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thewh00sel  United States. Jul 25 2012 14:16. Posts 2734 | | |
Does anyone have any experience with sites like LendingClub.com or Prosper.com? If you haven't heard of them, they are sites where you can apply for a personal loan, and the site verifies your income and credit score, etc and then approves you for a loan of $X (up to $35,000 on lendingclub.com). Then in order to get the loan, people who have money on the site can buy shares of the loan in as little as $25 increments.
Anyways, it seems like with some strict filtering for specific types of loans people have been churning consistent profits between 10-15% by diversifying into hundreds of different loans. The ideal strategy seems to be (to me anyways) to invest in the highest risk loans, because the interest rate is significantly higher, and the default rate doesn't go up equally with the interest rate (i.e someone with perfect credit in the "A" category might have 7% interest, and "A" might have a default rate of 3%, while the lowest level borrowers would have 21%+ interest and a default rate of 7%). So if you can try to filter out the bad eggs in the "bad credit" category I think you can beat the "average" return of 10% that the website claims. And even if you can't, 10% ain't bad.
There is also a trading side of the site where you can buy loans that people want to sell. Seems like there might be some value there too if you can find some good deals. I think the site rakes 1% and the returns are all post-rake from the limited research I've done. I think I'm going to open up an account on LendingClub and maybe in a few months I'll do an update on it. Let me know if you guys have any experience with sites like this, positive or negative.
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| A government is the most dangerous threat to man’s rights: it holds a legal monopoly on the use of physical force against legally disarmed victims. - Ayn Rand | |
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TheTrees United States. Jul 25 2012 15:17. Posts 1592 | | |
Have read a decent amount about them and have seen returns of 10-15% from posters on other boards. Pretty good investment if you have the time/patience/capital. |
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inde Germany. Jul 25 2012 15:20. Posts 1298 | | |
I just wrote lendingclub to inquire if this is for foreign investors as well. prosper.com has a NO on their page.
Anyone know if this exists outside the US? |
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Funktion Australia. Jul 25 2012 15:44. Posts 1638 | | |
Sounds like speculation not investing to me.
I'd love to know how accurate the returns vs risk calculations are. Be interesting to know what the underlying systematic risk is and what level of diversification is necessary to reduce the non-systematic risk to its lowest point. Which I assume applies as it seems to run just like a secondary market?
Like I said though how they (and you) value the risk of these loans is pretty essential to this investment imo. The banks couldn't do it correctly for RMBS who's to say how accurate a place like Lending Club can do it (I'm not disputing how seemingly legit this business is, you don't get millions of investments and forbes articles for nothing).
Is this all the data you have at your disposal to perform analysis with or do they provide raw numbers? |
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| | Last edit: 25/07/2012 15:46 |
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thewh00sel United States. Jul 25 2012 16:01. Posts 2734 | | |
| | On July 25 2012 14:44 Funktion wrote:
Is this all the data you have at your disposal to perform analysis with or do they provide raw numbers? |
www.lendstats.com has a lot of raw data that you can filter through. Can backtest some filters to see what ROI you would have been under certain restrictions. Cool site. |
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| A government is the most dangerous threat to man’s rights: it holds a legal monopoly on the use of physical force against legally disarmed victims. - Ayn Rand | |
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inde Germany. Jul 25 2012 16:14. Posts 1298 | | | |
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2c0ntent Egypt. Jul 25 2012 17:30. Posts 1387 | | | |
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okyougosu Russian Federation. Jul 25 2012 18:33. Posts 963 | | |
lending mass micro-loans (up to $1000) is much more profitable as yearly rate increases huge |
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Funktion Australia. Jul 25 2012 18:36. Posts 1638 | | |
| | On July 25 2012 16:30 2c0ntent wrote:
what systematic risk are you referring to |
The risk that the entire market is exposed to ie/ can't be diversified away.
| | On July 25 2012 15:01 thewh00sel wrote:
www.lendstats.com has a lot of raw data that you can filter through. Can backtest some filters to see what ROI you would have been under certain restrictions. Cool site. |
Looks good. I only had a quick dabble and I think I was mostly looking at the prosper figures. If you think you can do it then you can at least give it a shot for a certain % of your portfolio. If nothing else you'll have some asset class diversification. |
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| | Last edit: 25/07/2012 18:40 |
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whamm! Albania. Jul 25 2012 20:17. Posts 11625 | | |
I'd be super careful about any type of internet investing. The internet is just too shady and unregulated |
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Spicy United States. Jul 25 2012 23:14. Posts 1027 | | |
I want you to realize you are an individual, not a bank. Unless you have the resources, time, experience to properly value these loans I can't see how this can be a winning game. You won't have an edge just using the figures they give you. Are you going to just trust the site's models that say someone's default rate is 3%? How did they come up with this number? What procedures do they use to verify credit score and income? Also realize that these metrics don't even tell the whole story. Is it easy for people who apply for loans to fudge the numbers they submit? You won't know because you'll never be face to face with the people you're lending money to. One of the lessons of the financial crisis is that repackaging loans for resale can go horribly wrong without proper due diligence. Realize that you'll be the one down the food chain, holding the bag, and with access to the least amount of real information.
The real winners are the ones collecting a commission from packaging the loans and the traders who can dump it to the next guy for more than he bought it. The investors who are holding for a promised return ultimately get screwed in the deal. You might see a steady return for X amount of years but are in huge danger of tail risk.
That said, you might be able to win with hard work and a bit of luck. There just isn't any easy money in the credit market ATM imo |
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| | Last edit: 25/07/2012 23:38 |
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Uptown . Jul 26 2012 00:14. Posts 3557 | | |
reminds me of junk bonds and subprime mortgage loans in a way.
As long as the system doesn't systematically collapse... |
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Svenman87 United States. Jul 26 2012 18:55. Posts 4636 | | | |
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jchysk United States. Jul 27 2012 08:00. Posts 435 | | |
Wait for Jobs Act regulation to kick in for next year and invest in start ups. High risk and adventure! |
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