About two years ago I started up a lending club account, so far here’s what my experience has been:
- Lending club is basically like bonds if you intend to sell them you will likely lose money.
- Lending club has a note trading platform, stay away from it, I write algorithms to trade against it and I’m sure others do to. You’ll usually(always) lose the trade if you are competing with us
- The long-term return has been fairly good and is typically around 6% but that comes with some risk
- You’ll get several notes where the borrower doesn’t even make the first payment this seemed like a huge issue to me and hurt my returns.(They should offer protection)
- There are some very significant hidden risks, it is possible that the economy could cause many of your borrowers into bankruptcy, at which point you could/would lose all your initial investment.
- Stocks outperform peer-to-peer lending and seem a superior investment in my opinion
So I definitely see some benefit and think that it can be a viable way to invest your money, but I believe that you will likely under-perform the market and that there is some inherent risk.
Please note that this article is purely my opinion and should not be used or considered as financial advice. This article is intended to help others think about investment concepts. If you are interested in concepts mentioned this article I recommend that you consult a certified professional to better understand the many risks including loss of entire investment or even greater than your initial investment from leverage.