P2P Lending

A place to talk about speculative investing ideas for the optional Variable Portfolio

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technovelist
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Re: P2P Lending

Postby technovelist » Tue Mar 21, 2017 8:41 am

sophie wrote:In case anyone is into Lending Club....

Get out now.

I put a tiny slice of VP money into it as an experiment, just enough to diversify sufficiently. Return's been good (~9%) but in the past several months I've seen a constant stream of loans going bad. The company's claimed charge-off rate is absurdly low. At the current pace, I expect that at least 1/3 - 1/2 of my loans will ultimately charge off. And, the recoveries have shrunk to less than 1% of charged-off amounts, as opposed to the 10% I was getting previously.

Either the economy is not nearly as healthy as advertised, or LC has decided to dump investors overboard and aren't going after deadbeat borrowers. Not good news either way. I guess P2P lending has run its course, but I wonder about all the big pension funds that bought into it.


I can't imagine why anyone would do this. It's not like running up debt on credit cards is hard for anyone who is likely to pay it back, so why would they need to borrow from other individuals, unless they are really bad risks?

The big pension funds are going to go broke from this and all the other tricks that they have been using to try to meet their return expectations. I blame the Fed for their interest-rate suppression... although actually it's the fault of the government for spending so far beyond their means.
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blue_ruin17
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Re: P2P Lending

Postby blue_ruin17 » Fri Jun 16, 2017 10:19 pm

For any Canadians out there looking to get into P2P lending, checkout LENDING LOOP

So far I've put $25 into every loan they've posted since January (about 50) and I've yet to have a single late payment or charge-off.

I'm fascinated by the technology of P2P lending, in the same way that I'm intrigued by how Uber and AirBNB are killing the legacy taxi and hotel models. I like the idea of being able to compete directly with the biggest banks in the country for small-business loans. Where will P2P lending be in a decade? Is it just a fad? Or is there a private debt distribution/investment revolution in the near-future that we can't even envision yet, in the same way that we couldn't envision a social media world in 2003?

I don't know. And that's why I just put play money into Lending Loop so far.

Here is one of the company profiles for a 'D' rated, 20%+ interest listing:

What Does Eram Transportation Ltd. Do?
We're a trucking company that transports a variety of goods.

Financial Situation
My business is profitable and growing.

What is the loan for?
We intend to buy new equipment to improve a truck.

Why are we safe to lend to?
I'm a hard worker.


...Clearly the P2P lending model is still in the "wild west" stage. But I'll be watching closely, and throwing all the Eram Transport Ltd's out there a few bones...and sticking with the HBPP for my serious capital.
"Of course, the market narrative exists whether you pay attention to it or not. But when you embrace the great unknown, you’re able to disengage and observe the mania for what it is: the Jungian collective unconscious acting to manifest its own destiny."
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sophie
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Re: P2P Lending

Postby sophie » Sat Jun 17, 2017 7:27 am

Wild west is right.

I thought borrowers would legitimately be people looking for lower interest rates than you can get from banks, but I think a lot of them are scammers. Think of it this way: the only penalty for not repaying a loan is a 7 year, 100-200 point hit on your credit rating. That's surely worth the $30K+ you can score by taking out the max size loan, making 6 payments to protect against fraud charges, and sending a cease-and-desist letter. This is a pattern I've been seeing often, and it doesn't help that I think Lending Club has reduced its effort to go after the deadbeats. Failed loans cost them nothing after all, but collection efforts do.

I expect to get all my money back from Lending Club with a fairly decent profit (maybe 7% annual cagr), but it's truly not worth the effort. It was fun to try though. Don't do it with an amount you'd be uncomfortable losing - I invested only a very small amount and would not have dreamed of doing what some people do and putting in 10% or more of their retirement savings. That would be sheer insanity.
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blue_ruin17
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Re: P2P Lending

Postby blue_ruin17 » Sat Jun 17, 2017 8:54 am

sophie wrote:Wild west is right.

I thought borrowers would legitimately be people looking for lower interest rates than you can get from banks, but I think a lot of them are scammers. Think of it this way: the only penalty for not repaying a loan is a 7 year, 100-200 point hit on your credit rating. That's surely worth the $30K+ you can score by taking out the max size loan, making 6 payments to protect against fraud charges, and sending a cease-and-desist letter. This is a pattern I've been seeing often, and it doesn't help that I think Lending Club has reduced its effort to go after the deadbeats. Failed loans cost them nothing after all, but collection efforts do.

I expect to get all my money back from Lending Club with a fairly decent profit (maybe 7% annual cagr), but it's truly not worth the effort. It was fun to try though. Don't do it with an amount you'd be uncomfortable losing - I invested only a very small amount and would not have dreamed of doing what some people do and putting in 10% or more of their retirement savings. That would be sheer insanity.


What do you think about the future of P2P lending? Will it prove to be a fad, remain fringe, or is there potential for it to grow to rival the big banks, should the issues you experienced be somehow addressed?
"Of course, the market narrative exists whether you pay attention to it or not. But when you embrace the great unknown, you’re able to disengage and observe the mania for what it is: the Jungian collective unconscious acting to manifest its own destiny."

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