Back when I was trying to figure out how to pay off my back taxes and keep my retirement account intact, I looked into the peer-to-peer lending space at Prosper and Lending Club. At the time, Lending Club was not authorized to do business in the state of Indiana so the only option I had was to get what I could through Prosper.
The money definitely helped at the time, but it wasn’t enough to ease the pressure so I finally had to bit the bullet and took a distribution from the retirement account to pay off the taxes and some other debt. I will detail more about that in the next post.
Following P2P Lending Returns
In the meantime, I have had an interest in following the results of P2P lending and seeing the kind of returns that investors were able to achieve. Not that I am in a position to be an investor, but I find the information interesting even though I am only a borrower.
Here are some of the recent reports that I have been reading:
- Five Cent Nickel is winding down a $10,000 Lending Club portfolio and received a 6.7% annualized return. Not too back compared to the interest on savings accounts.
- Matt is making passive income by being a Lending Club lender and affiliate.
- Mr. Money Mustache is working on a complete Lending Club experiment and recently doubled down to invest $20,000 getting an early return of just over 20%. That will most likely trend lower as defaults occur, hence the experiment.
- Joe invests at Prosper and has had some defaults now so that his return is down to 8%. Hopefully, this is the end of that kind of pain.
Well, it was reading these updates that got me to wondering if Lending Club had ever gotten around to being able to do business in Indiana. As it turns out, two months ago in December 2012, Lending Club announced its debut for the state of Indiana.
For me, that represents some good news as I plan to use Lending Club to consolidate as much higher interest rate credit card debt as possible. I will probably wait a month or two until I can get a business deal I am working closed and pay off a little more debt which should help my credit score.
But after that, I would hope that I could save some interest expense and decrease my mandatory payments thus improving my monthly cash flow should any emergencies happen. Obviously, it will depend upon what interest rate I can get. If it doesn’t make sense, then I won’t do it, but it won’t hurt to investigate the option of getting a loan from Lending Club.
It looks like they grade their loans from A1 to G5. I would need to fall right in the middle for it to really make sense. And there would have to be no prepayment penalty as I am trying to pay off debt from the highest interest rate to the lowest and I do have some favorable interest rate debt.
I guess we will see what transpires, and I will keep you up to date.
Care to share your experiences with Lending Club or Prosper?