easy peasy, all you basically need to do is pick the loans you want to resell, price them at a discount and click “submit”.
Diversify your notes. By this I mean to invest in notes of different grades to balance risk and returns. Peer lending platforms grade the loans based on borrower credit history and allow you to drill into the details and pick loans paying higher returns while still offering less risk – they’re there, you just have to look.

Those are the basics. Feel free to ask questions in the comments section below.

How you can get started with peer lending

If you like the returns peer lending is delivering and want to get started, there are two companies I recommend in full confidence… Lending Club and Prosper.

Personally, I have more experience investing with Lending Club, but know both companies are sound and proven, so choose Prosper if their platform suits your needs better.