Home > Investing, LendingClub > LendingClub Trading Platform Reflections – July 2011

LendingClub Trading Platform Reflections – July 2011

LendingClub Reflections - July 2011

"Jump" by frederico stevanin on freedigitalphotos.net

Look before you leap!

That’s my main reflection at this point in time. The LendingClub Trading Platform is nothing like the basic LendingClub Platform. You aren’t able to get in at the ground level and lend money directly. You are only able to trade notes that are listed on the trading platform, which is a secondary platform. Let me brain-dump some pros and cons.

Pros

  • At least I get to participate in peer to peer lending through a secondary market
  • I get to see the payment history of existing notes before I invest
  • I get to see the credit history graph of a borrower before I invest
  • I am able to go back and review the original listing
  • Notes that are bought are seamlessly transferred from the Folio platform to the LendingClub platform

Cons

  • New notes being sold at par are rare finds
  • Notes that are at a discount usually have payment issues
  • You end up paying more than the remaining principal on notes most, if not all, of the time
  • The same threat of default is there
  • You will probably get less percentage yield than someone who was in at the ground level of the same loan
  • There aren’t as many high quality notes available on the secondary market since most people want to sell their riskier notes

I wouldn’t hesitate this to someone who is already familiar with buying and trading bonds. There are similarities and if someone knows how to trade bonds, then they can figure out how to invest in the LendingClub secondary market. For those who have experience in the stock market, that experience is not enough. There is a lot more math involved here and people misprice their notes left and right. I can’t tell if they’re shady or just uneducated. I’ve seen prices as high as double the remaining principal. Why in the world would you buy a note that will never pay you back 100% of your principal?

Verdict So Far

I haven’t had any defaults so I still have a positive outlook on this income stream. So far I have received the first payment from 13 of 27 notes. The rest are upcoming and I am hopeful that there won’t be any missed payments. I’ll write a more detailed article later on about how everything has gone in the month of July. The fact of the matter is, I still haven’t broken even with my what I spend on buying the notes. I am probably a month or so away from breaking even. I’ll elaborate on what I mean later for those who have no clue what I am talking about.

I maintain that the LendingClub Trading Platform should be looked into by those who are knowledgable about investing in bonds. For everyone else, I would suggest that you hold off and learn as much as you can through my articles.

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Categories: Investing, LendingClub
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