Since I wrote recently (and critically) of the recent negative articles about p2p lending, I thought it was time to put my money where my mouth was, so tonight I doubled my Lending Club investment portfolio.
Of the initial $1,000 that I invested last month, $250 didn't clear (because loans either fund fully or not at all so if a borrower fails to attract enough investors, the lenders who initially pledged retain their money), so I began backfilling that portfolio. Then I used their investing tool to screen by a few filters - less than 3 defaults in the past 2 years, approved by Lending Club - and create a customized "moderate risk" portfolio. I scanned the 50 proposed notes and eliminated those that seemed particularly egregious. Like last time, "egregious" to me meant poor grammar, failure to answer investor questions, and bad business ideas, such as this gem:
I help executives with 15+ years of experience start their own businesses as solo Entrepreneurs, or "Solopreneurs". After streamlining the setup process and creating an "incubator" that has most of the systems already setup for them, I am now ready to deliver this service via the web using an interactive website. (Emphasis added)
I then filled in the gaps with handselected loans that met my most stringent criteria - verified income, no defaults in the last 2 years - plus an effort to get loans that will clear more quickly - notes that end in less than 7 days. My expected return, accounting for expected defaults, is just shy of 12%.
My standards are rather lower than I thought they would be. I suspect that if I actually knew these people, I wouldn't lend to the majority of them. Maybe I'm being elitist. The questions asked by the lenders also seemed particularly invasive, "e.g., what steps are you taking to ensure that you will not end up in this financial hole again?" I thought about signing up as a borrower as well to see the experience, but now realize that I would prefer not to be so examined by strangers myself.
Still, I'm really excited about my Lending Club investments. I've begun to receive my first deposits and I look forward to continuing to grow the portflio.