If you’ve spent some time in the Personal Finance blogging world, you’ve probably heard of Lending Club before. If not, do yourself a favor and click the link to get yourself familiar with it. (I’m not an affiliate or anything and don’t make any money if you do.)
Basically, it’s a peer-to-peer lending platform. You can invest in people’s debt whether it’s to pay off a credit card, do some home improvement, start a business, or some other kind of common debt.
You do this by investing in “notes” of increments of $25. Notes are either 36 months or 60 months. Depending on various factors, each note has a certain interest rate which you can expect to have as your rate of return.
So you get a payment each month, (some principal, some interest) until the note is paid off. Some people will pay off the notes early and some unfortunately will get defaulted on and you won’t see any money.
If you’re familiar with how bonds work, these are very similar.
I’ve been investing through Lending Club since 2014. I used to invest in the stock market before I came across the Personal Finance blogging world and I used Lending Club as a way to hedge some risk.
Plus there’s something fun about seeing how much money you “make” through payments throughout the month.
At its peak, I had about $800 invested in Lending Club notes. But life happened, (like when I was supposed to do that awesome internship,) and I took a significant amount of money out.
I’m down to just under $400 now. I’m not going to make a significant amount of money investing with that but I’m okay with that.
Right now, I “make” just over $20 a month with the payments I receive on my notes. These payments include principal re-payments and interest.
In total, I’ve invested in 35 notes over the years. Of these, 25 are issued and current which means I’m getting payments each month. 9 of them have been repaid in full so I’ve received all of my principal back plus some interest which I’m okay with. Unfortunately, one has been charged off and I’ll never see the $14.94 in outstanding principal. It was a high interest rate note, so I’m not surprised.
My goal with Lending Club is to be able to invest in a new note each month so I need to reach a level where I get at least $25 in payments each month. My expected payments are $20.37 each month so I’m kinda close.
Right now, that’ll get me 9 new notes a year just by re-investing the payments that I receive.
That’s not bad at all!
Yeah, $20 in the grand scheme of things isn’t much. But $20 in “passive income”, for only having about $370 in outstanding principal with an adjusted net annualized return of 11.47%, is pretty sweet to me.
If you want to find out more about Lending Club, Mr. Money Mustache has his own experiment going on.
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Going forward, I’ll have a page dedicated to updates with my Lending Club experiment as well as my other side hustles.