I think that P2P lending is a great way to generate consistent and dependable income. After playing around with it for over 2 years, I am convinced that it is a good idea and will be a significant part of my income generating portfolio.
Every month, I’ll post an update on my progress with Lending Club. This is update #2.
I started with Lending Club almost 2 years ago (April 2011) and just had my first default. I really can’t complain though. Almost 2 years without a default with over 100 loans is an accomplishment no matter which grade loans you prefer.
However, I do expect that ROI will drop further before it recovers. I had an idea to put $50 (instead of my usual $25) into loans that I really felt good about (Bad Idea Jeans). I only did this a couple times, but one of the notes is about to go belly up after only receiving a couple payments. That one will be painful, but it also reinforces an important lesson: Be Diversified.
From here on out, I’ll put only $25 into every note until I get up to $5000. Once I’m there, I may bump it up to $50 depending on if I can find enough notes. This strategy ensures that no one note will be more that 1% of my holdings.
I’ve also changed my strategy. While I’ve been happy with my returns, Peter from Lend Academy tells me that I can probably do much better. I’ve changed my criteria to use his filters exclusively with the help of Nickel Steamroller to find notes. I do expect my ROI to start inching upwards eventually as I acquire higher risk notes.
Finally, I have added $175 to my LC account since my last update and hope to add a bunch more this year. The only thing holding me back is that I’m keeping money on the sidelines to buy a rental property. As soon as that’s in the bag, LC will start seeing much more of my income.
Stay tuned for another update at the end of March.
*The website, Nickel Streamroller has a portfolio analyzer that takes into account late loans. Some would argue that this is a better indicator or ROI.
Join the 10s who have signed up already!
Subscribing will improve your life in incredible ways*.
*Only if your life is pretty bad to begin with.