Peer lending (Prosper)

[younginvestor2013]

Just curious if anyone has every experimented with these before (on the lending/investor side)? They seem to be growing in popularity, and (my limited research has shown) they appear to offer reasonable and predictable returns (net of fees) of ~5-10%.

I haven't done much research, but just wanted to see what your thoughts were and if anyone had experience with them.

[brewer12345]

Run.

[ERD50]

Let's see, make an unsecured loan to strangers who can't get money elsewhere? What could possibly go wrong?

-ERD50

[bad_LNIP]

Lots of hedge funds and institutional smart money has invested in them. There are also backdoor ways to pack an IRA with money with prosper and lending club.

Sent from my XT1049 using Early Retirement Forum mobile app

[SumDay]

This reminds me of my dad's retirement plan: flip houses and owner-finance the sale to people who couldn't get a conventional mortgage. There's a reason those people can't get loans. He visited some of them 10-15 times a month to stay in their faces so he'd get paid. This would not be something I'd be interested in, as I'm already heavily in that "sector".

[calmloki]

Quote:

Originally Posted by SumDay This reminds me of my dad's retirement plan: flip houses and owner-finance the sale to people who couldn't get a conventional mortgage. There's a reason those people can't get loans. He visited some of them 10-15 times a month to stay in their faces so he'd get paid. This would not be something I'd be interested in, as I'm already heavily in that "sector".

Heh. I early on rented to some pretty desperate characters. As in not far from living under a bridge. Used to go and see them several times a week and called it collecting excuses rather than collecting rent. They were mighty hospitable though - almost always offered me a beer, which I always declined.

[ERTX]

Tax reporting on this must be a nightmare.

[cooch96]

P2P lending is essentially junk bonds. Many investors here do not recommend junk bonds because they are high risk and don't provide diversification with stocks.

That is, when stocks go down, bonds tend to do well, but junk bonds just follow stocks. In P2P lending, a lot of the borrowers won't be able to make good on their loan if the market tanks and they lose their jobs.

One could justify this type of "investing" by considering it charity: Providing a service that's less predatory than loansharking or payday lenders to folks who just need a hand up. But don't be surprised if you lose your shirt.

[frank]

I have had good and bad experiences with this issue. on the whole I would say stay away, because of the aforementioned need to run down the occupants for the rent.

[Agni]

Hi, I invested in Lending Club. I had put in around $43K in various notes. So far, the adjusted return is around 6.6%. Around $1K has been charged off, another $1K is late. I have withdrawn (only as the notes mature), around $20K and the remaining outstanding balance is $26K...... so overall I am not too happy with the return.. but no complaints either. I plan to take all my money out as the notes mature (you can choose between 36 mo or 60 mo notes). However, we have not experienced a market correction/slowdown so can't really say how the loans would have fared had that happened. A bonus though was the 250 shares I got at $15 when LC IPOed.. sold them immediately at $25.. so some short term gain there as well.

[clifp]

I was early lender in Prosper, lost a modest amount of money, but less than I would have if the money had been in the market in 2007 and 2008.

There are a number of threads on the subject. But by far the best information on Peer 2 Peer lending is this series of article done by early board member, Nords on his blog here

You should read it before investing in either Prosper or Lending Club. It doesn't mean they are horrible investment, but many of the risks are non obvious.