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Is Lending Club a Good Idea?

May 2, 2014

lendingclub

The market downturn from 2007-2009 forced banks and other institutions to increase their lending standards for personal loans, as a result, peer-to-peer lending has found its footing. Because of this, Lending Club has been able to jump out front of the market for these loans. Brian and Bo have been dabbling with the site over the past year, and in this show they give everyone a rundown of their experience over the past year.

Since our podcast on this topic last year we have had a ton of feedback and read many articles that review the peer-to-peer lending market and  thought it would be fitting to do a 1 year update. Last year’s podcast was so popular with our listeners that a representative from Lending Club gave us a call to give us a behind the scenes look at how they operate (Disclaimer: we do not receive any compensation, discounts, “kick-back” or “special deals” for featuring Lending Club).

To share our behind the scenes knowledge with you, new loans are issued at: 9am, 1pm, 5pm, and 9pm ET. This is when the loans with the highest rated borrowers and highest interest rates are issued. The problem here is that, we know life gets in the way, and you probably are not going to be able to check in everyday exactly at these times. Lending Club has recognized this issue as well and has created a tool called “Prime” which is basically an “auto-pilot” buying service that you can use if you have over $2,500.00 with them. For those that do not have over $2,500.00 Lending Club will send out emails every time you have extra cash built up. The downside, you can lose money. Sometimes people cannot afford to meet their obligations with you. Also, morally, if you do not feel comfortable being involved with “debt instruments” this may not the best thing to do with your spare money and time. There are also consumer articles addressing concerns that Lending Club could be overstating their rates of returns. However, Lending Club upgraded their systems to help better calculate your expected return based on the quality of the notes that you have exposure to.

So, is Lending Club worth it? If you have “fun money” set aside and are looking for something to do in your spare time, we say yes, Lending Club could be a great resource for you. If you are looking for a get-rich-quick scheme or you are considering this in place of traditional savings or investments, then no, Lending Club is not for you.

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