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 Post subject: Peer to peer lending
PostPosted: Sat May 14, 2016 5:38 pm 
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Has anyone tried investing in p2p lending, like Lending Club?

https://www.lendingclub.com/public/stea ... rns.action

I'm thinking of transferring my Roth IRA into lending club or one of the others, like Prospere. Seems like pretty reliable returns of 7-12%, a lot better than a money market or cd account. Could be risky in a recession, but a good way to diversity.

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 Post subject: Re: Peer to peer lending
PostPosted: Mon May 16, 2016 10:30 am 
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Let me know if you decide on one to try. I was thinking the other day that with the stock market being (in my opinion) inflated, and interest rates being in the garbage for things like bonds and CDs, it's a shame we can't get into lending or investment (in private companies) but that's not something you can just run out and do as an individual (without shitloads of cash, anyway).

Maybe this P2P model is the next big investment scheme. "Shitloads of cash" because you're pooling with many thousands of other investors, so the door to becoming a lender is opened.


As long as the company is backing it up with credit checks and debt collection, it seems like it could work.

Have to really make sure it's a legit company that won't just take your money and run to Tahiti, though. It's not like this is Bank of America doing it.

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 Post subject: Re: Peer to peer lending
PostPosted: Mon May 16, 2016 3:41 pm 
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I just initiated the transfer of funds from my Roth IRA to Lending Club, although it will take a couple of weeks. I decided to use IRA funds instead of cash because the taxes can get complicated with this sort of investment. You have to pay taxes on the interest you earn, but you also need to claim losses on any "chargeoffs" (bad loans). There is max per year on the latter of $2000, I believe. So rather than deal with the hassle, I'm going to use IRA funds where it doesn't matter.

If you want to learn more, there are a couple of guys who have been documenting their experiences (and gains) with LC for the last few years. First is here:

http://www.mrmoneymustache.com/2012/09/ ... xperiment/

With his annual returns here:

http://www.mrmoneymustache.com/the-lend ... xperiment/

As you can see, he's been getting annualized return of 11.32%, although closer to 9% over last two years. That's still pretty good, and is entirely using the LC "automated investing" approach. That's where they pick out the best loans for you to invest in, rather than you scoring through the loans and picking them out yourself. Kind of like an ETF vs stock picking.

And another (more technical) guy documenting his experience is here:

http://www.lendacademy.com/my-returns-a ... d-prosper/

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 Post subject: Re: Peer to peer lending
PostPosted: Tue May 17, 2016 4:41 pm 
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Good point. I hadn't thought of the taxes being a probable pain in the ass. Did you do day trading exclusively in your IRA too? I guess that simplifies the taxes there, as well?

Always thought that trades were a sufficient pain in the ass on tax day that I didn't know how day traders did it. I can just imagine ending the year with 100 transactions that have to be including individually in tax filings.

These days some places have automatic import. My Capital One trading account does this now, into H&R Block. I tell it my account info and blamo, right into my online taxes. Wonder if any of the P2P lending places offer that yet.

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 Post subject: Re: Peer to peer lending
PostPosted: Tue May 17, 2016 10:43 pm 
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Yep, I moved all my trading to IRAs a few years ago, because the taxes were getting be too much of a pain. Especially all my options trades. Now I can do whatever I like without worrying about it.

I still do all my own taxes with Turbotax - I'd rather I mess up my taxes than someone else does. :) And I want to understand how everything works. Only problem is that now my whole extended family has me do their taxes every year. I should just bite the bullet and become an accountant.

Lending Club have some issues right now, may want to stay clear until it plays out...

http://www.bloomberg.com/news/articles/ ... -purchases

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 Post subject: Re: Peer to peer lending
PostPosted: Wed May 18, 2016 4:28 am 
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Anything that gets you 7%-12% annual returns is going to be kinda shady if you look at the details. You need to know what debt they are taking on and to whom or what.

http://www.nytimes.com/2016/05/18/busin ... .html?_r=0

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 Post subject: Re: Peer to peer lending
PostPosted: Sun May 29, 2016 5:48 pm 
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I would be interested see how this goes Grieve. I looked at it a year or so ago. My understanding of risk and return then, was that you defined it. Less risk loans had less interest.

The cool thing about it is it wasn't 1 loan to one person, but distributed. So one guy fails, you don't lose it all.

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