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.