Cash Money Life» Making Money

Alternative Income is a Form of Insurance

Ryan — Thu, 07 May 2009 13:00:48 +0000

My wife and I are entering into the great unknown – we will soon be first time parents. We are as excited as any other first time parents, but along with that excitement comes a little bit of worry. This is a huge lifestyle change for us and there are many unknown factors – one of which is financial.

My wife and I decided she should be a stay at home mom. We are blessed to have this opportunity, but that also means our income will decrease after she resigns from her job. Going down to a one income family increases our risks – if I get laid off or something else happens, we could be in trouble. That is why life insurance and long term disability insurance are so important. But that is also why I have worked so hard to improve my small business over the last 2 years. With my business, all my eggs are no longer in one basket.

Alternative income is a form of insurance

I’ve written about alternative income before, and why it is a large part of my long term financial plans. There are many benefits to having alternative income streams: income diversification, more financial options, accelerate debt repayment, save more money for retirement, work toward financial goals more quickly, and many more.

Alternative income can work for everyone. My friend Steve wrote about how to make money without a job and why you should. This is an excellent article that explores the merits of creating alternative income streams and why they are important. By the way, Steve was already earning six figures from his day job when he wrote this. Steve worked as a consultant, and recently, the company he was working for opted not to renew his contract. He is earning much less than he was as a consultant, but his alternative income streams helped bridge that gap.

How do you create alternative income streams? Steve lists several ideas one could use to create a source of alternative income, such as starting a blog, creating an online store, consulting, and more. But don’t limit yourself to his list, my list, or this list of more than 40 alternative income options. Use your skills and talents – whatever they may be.

It doesn’t take a lot to make a difference. Even a little extra cash flow can help you with bills, living expenses, retirement savings, or give you date money. Any extra income that helps you meet your financial goals is a good thing. And once you get the ball rolling, you may find ways to increase your alternative income streams beyond your original goal.

Hedge your bets with alternative income. I think it is important to have more than one income source. There are very few guaranteed jobs out there. I think of alternative income as another form of insurance.

~$~

This article written by Ryan Guina. Ryan is the founder and editor of this site. He is a writer, small business owner, entrepreneur, and professional in the corporate world. He served over 6 years in the USAF and also writes about military money topics at Military Finance Network.

All content copyright Cash Money Life.

$25 Sign-up Bonus from Lending Club

Ryan — Fri, 06 Feb 2009 01:42:25 +0000

Lending Club, the peer to peer (P2P) lending company, is currently offering new lenders a $25 bonus for opening a new Lending Club account. I have written about P2P lending several times on my site, and I think it is a great alternative to get financing if you are in need of a loan, and it can be a unique investment opportunity for lenders.

The growing P2P lending industry

The P2P lending industry is still in the growing stages and right now the P2P lending companies are working hard to introduce new lenders and borrowers to the concept of lending money to their peers. With the current credit crisis, borrowing money from individuals instead of banks makes a lot of sense for people looking for loans. And while P2P loans are not guaranteed, lending money can be a good investment compared to putting money into a high yield savings account or CD ladder.

Get paid to try P2P lending with Lending Club

Lending Club is currently the P2P industry leader and they are continuing to grow. To speed that process, they are giving new lenders a $25 bonus to sign up for a Lending Club account, which is enough to fund your first loan with Lending Club. But here is an important note – the $25 bonus is only available through certain sites, and this is one of them!

How to get a $25 Lending club sign up bonus:

Sign up through this link: $25 Lending Club new lender bonus
Complete the new lender application
Receive $25 bonus

It’s that easy! Your $25 bonus will be enough for you to fund your first loan with Lending Club, or if you decide not to fund a P2P loan through Lending Club, you can withdraw the contents of your account.

~$~

Two Financial Goals – Less Debt, More Income

Ryan — Tue, 02 Dec 2008 11:10:55 +0000

This article is part of an M-Network group writing project, the 12 Days of Christmas – Personal Finance Style. Last year, the M-Network changed the lyrics to the popular Christmas song to give them a financial twist. This year, we are at it again. The First Day of Christmas was held at Paid Twice; this is the Second Day of Christmas.

Two Financial Goals – Less Debt, More Income

The Christmas season is one of Joy, Love, and Hope. It can also be a time of new beginnings. As the year comes to a close, think about your finances and how you would like to improve them. If you are like the majority of Americans, there are two things on your wish list: less debt and more money.

While Santa Clause won’t come down the chimney and drop off a sack of cold hard cash, there are a few things you can do to make this wish come true. It won’t happen overnight, but if you work hard, it may just happen in time for next year’s Christmas. And that’s something to look forward to!

Debt Reduction

Debt is an ugly beast which can be incredibly difficult to slay – especially credit card debt, which can have interest rates over 30%. If you only make the minimum credit card payment, it will take you years to pay your debt. Here is how you can reduce your debt:

Analyze your situation. Make a list of all your sources of income and all your obligations. Then use this information to create a budget.

Stop generating new debt. Doubling your payments doesn’t do much good if you continue to add new debt. Cut up your credit cards and stop spending more than you earn.

Accelerate your debt payments. After you have a budget in place and you stop creating new debt by spending beyond your means, increase your debt payments to eliminate your debt more quickly. There are several ways to do this, but one of the most effective and most popular ways is the debt snowball, which was made popular by Dave Ramsey. To create a debt snowball you take extra money you earn and put it toward your debt. When you pay off one debt, continue using that money each month to pay other debts. Your debt payments will get larger over time which will eliminate your debt more quickly than if you were to pay only the minimums.

Earn More Money

Your ability to create income is your greatest asset, and because of this, you need to not only take care of it, you need to grow it! Why do you need to earn more money? Many reasons… How about debt repayment, keeping up with inflation, investing, saving for retirement, taking a vacation, no longer living paycheck to paycheck… need I go on?

OK, we know that earning more money is never a bad thing, but it is sometimes easier said than done. Here are a couple ways you can earn more money. Keep in mind, they may take some time and there is work involved, but anything worth having is worth working for.

Earn more money through your day job. Chances are most, if not all, of your income comes from your day job. That means you need to work to maintain your current income, and strive to improve it if possible.

Ask for a raise. One of the best ways to get a raise is to simply ask for it. Make sure you do it the right way and go in prepared – have a list of accomplishments including how much money you earned for the company or saved the company.
Professional certifications. Obtaining a professional certification can lead to increased income. Research which certifications are the best in your field and go after them.
Change jobs. Sometimes the best way to get a raise is to go to another company. Consider it a bonus if your company pays for it.

Earn money through alternative income streams. I define alternative income as any money earned outside your normal day job. There a hundreds of ways to earn money outside of your normal routine, and earning a little side income can help you reach your financial goals more quickly and act as an insurance policy against losing your job or another main source of income.

Some ideas for alternative income include starting a side business, consulting, working a part time job, owning a rental property, owning dividend paying stocks and other investment income, working a part time or seasonal job, owning patents or receiving royalties, buying and selling items on Ebay, etc. With alternative income, you can use creative ways to generate more money. The limits are up to you and your imagination.

The 12 Days of Christmas – Personal Finance Style:

Day 1 -The First Rule Of Personal Finance @ I’ve Paid For This Twice Already…
Day 2 – Two Financial Goals – Less Debt, More Income @ Cash Money Life
Day 3 – 3 New Year’s Worksheets @ Mrs. Micah
Day 4 – 4 ways to be better prepared for Christmas next year @ Gather Little by Little
Day 5 – 5 Golden Rules To Follow During The Holiday Season @ My Two Dollars
Day 6 – 6 Ways To Give @ Moolanomy
Day 7 – 7 Savings Strategies @ Being Frugal
Day 8 – Eight Simple Snowflakes @ I’ve Paid For This Twice Already…
Day 9 – 9 Year-End Money Moves @ Moolanomy
Day 10 – 10 Personal Finance Essentials @ Cash Money Life
Day 11 – the 11th day of Christmas: 11 ways to decorate more frugally @ Plonkee
Day 12 – 12 Steps to a Prosperous New Year @ Being Frugal

~$~

Why Alternative Income Streams Are Part of My Long Term Plans

Ryan — Mon, 10 Nov 2008 12:33:44 +0000

I have always had an entrepreneurial spirit. When I was young, I worked the playground economy and traded baseball cards and other trinkets, wrote papers and book reports, and found other creative ways to make a few bucks here and there to supplement my allowance. It was primarily fun for me then, and my money was just as quickly spent on baseball cards or something else I probably didn’t need.

As I’ve grown older, the desire to create things and earn more than my allowance (now a salary) never left. In fact, it has grown stronger. Most people in today’s workforce cannot rely on receiving a pension at age 55. If I am going to be able to retire at a young age I will need to contribute a lot of money to my retirement accounts and I believe that the more I contribute now, the less I need to contribute later.

One strategy I am using to contribute more money toward my retirement accounts is to create alternative income streams. My current goal is to become a millionaire, followed by my ultimate goal, which is to be able to retire with enough money to last the remaining years of my life.

Defining alternative income streams

When I talk about alternative income, I am talking about anything that I don’t earn through my day job. This could be money I earn from my home business, earned interest and dividends, monetary gifts, or money I get from bank bonuses, credit card bonuses, or other sources of free money. Other examples could include working a part time job, receiving rent from a property, royalties, etc. These are all forms of income I don’t rely on for my day to day living expenses, which gives me additional money every month to reach my financial goals.

Why alternative income streams are important

In many ways, alternative income is just as important as your regular paycheck, and potentially even more important if it is passive and requires no additional work to continue creating income. Here are a few more reasons why alternative income is important:

Don’t put all your eggs in one basket. I am a firm believer that your ability to generate income is your greatest asset. You career is probably the largest contributor to your basket, should only be part of that equation. The economy is bad right now and we are in the middle of a financial crisis. Unemployment is increasing and many people are having to deal with sudden decreases in income. Alternative income streams help ease the loss of a job or your main source of income.

Options. Like investing a lot of money early in life, alternative streams of income give you options. Last year, my wife left a higher paying job so we could enjoy a better quality of life. At the time she was working long and irregular hours and it was difficult for us to spend time with each other. So we decided to cut back on our budget and begin saving money while working toward a transition when we would become a one household income. As part of that transition, I began a home business to increase our income. The additional income is irregular and may not replace 100% of her income when she stops working, but it will certainly make the transition easier.

Non-existent pensions. Pensions have all but disappeared in the US. Gone are the days you could join a company after high school or college, work there for 30 years and get a gold watch, a pat on the back, and a paycheck for the rest of your life when you retire. Social Security is also in a perilous situation. Most people don’t have the comfort of knowing someone else will take care of them in retirement age. Alternative income streams help me contribute more money to my retirement accounts now so my retirement years will be easier.

Help reach your financial goals. Using alternative income is a great way to reach your financial goals – whether your goal is debt reduction, retirement, saving for a big ticket item, putting your children through college, or something else. An additional income stream means you can put your financial goal(s) into hyperdrive.

Alternative income equals freedom

I think everyone should strive for some form of alternative income stream – even if it is just earning interest from a CD Ladder or a high yield savings account. The key is to have your money working for you until you can reach the point when you are less reliant on a single source of income.

~$~

Lending Club is Back; Prosper Goes Quiet

Ryan — Thu, 16 Oct 2008 12:00:38 +0000

Earlier this week Lending Club announced the end of their quiet period when their bid to host a secondary market for loans was approved by the SEC. This means that Lending Club users able to resume funding loans and they can later sell these notes on an open market within Lending Club’s platform. In related news, Prosper announced yesterday that they have filed a similar request with the SEC and have entered into a quiet period.

Lending Club SEC Filing Approved

Lending Club is the first P2P lending company to offer a secondary lending market. They filed their SEC papers in April and immediately entered into a quiet period in which current lenders were not able to make loans. The approval process with the SEC took 6 months. Here is a snippet of Lending Club’s secondary market announcement:

By partnering with Foliofn Investments, Inc., a registered broker dealer, Lending Club becomes the first social lending network where you have the option of a Trading Platform to put your notes up for sale in the event you need liquidity before the 36-month term of a note. Any new note (issued after October 12, 2008) can be traded on the Trading Platform. You can also buy notes from other lenders.

This is a great development for Lending Club and its members as it adds another dimension – added liquidity for investors.

Prosper Enters Quiet Period

Following several months behind Lending Club, Prosper filed paperwork with the SEC this week to offer a secondary market. While it took Lending Club 6 months to get their paperwork approved, there is no way to determine how long it will take for Prosper’s paperwork to be approved – if it gets approved.

Here is their message to Prosper members:

Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.

The registration filing is a necessary step toward making the secondary lending market available to the community. This is something many of you have been asking for, and we believe the liquidity of a secondary market will make Prosper even more vibrant.

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you’re an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you’ll be able to track and monitor your loans; and you’ll be able to withdraw funds from your Prosper account.

If you’re a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you’re a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources.

A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we’re required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective.

We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.

Sincerely,
Prosper

What does this mean for Prosper? This means current lenders will not be able to make loans through Prosper until the end of the quiet period, which could take a few months. All current loans are unaffected, and borrowers can still get new loans through Prosper. Prosper will fund loans while the quiet period is in effect. This is the same process that Lending Club went through over the previous 6 months.

What’s next for the P2P industry?

Creating a secondary market will allow investors to more easily get in and out of P2P loans, which should be good for the industry as a whole. Hopefully the SEC will approve Prosper’s bid soon – I think competition is a good thing.

And speaking of competition, this week also saw the entrance of a nother competitor to the Peer to Peer Lending Market – Loanio. I plan to do a full writeup on Loanio soon. Be sure to check back!

~$~

P2P Lending Update

Ryan — Tue, 01 Jul 2008 12:44:26 +0000

When I first found out about peer to peer lending, I was excited about it, and I read everything I could find about the industry. Then I wrote several articles explaining the P2P lending process, and answered the questions, is P2P lending safe and are P2P loans are guaranteed?

After getting my initial P2P investments in place, I haven’t had much to write about other than the current situation with Lending Club. I also haven’t given readers any updates on my P2P loans. So far, no news has been good news, but I decided it was time for an update.

My experiences with Person to Person lending

Prosper. My initial investment with P2P lending was with Prosper. Late last year, Prosper was doing a large advertising campaign and contacted me about advertising on my site. Before agreeing to run their advertisement, I wanted to check out their business. I liked what I saw and invested in a few small P2P loans.

I equated Prosper to the Ebay of P2P lending because lenders bid on the loans they give to borrowers. Since then, I have made several more loans via Prosper and I am happy to say each of them is current and has never been late. Granted, most of these loans are only about 6 months old at this point, but it is promising, nonetheless. I am currently earning almost 12% on my initial loans.

Lending Club. After trying out Prosper, I decided to investigate purchasing loans through Lending Club. At the time, Lending Club was giving out $25 referral bonuses to sign up for a new account, and the minimum loan was $25. This made it the perfect “no risk” situation. I signed up, got my $25, and immediately invested it in a P2P loan. The lending process at Lending Club is more like shopping, and I equated Lending Club to the Amazon of P2P lending.

Again, I am happy to report that all of my loans are current with Lending Club. Most of these loans are about 4-5 months old, and I am currently earning approximately 11% return.

Changes in the P2P Lending environment

In early April, Lending Club abruptly announced they were ceasing new lender registrations and loans as they entered a “quiet period” while they registered with the SEC. Lending Club has since resumed normal lending operations, while Prosper has ceased lending operations while they too have filed with the SEC.

How I feel about P2P lending with the current developments

I still believe P2P lending can be a viable investment option for some people and is worth trying if you have the time and money to invest. I currently have a relatively small amount invested in peer to peer loans (less than $1,000), and I plan on monitoring the loans for the time being.

At this point, I believe P2P lending is still in the developmental stage in the US and has room for improvements in several areas. I still think it is a good option as long as one is willing to put in the time needed to study the market and understand how it works. Like most investments, P2P loans are not guaranteed, so there is a risk of loss associated with your investments. I also don’t think P2P loans should be the main form of investment in your portfolio. But used wisely, they can be an additional source of income for you.

Here are what some others say about P2P lending:

Making Extra Money With P2P Lending
The Future of P2P Lending – Dusting Off My Crystal Ball
Is Peer to-Peer Lending Ready for Prime Time?
Why I think P2P lending is a bad idea (for an alternate viewpoint of my own).

~$~

The Future of Lending Club – Will they Survive and Thrive, or Crash and Burn?

Ryan — Wed, 16 Apr 2008 14:42:07 +0000

Last week, Lending Club made a major announcement: they suspended the addition of new lender registrations, stopped current lenders from lending more money, and halted their referral program. This has sparked a lot of debate in the blogosphere regarding what is going on at Lending Club HQ, and what will happen to not only Lending Club, but to the P2P industry. To further confuse the issue, Lending Club has officially entered into a “quiet period” where they are not allowed to discuss their situation with the press, save reading from a prepared script and answering general questions.

What follows are my thoughts about Lending Club which are based on reading other blogs, industry news, and a phone call I had with a Lending Club customer service representative last week. Many of the answers I received from Lending Club were read directly from a script, and several questions received the standard “no comment” response. However, the customer service rep answered a few other questions which I received interesting responses to – if you read between the lines.

As a note, I am a paid freelance writer for the Prosper blog, and these views do not represent those of Prosper, Lending Club, or any other person or business. I am an active lender in the P2P loan market, and I have a vested interest in the P2P lending industry. As such, these are my own views regarding Lending Club, what is going on over there, and their future within the P2P industry.

What is going on at Lending Club?

Last week Lending Cub halted new lender registrations and their referral program to “register with the proper authorities.” Most people speculate that Lending Club did this to obtain a broker/dealer license from the SEC that would allow them to permit members to buy and sell loans between themselves. Currently, Lending Club borrows money from “lenders” and lends it out to “borrowers” in the form of a promissory note. If the filing is approved, it will allow Lending Club to register these promissory notes as securities, which will allow lenders to buy, sell, and trade portions of their portfolio.

According to Lending Club officials, this was a voluntary decision and they were operating within the full limits of the laws. However, there were certain things they were not legally allowed to do, such as allow Lending Club borrowers to transfer loans among themselves. Borrowers are currently locked into 3 year loans which is a deterrent to investors who desire liquidity in their investments. Filing with the SEC will legitimatize the buying/selling process between users and allow Lending Club and its users more freedom with their investments.

Is Lending Club broke / dead?

Several bloggers have asked the question, is Lending Club broke or is Lending Club Dead? Based on the information I have, the answer is no.

Lending Club is not broke. They are continuing to fund new loans during the quiet period. They also have millions of dollars in private equity backing. (They are a privately held company, so their books are closed; this information is based on discussions with LC representatives and reading on the web). Based on the fact that they have so much backing and so much money in current loans, there is too much potential for profit for Lending Club not to be backed by someone.

However, Lending Club is at a turning point for their company. They have stopped bringing in new lenders for the time being and I believe they need to get this situation resolved quickly to increase their foothold within the P2P lending industry and become profitable. Lending Club is still at a young enough state of business that they may be able to afford to slow operations to add functionality and legality to certain operations. Had they waited much longer, this could have been nearly impossible.

As it stands, I think they are taking a very calculated risk, and one that was not made lightly. A small sacrifice now has the potential to reap large dividends later.

Lending Club is continuing current operations – although at a slower pace

Prior to this announcement, Lending Club was making huge strides in the P2P industry. Lending Club had originated over $15 million in loans and they were recently growing at the rate of $1 million in loan originations per week for the several weeks leading up to the quiet period. (See Lending Club Stats for more information regarding originated loans).

Lending Club has announced they will continue funding new loans, albeit at a slower pace. They have heavy backing, but I don’t think they have enough funding to burn through over $1 million in loans per week for several months.

They will continue funding new loans and my guess is that if/when the securities application is approved, they will likely put these loans on the market to their lenders. I believe Lending Club’s business model supports them being in the P2P lending industry as a loan facilitator, not as a direct lender. So this would make sense. (this is speculation on my part).

Why did Lending Club halt new lender applications if they are continuing operations?

Lending Club reported they were required by the “registration regulations” to halt new lender registrations and their referral program until their registration application is resolved. I think this is primarily for two reasons – to simplify accounting and to ensure that everything is within the limits of the law.

How long will this take?

At this point, the answer is unknown. But it will likely take several months before any answer is given by the SEC (or whichever governing body LC is registering with; this was a point they could not confirm or deny). This type of registration often takes 2-4 months to complete, but as no company has successfully attempted to register a P2P lending company this way before, this is really unchartered territory. It will be interesting to see how the regulatory committee handles the application. (One of the key points to this being unchartered territory is that only a portion of the loan is being sold to an individual, and not the entire loan).

How will the securities registration affect Lending Club?

Right now Lending Club is taking a hit on their image. There have been many questions regarding their stability (see the articles mentioned above, and a few below), and many people have withdrawn their money and vowed not to return. I think much of this is due to the lack of available information and the fact that many people just don’t know what is going on. The quiet period is not helping matters. However, I think this has the potential to be a short term image problem if Lending Club is successful with their registration bid.

Lending Club needs to maintain the image that everything is, and will be, good for their company. Their actions to this point are reassuring. To me, it speaks volumes that they are continuing to fund loans with their own operating funds. I think their actions also send a positive message to the P2P industry, markets, and analysts.

There are several ways the securities application can affect Lending Club:

Lending Club’s application is approved. If Lending Club’s application is approved, I think they will be fine. Upon approval, LC is going to do everything they can to engender positive media and bring new lenders and borrowers to their site. They will likely bring back their referral program (though I have been told it will be in a different form; no details at this point). The increased functionality and liquidity of their loans will be a nice selling point, as the other major P2P lender in the US, Prosper, does not yet have this option.

In addition to filing for a securities license, it is believed Lending Club is requesting approval to allow its account holders to place their unused funds in a Money Market Account, similar to what PayPal does. This allows unused funds to earn the borrowers/lenders interest, which is currently unavailable for account holders at either Prosper or Lending Club.

Lending Club’s application is not approved. If Lending Club’s application is not approved, there a couple possibilities. The first is they revert to the old business model. Lending Club reports they were operating within legal limits, so there should be no reason why they would not be able to revert to the old process. However, there is the possibility that the application process initiates changes to the laws under which Lending Club operates. If this happens, Lending Club will be forced to adapt to whatever changes occur within the industry. It is important to note that if this is not approved, Lending Club may or may not operate as before.

What should I do with my Lending Club account?

If you made loans at Lending Club they will continue to be serviced, and you will continue earning your payments as if nothing happened. However, you will not be able to reinvest your funds at this time. I recommend withdrawing your funds as they become available, because they will not earn interest and you cannot reinvest them.

If you borrowed money from Lending Club continue to make payments. You entered into a legally binding agreement and are legally bound to repay your debts just as if you borrowed money from a bank or made a purchase with a credit card.

If you have unused funds at Lending Club withdraw them. They cannot earn you interest under the current business model, so there is no sense leaving them there for several months until this situation is resolved.

What I am doing with my account: I withdrew my funds the day of the announcement and have 2 active loans at Lending Club. My loans are current and continue to earn me money. As the money becomes available, I will withdraw it.

I will make a decision regarding my accounts after Lending Club’s situation is resolved. If the business model improves, I will definitely consider adding more funds. However, it is much too early to make that decision.

What does this mean for the P2P lending industry?

Right now I think this is scaring a lot of people away from the industry. The P2P lending industry is very new in the US and is still unproven in its current form. As with any new kind of investment or business there will be growing pains, and this is a perfect example of that.

I think the P2P industry has a lot of potential, which is why I write about it and support it. More importantly, it is why I have invested some of my own money there. However, I do not yet think the P2P lending industry is a viable mainstream investment for everyone, and it is definitely something you need to investigate and research before making any investment. But you so that with all your investments, don’t you?

My verdict: Take a wait and see approach with Lending Club. I won’t write them of as dead, but I will wait for more information before calling their new situation a success.

More reading about Lending Club from other blogs:

Debt Kid – My Take on Lending Club’s SEC Registration
Tech Crunch – Lending Club Puts Hold on Lending Activity While It Sorts Out Some Legal Issues
Personal Loan Portfolio – Lending Club Quiet Period Announcement: A Blog RoundUp
Thicken My Wallet – What the P2P lending industry doesn’t want you to know: of Lending Club and Prosper

~$~

Lending Club Referral Bonuses and New Lender Registrations Halted

Ryan — Wed, 09 Apr 2008 11:30:10 +0000

Lending Club, one of the two major Person to Person Lending companies in the US, announced they are halting new lender registrations and lender referral bonuses for the time being.

This is a major announcement in the P2P lending industry. I read the e-mail announcement several times to make sure I understood it completely, and I think it may actually be a positive change for the industry.

However, the company is undergoing a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time. So I can’t confirm my thoughts about what they are doing.

This is a full text of the e-mail announcement:

Dear Ryan,

Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.

Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.

Q&A:

Q1. What about money I have begun moving, but is still in transit to Lending Club?
A1.1. If you are in the process of verifying your bank account, you will be able to complete that verification but will not be able to add new funds
A1.2 If you have initiated a transfer, the funds will be displayed in your Lending Club account balance as soon as those funds are available.
A1.3 If you have uncommitted funds, you may request that Lending Club return those funds via the same method used to load the funds. For example,

If you have initiated an ACH to add funds, these funds will be transferred into your Lending Club account but you will not be able to lend these funds out. You can go into your Lending Club account once the ACH transfer has been completed and withdraw funds back into your linked bank account..

If you’ve wired funds into your Lending Club account and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to wire these funds back to you at no charge.

If you’ve sent funds by check, and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to send you a check by mail for the same amount at no charge.

Q2. What about referrals?
A2.1 The current referral program is terminated. If you have referred someone who has already signed up as a lender or a borrower, or if you have been referred by someone and have already signed up as a lender or a borrower, you will be receiving your referral payment within the next few days.

Sincerely,

Ryan Gannon
Senior Vice President
Lending Club
440 N Wolfe Road
Sunnyvale CA 94085
www.lendingclub.com

This is definitely big news in the P2P lending industry, and I will write more on this in the following days.

~$~