For what its worth, I almost feel like we're being herded away from safer investments towards ones where its easier to pluck our money away.
Some things never change. I felt that everyone was being herded away from index funds back in the post dot-com days.
I'm suggesting that having a 200 point fico drop and then being unable to get credit, or getting it at a ridiculously high rate is a good motivator to pay your loan. I didn't say anything at all about bankruptcy.
OK. I know you didn't say bankruptcy. I just thought you were alluding to it, and I was very surprised when a friend informed me that post bankruptcy credit was very easy to acquire. So I figured others might be equally surprised.
The notes are held by an actual bank, and LC has a backup company primed and ready to go to service the notes cash flow in the event LC goes out of business. Since service fees (usually <.5%) are paid monthly, the backup transaction company would find it financially appealing to take up the work so it'd be better than a simple contractual requirement.
If I read the prospectus correctly, LC has a backup company lined up, but did not seem certain that a bankruptcy court would allow the backup company to continue business as usual. LC's direct creditors who are not using the notes system could have a strong reason to argue that you are their peer unsecured creditor, and thus you should not get special treatment.
Suffice it to say I do a lot of due diligence on most things, and money falls out of just about everything I touch. If there is too much perceived risk against the certainty of losing 5-10% of your cash's value to inflation or poor cash returns over the next 3-5 years...then do that instead!
I'm pretty thoroughly convinced that to get rich quickly one needs to roll the dice on concentrated bets, diversification be damned.
I'm also pretty thoroughly convinced that to stay rich a portfolio should consist of extremely well diversified equity investments, buffered by extremely safe cash/bonds which act as insurance and are expected to be very liquid when equities go on sale. With the exception of the US Federal Government, I limit my exposure to any single company/organization to less than 1% of my portfolio, mostly via Vanguard index funds. I really like diversification. I tolerate my concentration at Vanguard because as I understand it, Vanguard's bankruptcy would not affect my ownership interest in each fund's underlying assets. I will also grant that adding other relatively uncorrelated investments to reduce volatility should be a good idea, which so far is mostly spoiled by high investment costs and/or lack of liquidity.
So the idea of diversifying across say 1,000 different borrowers using these LC notes seemed interesting. However, once I understood that if I bought 1,000 of these LC notes, I would technically own 1,000 unsecured loans to LC each with repayment terms derived from LC's loans to the ultimate borrowers, instead of being great diversification, LC notes became an unsecured loan to a dot-com before that dot-com made a profit. Definitely an investment subject to my "at most 1% of the portfolio" personal rule.
I also still w*rk, so even a small amount of time spent screening borrowers is currently a big negative. Though it sort of looks like a fun game. While working, a stable cash flow is unimportant. If I lose my job, liquidity suddenly becomes important. So at this time LC notes do not look like a good choice for me. However, our situations are certainly different. I can not imagine living on $20k/year, and frankly don't see how you will do it given the numbers you quote.
LBYM? I'm going to try and live on about $20k a year, with a paid off house, but in one of the more expensive places to live. My electric and water bill last month were $1000 total. My taxes, insurance and minimum bills I can't avoid are about $11k a year. My spending over the last 7 years has been about 3-4k a month, now its going to be less than a grand. If I get any more LBYM I'll have to use a smaller font.
Though my household currently has 5 rescued pets (my wife worked at a shelter for awhile), likely to soon be 4 because of cancer, so our situations do have some similarities.
I'm afraid I find the signal to noise ratio here somewhat worse than the last time I was here. I'm not getting anything out of this, and it seems many people don't want me to put anything into it either.
I'm glad you are back. Just pace yourself, and don't feel a need to respond to every post until everyone agrees with you. Searching for some of the above quotes, I realized that you are treating posting here as a full-time job! You don't have to fill the whole forum all by yourself!