One bad loan and you will be in the red with Prosper
Yvette, I think you might have misunderstood. It doesn’t say you can invest in p2p loans from any kind of account but into any kind of account (regular investing, IRA, ROTH). As far as I know Lending Club only receives money for investing through checking or wire transfer. Not sure of all the rules around p2p investing for those on benefits.
I’ve been investing on Lending Club for years but have never bought or https://worldloans.online/installment-loans-ky/ sold any of the loans on folio
I have been investing in a minor way under $1000 for about 5 years. I had returns of about 11%. This year I finally went heavy investing over $30,000. I am currently at 12% return which I am very happy with. I use Lending Club. I constantly use Folio investing (trading format for lending club). I sell my notes 100% of the time. I think it is especially useful to sell off bad debt. I also constantly have my notes for sale. Ranging from 2%-6% depending how attractive the note is. Keep in mind when selling on folio investing each transaction is 1%. So is you sell a note for $25 you will get $. This tool can also be very beneficial if you ever need to liquidate the account. Give a 2-3% discount and it will liquidate very quickly. I like this form of investing because of the cash flow. You can create a second income. On 30,000 you will create about $1100 monthly cash flow with about $450 being interest. That is what I’m seeing now. I’m hoping to ramp up over $100,000 in the next 12months. A safety net, a way to eventually retire early, supplemental income, or what ever you want it to be. I have been very happy
Some great ideas Derik. Are there any criteria you use for deciding when to sell late p2p loans? When you say you have the loans for sale on 2% to 6%, does that mean you ount?
I am. I have my Lending Club account on automated so really don’t look at it much. Around 10% annual returns, consistent.
I would go with at least the 80 loans to start so you have a little better diversification. As far as doing $10K, it depends on the size of your overall portfolio (stocks, bonds, real estate, etc). I wouldn’t have more than 20% or so in p2p loans. Not necessarily because they’re high risk or anything but just to make sure you keep that diversification.
Prosper openly tells borrowers that after onoy 120 days they charge off any loans in default. Since they bare no risk when a borrower stops paying, they have little to gain by aggressively going after a borrower in default. This single aspect of their program makes it too risky for many lenders and I now included myself in that group.
Defaulting loans are a drag on a p2p investing portfolio but it isn’t quite as you describe. Prosper and Lending Club outsource their loan collections and do have a vested interest in seeing bad loans collected. Investors leave if default rates rise so the peer lending platforms do want to see late loans collected.
You will always have bad loans, even in a portfolio of traditional corporate debt. In peer to peer lending investing, as with any investment, you need to diversify across different risk categories and other criteria. Sure, if you’re only in 20 loans then a default will wipe out 5% of your portfolio. Invest across at least 200 loans though and each loan is only half a percent of your investment. Earn an average 10%+ on the other loans and you more than make up for any defaults.