August 9, 2013

Brian and Bo evaluate an alternative way to borrow and lend money in this week’s show. They get into the nitty gritty of peer to peer lending, as well as, the real estate research website Zillow. Brian shares his personal experiences with peer to peer lending using the Lending Club website.

This week’s Money-Guy Distraction:

Before we get into the podcast stuff you have to go over to YouTube and check out Ella Sings Elvis. You’re going to love it, especially if you have kids.

Peer to Peer Lending:

Since 2008 it has been hard for individuals to find personal loans. This has created a tremendous gap in personal finance, and from this void came a new category of lending known as peer to peer lending. It is essentially an online system that allows you to meet with your peers to borrow and lend money.

Of the different websites that are available, our experience has been with the Lending Club.  As a background to the sites success here are some analytics:

  • Last year’s private offering valued the company at $500 million.
  • Google just invested $125 million in Lending Club; which brought the current value to $1.55 Billion, with a B. Talking about a return on investment, wow!
  • They have loaned: $2.2 Billion since their inception in 2007.
  • 80.66% of loans are used to consolidate debt.
  • Last month $174 Million was loaned through the site, which puts them on track to outpace their total lending in one year at that rate.
  • They make money by service fees through both borrowers and lendors.
  • Lending Club has paid interest of $193 Million to investors.
    • 1 month average annual interest rate: 14.79%
    • 36 month average annual interest rate: 12.98%
    • 60 month average annual interest rate: 17.89

The Money-Guy’s take on the Lending Club:

  • Positive: We like the investment side as a hobby (note we did not say primary investment) because there is tremendous flexibility. You can loan as little as $25 and up to $5,000 on an individual loan.
  • Brian is set to make 15.64% on an annualized basis, but realizes that this will not likely hold up because of potential loan defaults.
  • Downside: A lot of the loans do not get filled, not everyone will get approved for a loan. There is also a risk of default.
  • How you should use lending club: This is not for your emergency reserves, or to be treated as a primary investment. It is very speculative, so consider this fun money or a hobby that you can make money with. Treat it as a very illiquid investment as the loans are set at 36 or 60 months. This is a brand new category of investing that we have not included in any of our portfolios.
  • What does the future hold? This market could mature to the point that it is a part of your retirement system. (i.e.): like a pension or annuity.


Switching gears over to the popular real estate site Zillow.com, this site is an awesome resource. They break things down with easy to use calculators and they can provide local quotes for your entire home buying needs. The features that we like particularly well are the:

  • Affordability Calculator
  • Fixed vs. Variable Calculator
  • Should You Pay Discount Points Calculator
  • Closing Cost Calculator

Another great resource that we have mentioned a lot in the past is Bankrate.com. They have very helpful tools that relate to this podcast. Be sure to check out the links that we have provided and we will be back in two weeks!!




Most Recent Episodes

The Best and Worst Types of Life Insurance!

No matter how much you know about finance, you’ve definitely heard about life insurance: maybe from commercials pitching it as something to buy your baby, or a family member or friend that got into the industry. Is life insurance worth getting or something you should...

How to Recover From 4 HORRIBLE Financial Mistakes!

In our nearly four decades of combined experience managing money, we’ve seen some horrible financial mistakes - here are the four worst we’ve seen first-hand and what you can do to avoid making a similar mistake. In this episode, you’ll learn: The worst financial...

New Data: Active Investments Are Better Than Index Funds?

A new research paper is out that claims active funds from two large providers, Vanguard and Fidelity, beat their own index funds. Are active funds beating index funds? What’s going on here? Let’s find out! For more information, check out our free resources...

Why Americans Are Actually Broke! (2023 Edition)

Americans might be bad with money, but you don’t have to be. In this episode, we discuss the underlying reason why Americans are so bad with money and how you can do it better. In this episode, you’ll learn: Common financial pitfalls you should avoid Practical steps...

Build Wealth With the 3 Bucket Strategy! (By Age) 2023 Edition

We believe there are three distinct taxable buckets you have the option of investing in for retirement. We’ll talk about how to balance those buckets by age and show a case study by age that shows what your buckets may look like! In this episode, you’ll learn: The...

Debt Ceiling Crisis: World’s Financial System at Risk?

Should you be worried about the debt ceiling crisis? Although political leaders have so far been unable to come to an agreement, we'll tell you what history says will happen and what it means for your finances. For more information, check out our free resources...

Financial Advisors React to INSANE Money Advice on TikTok!

Is financial advice on TikTok all bad or is there some good advice out there? Check out our brand new TikTok react show where Brian and Bo give their honest reactions to trending financial advice. Enjoy the Show? Sign up for the Financial Order of Operation (FOO)...

How to Save Thousands of Dollars in Taxes in 2024

Tax season is over for most of us, but that doesn’t mean it’s time to stop thinking about your taxes! Planning out your tax strategy in advance can save you time and money on your taxes. In this Q&A, we’ll discuss the line items on your return to pay attention to...

Average 401(k) Balance by Age (2023 Edition)

Are you doing better than the average American at saving in your 401(k)? We'll talk about basics of a 401(k), including new limits, employer matches, and vesting schedules, how many millionaires are created by 401(k)s, and of course the average 401(k) balance by age....