I spent Labor Day in the Finger Lakes region of New York, visiting my sister.
But while we were relaxing in the sun – drinking local Riesling and feasting on fat, ripe tomatoes from her garden – my money was hard at work.
In particular, one of my crowdfunded investments was automatically churning out cash – just like it’s been doing non-stop for the past 12 months.
Today I’ll show you how this investment has earned me an 8.93% yield…
And then I’ll show you why it’s now easier than ever to join me.
Unlike equity crowdfunding, where you invest in a private company and receive a stake of the business in return, today I’ll introduce you to crowdfund lending.
Crowdfund lending (or “peer-to-peer lending”) is where regular people like us pool our capital and lend it to others.
Borrowers use the loans, typically $15,000 to $25,000 in size, to pay down high-interest credit cards, or to make a significant purchase like a new car.
Yes: it sounds crazy. But by cutting out the middleman, borrowers pay less, and lenders earn a higher yield.
As of June 2014, the leader in this sector, Lending Club, has made over $5 billion in loans… and has paid out $494 million in interest to investors like you.
Depending on the borrower’s credit score, gross yields before fees and defaults have ranged from 9% to 14%.
So What’s The “Catch”?
The catch is that you can’t just invest in a handful of loans – Lending Club calls them “notes” – and expect to do well. You need to build a diversified portfolio.
According to Lending Club, over 99% of their investors had positive returns if they:
1. Built a portfolio that included 100 or more notes, and
2. Had no single note that accounted for more than 2.5% of their total investment.
To meet these criteria, given Lending Club’s $25 per note minimum, you’d need to invest $25 into at least 100 different notes.
$2,500 is a relatively low financial threshold to be diversified…
The problem is that sifting through thousands of loans to select the ones that meet your criteria would be incredibly time consuming…
And given the enormous investor demand for yield, you’d need to log in many times a day to snatch up the good deals.
The new tool, called Automated Investing, provides a “Set It and Forget It” investment strategy.
You simply fund your account ($2,500 minimum), set your criteria (loan grade, term length, amount per Note, etc.), and Lending Club automatically places orders as matching inventory becomes available.
There’s no additional fee to use this service:
Whether you use Automated Investing or not, Lending Club charges 1% of the amount of any payment you receive.
$3,079 a Month in Easy Income
To see how this strategy could earn you an easy income stream, let’s look at a scenario Lending Club mentions on their site:
Let’s say you invested $100,000, and wanted monthly payments of interest and principal.
If you invested in 36-month, grade B Notes providing an aggregate 7.0% net annualized return, you’d earn $3,079 each month in cash.
You could reinvest those proceeds, or you could withdraw them.
Not too shabby…
Get In There
Are there risks here?
They include defaults on the loans (historically, defaults have ranged from 1.4% to 9.8%) and government regulation.
But if you’re thinking about exploring this option, take a look soon >>
Last week, Lending Club filed to go public – and since it might be one of the ten largest IPOs of an Internet company, it’s starting to get a lot of attention.
Get in there now before others learn about it –
And earn some easy monthly income!
(Please note: Crowdability has no relationship with Lending Club, but Matt does invest there as an individual investor.)
Have you ever made a Peer-To-Peer lending investment? If so, how’s it done for you? Let us know by commenting below.