Sunday, July 7, 2013
Lending Club is a Peer-to-Peer Lending site, meaning it allows borrows to borrow money directly from lenders without a banking intermediary. Lending Club facilitates the entire transaction ? but they only take a small fee and the borrow and lender both realize cost advantages.- The borrower gets a lower interest rate than going to a bank. Banks typically make an interest rate return: they pay depositors a very low (or no) interest rate in their checking and savings account, and then charge high rates of interest to borrowers.
- The lender gets a great return. It?s better than buying a bank stock because you get the full return of the loan without the overhead of bank branches, management, etc.
When you invest in a bank stock ? you are buying a part of their branches (including the slick-hair of their branch managers), as well as their terrible call centers, slow websites, and extra fees. You do get a portion of exposure to consumer debt. But the overhead is costly. Plus, depending on the bank, you?re likely getting much less exposure to consumers and are instead investing in commercial real estate.
Investing in a Lending Club Loan is much different. You?re getting direct exposure to a consumer who is looking to refinance bank debt. There?s no middle man other than lending Club. You get returns of 8-25%, all while helping the borrower, who is getting a lower interest rate than from the bank. It?s a win-win.
Some of the loans are like gold ? the borrower is very likely to pay their bill off in full. Others, however, are risky, and the borrower is unlikely to pay back their debt. How are you to distinguish the two?
Some people get lucky. They come up with a system, and it yields good short-term results. But often, their returns regress to the mean, and they do not maximize their returns.
That?s where Peer Lending Advisors comes in.
We pick the loans for you ? saving you the time of reviewing each loan and deciding which ones to invest in. While doing this, we have delivered returns above 10% for our investors (past returns not guaranteed). At the same time, investors gain the benefits of diversification, diversifying out of the stock market while still bringing in great returns.
For typical investors, we break their investment into bite-size chunks, investing in 400 loans or more, which helps diversify risk. If a few loans go bad, the portfolio can still deliver double-digit returns. If there aren?t good loans to invest in, we are happy to sit on the sidelines and wait for the right opportunities to maximize ROI.
All loans are at a minimum Prime ? meaning the borrowers have high credit scores and a high propensity to pay. These are not sub-Prime loans.
Google recently invested $125 million in Lending Club, seeing the potential of the platform.
What are you waiting for? Drop us a line and let us know how we can help you get started investing in Lending Club.
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