Lending Club

Quote:

Eighteen people have been charged in what may be one of the nation's largest credit card fraud rings, a sprawling international scam that duped credit rating agencies and used thousands of fake identities to steal at least $200 million, federal authorities said on Tuesday. The elaborate scheme involved improving fake cardholders' credit scores, allowing the scammers to borrow more money that they never repaid, investigators said.

Me wonders about credit rating accuracy sometimes (note the bold in above) I assume the frauds had premium credit scores. And then there's that whole Wall Street rating debacle.

from here

Quote: rxwine

Quote:

Eighteen people have been charged in what may be one of the nation's largest credit card fraud rings, a sprawling international scam that duped credit rating agencies and used thousands of fake identities to steal at least $200 million, federal authorities said on Tuesday. The elaborate scheme involved improving fake cardholders' credit scores, allowing the scammers to borrow more money that they never repaid, investigators said.

Me wonders about credit rating accuracy sometimes (note the bold in above) I assume the frauds had premium credit scores. And then there's that whole Wall Street rating debacle.

from here

FICO is a double edged sword. It makes rating easy but makes people think the number is the entire story. The bond rating thing is another story. Since the issuer pays the rated there is a inherent conflict. I could see one day where issuers are forced into a pool of raters lottery style. Have to do it that way because rating is so complex that few investor could or would pay individually.

Profiting from credit is what I do for a living. I personally wouldn't put my money there. But I am generally a risk-averse person. If you have a greater tolerance, then it might be ok for you. I wouldn't do it, myself.

Over the past week or so I funded my Lending Club account with a non-trivial amount of money...but still only about 4.3% of the total amount of money I have tied up in the stock market!

I purchased notes with all of my balance, following Mr. Money Moustache's strategy of lower-grade, higher-risk, higher-return notes. Interestingly, there seemed to be far fewer notes available for purchase than what was implied by his article from back in September. In fact, with no filters at all, only about 1100 notes were available! This in contrast to his description of 200-1200 available after he filtered for grades D-G and other factors. I don't know if increased competition has curbed the number of borrowers coming to LC or I am just using the website wrong, but whatever.

In all I have outstanding purchase orders for 142 different notes (various amounts in each one). They each have to reach their funding goal before they are actually issued, so likely I will have a few of those orders canceled and will re-order different notes.

I'm excited to see how this goes, but it's definitely a long play, much like a CD. The notes are all either 36- or 60-month terms. I knew that going in, but it's still worth noting. Definitely the least liquid of my investments right now (excluding tax-leveraged retirement accounts, of course).

Quote: AcesAndEights

Over the past week or so I funded my Lending Club account with a non-trivial amount of money...but still only about 4.3% of the total amount of money I have tied up in the stock market!

I purchased notes with all of my balance, following Mr. Money Moustache's strategy of lower-grade, higher-risk, higher-return notes. Interestingly, there seemed to be far fewer notes available for purchase than what was implied by his article from back in September. In fact, with no filters at all, only about 1100 notes were available! This in contrast to his description of 200-1200 available after he filtered for grades D-G and other factors. I don't know if increased competition has curbed the number of borrowers coming to LC or I am just using the website wrong, but whatever.

In all I have outstanding purchase orders for 142 different notes (various amounts in each one). They each have to reach their funding goal before they are actually issued, so likely I will have a few of those orders canceled and will re-order different notes.

I'm excited to see how this goes, but it's definitely a long play, much like a CD. The notes are all either 36- or 60-month terms. I knew that going in, but it's still worth noting. Definitely the least liquid of my investments right now (excluding tax-leveraged retirement accounts, of course).

For those of you curious how my experience is going thus far, an update!

Things have been slow. My account was funded on 2/12 as noted above, and at present, only 14.5% of my principle is actually "working" in loans that have been approved. The rest of it is still sitting in notes that are "in funding." Basically they are waiting for other investors to fully fund the notes before the loan becomes official.

Also, several of my initial notes were either not fully funded, or rejected for some reason, so I got that money back as "available cash" in my account, meaning I needed to go in and find more notes. In general, I'm a little bit disappointed in the amount of manual work that has been required so far. This will die down a little bit as more and more loans get approved, but there will be a continuous effort involved. As the borrowers start making payments, my "available cash" will grow again, and that money is not earning anything while it is just sitting in my cash balance in LC. So at that point, I will need to decide whether to re-invest that money back into LC, or withdraw it to invest elsewhere. This will be a little bit of a chore, but I think it will be worth the payoff. I spend a lot of time poking around at my finances anyway, so no biggie there. We'll see how it all works out!

Well, it's been about a week since I started actually buying notes, and still only about 1/5th of my initial investment is actually put to work. The rest is still "in funding." Kind of disappointing; I have no idea if this is normal or not.

I'd rather gamble at Craps.

Quote: AcesAndEights

Well, it's been about a week since I started actually buying notes, and still only about 1/5th of my initial investment is actually put to work. The rest is still "in funding." Kind of disappointing; I have no idea if this is normal or not.

That is kind of normal.

Weekly update: 46% of my invested capital has now been loaned out and is outstanding principal. It's picking up, but it's still effing. slow.

Quote: AcesAndEights

Basic idea is that they are a middle-man for crowdsourcing private loans. By cutting out the traditional financial institutions, lenders can get higher rates and borrowers can get lower rates. It sounds risky, but by buying dozens, even hundreds of $25 slices of different debt, the idea is you reduce your risk substantially. Their boast is that 93% of investors earn between 6-18%, which is pretty amazing, to be honest.

Immigrant groups have been making off the book loans to each other for centuries. Usually they count on a shared ethos, and the fear of public shame to collect their money.