Started checking out Lending Club as a diversification option for a portion of my portfolio. I know some of you on this board have mentioned it as a possible tool, so I do a little online research and I decide to invest a little bit.

Then I started thinking... instead of using my own money, I'm certain I could borrow some money at an A grade (high FICO, low DTI, no revolving debt, homeowner, etc.) and then "lend" it back out at C/D/E grades. Just like a bank. Does Lending Club stop you from doing this? Can I play bank sitting in my underwear on the couch?

Oh, and inb4:

Yes, I know it's incredibly risky.
Yes, I know I could lose 100% (or possibly more) of my investment.
Yes, I know some of the people taking out loans have low financial IQs and will probably never pay me back.
Yes, I know it seems too good to be true.

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Posted by TheHiddenFlask

The Welsh red light district

Member since Jul 2008

18384 posts

Posted on 12/22/15 at 5:52 pm to geauxbears08

You're cost of funds would be way too high. You need to find a lower cost option.

A lot of hedge funds are already levering up these notes.

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Posted by TJG210

New Orleans

Member since Aug 2006

28366 posts

Posted on 12/22/15 at 7:43 pm to geauxbears08

I participate in lending club and have a thread on here about it. That being said, what you're proposing is insanity. Would you do the same and sock that money into the stock market?
Those loans are in no way secure and could end up in a world of hurt quickly. Plus would you not re-invest your dividends/returned principal?

This post was edited on 12/22/15 at 8:18 pm

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Posted by Jag_Warrior

Virginia

Member since May 2015

4134 posts

Posted on 12/24/15 at 11:36 am to geauxbears08

quote:
Yes, I know it's incredibly risky.

Yes, I know I could lose 100% (or possibly more) of my investment.

Yes, I know some of the people taking out loans have low financial IQs and will probably never pay me back.

Yes, I know it seems too good to be true.

I looked into Lending Club about this time last year. I even submitted the initial paperwork. But I soon determined that the time needed to properly manage hundreds or thousands of notes simply wasn't there for me at that time. Maybe when I retire, I'll do it. I do find it to be a very interesting business prospect.

But as far as what you're asking, since you've already acknowledged the inherent risks, the only thing I'd question is what sort of spread would you be looking at between your borrowing rate and your average lending rate? If the net (ideally) is less than 5%, personally, I'd see the reward not being worth the risk.

I like the ballsy, opportunistic way that you're thinking. But yeah, that's like holding onto a lit rocket and hoping for the best.

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Posted by GeneralLee

Member since Aug 2004

13106 posts

Posted on 2/9/16 at 6:55 am to geauxbears08

I've opened up an account and have made deposits into a good amount of notes, but two notes got fully paid off within a day or two of being issued? Has anyone had this happen to them before? I wonder what is causing this behavior.

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