P2P Lending

[blue_ruin17]

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.

[sophie]

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.

[blue_ruin17]

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?