Title: Take on debt and put it in Lending Club?
Post by: toben88 on April 24, 2018, 11:00:00 PM
Post by: toben88 on April 24, 2018, 11:00:00 PM
Recently I needed to buy a truck and could have paid cash. Instead I got a 6 year loan at 2.99% and put the cash into lending club.
I have been doing this a few years now and appear to have a final return of 8.5% while investing in C, D, and E loans with my own secret investing strategies.
Is anyone else racking up debt on other assets to put money into Lending Club? Anyone think this is a bad idea?
I have been doing this a few years now and appear to have a final return of 8.5% while investing in C, D, and E loans with my own secret investing strategies.
Is anyone else racking up debt on other assets to put money into Lending Club? Anyone think this is a bad idea?
Title: Take on debt and put it in Lending Club?
Post by: AnilG on December 31, 1969, 06:00:00 PM
Post by: AnilG on December 31, 1969, 06:00:00 PM
There was detailed discussion about it few years ago. It is a bad strategy as there is not enough spread between borrowing rate and return to safely make such a bet. If you were borrowing at sub 1%, it may be good to do but definitely not at 2.99%. You should also realize that 2.99% borrowing is backed by a collateral but return is not guaranteed.
Your 8.5% return is phantom, it is only true as long as you continue to reinvest the repayments. Once you decide to stop buying new loans and start liquidating your account, your return will start declining as interest amount in repayments received will decline and may not be enough to meet the losses resulting from defaults. See RobL's thread about monthly interest to loss and net monthly proceeds that he regularly updates. It is very informative. Ask people who have liquidated their accounts or stopped buying loans about what their final return were. What they put in and what they got out in the end.
from: toben88 on April 25, 2018, 02:51:22 PM
Your 8.5% return is phantom, it is only true as long as you continue to reinvest the repayments. Once you decide to stop buying new loans and start liquidating your account, your return will start declining as interest amount in repayments received will decline and may not be enough to meet the losses resulting from defaults. See RobL's thread about monthly interest to loss and net monthly proceeds that he regularly updates. It is very informative. Ask people who have liquidated their accounts or stopped buying loans about what their final return were. What they put in and what they got out in the end.
from: toben88 on April 25, 2018, 02:51:22 PM
Title: Take on debt and put it in Lending Club?
Post by: bobeubanks on December 31, 1969, 06:00:00 PM
Post by: bobeubanks on December 31, 1969, 06:00:00 PM
Title: Take on debt and put it in Lending Club?
Post by: TravelingPennies on December 31, 1969, 06:00:00 PM
Post by: TravelingPennies on December 31, 1969, 06:00:00 PM
Performance of your portfolio is a good indication of why borrowing at 2.99% to lend is a bad idea.
from: bobeubanks on April 26, 2018, 11:15:22 PM
from: bobeubanks on April 26, 2018, 11:15:22 PM
Title: Take on debt and put it in Lending Club?
Post by: TravelingPennies on December 31, 1969, 06:00:00 PM
Post by: TravelingPennies on December 31, 1969, 06:00:00 PM
Don't invest borrowed money in LC. I do same in much bigger scale (200k+). There are other platforms with lower risk and higher return.
Title: Take on debt and put it in Lending Club?
Post by: MarinBB on December 31, 1969, 06:00:00 PM
Post by: MarinBB on December 31, 1969, 06:00:00 PM
Title: Take on debt and put it in Lending Club?
Post by: Edward Reid on December 31, 1969, 06:00:00 PM
Post by: Edward Reid on December 31, 1969, 06:00:00 PM
Yeah, borrowing to invest is almost always a bad idea unless you have a guaranteed return, and I mean like FDIC insured. IOW, at least as certain as the debt you owe.
from: AnilG on April 26, 2018, 04:33:46 AM
from: AnilG on April 26, 2018, 04:33:46 AM
Title: Take on debt and put it in Lending Club?
Post by: rawraw on December 31, 1969, 06:00:00 PM
Post by: rawraw on December 31, 1969, 06:00:00 PM
I don't think borrowing to invest is always bad. I think there are benefits to buying the stock market with leverage. But generally not a good idea to borrow money to invest in higher risk bonds
Title: Take on debt and put it in Lending Club?
Post by: Reginald on December 31, 1969, 06:00:00 PM
Post by: Reginald on December 31, 1969, 06:00:00 PM
To reduce risk, I would *only* borrow money from lenders who dont care whether or not you pay them back. Like, uhmm, for example Lending Club. 
Title: Take on debt and put it in Lending Club?
Post by: Harvey on December 31, 1969, 06:00:00 PM
Post by: Harvey on December 31, 1969, 06:00:00 PM
They will chase you if you default on the debt. Not a good idea. Diversify your investments very carefully.
There is one platform where you can get to know the borrower personally: www.beelend.com.
There is one platform where you can get to know the borrower personally: www.beelend.com.