I wasted little time in building up my Lending Club portfolio.
Only a few days in the peer-to-peer lending business, I already have, believe it or not, 20 loans (notes) in my portfolio 8 of them are $25 loans and the rest are $50 loans at a total value of $794.68. Right now, I don’t want to any loans that are greater than $50 because I want to spread the risk by making more small loans than a small number of large loans.
As I mentioned in my Lending Club review post, all the notes I own now were purchased through LC’s Note Trading Platform and all were bought at slight discount, which isn’t too bad.
As you see from the above picture, so far I have avoided high grade loans, grade A in particular. You probably wonder why no high grade loans. On one hand, the argument of investing in high grade loans is valid because high grade loans are assigned to borrowers with better credit scores, who are less likely to default or be late (Lending Club doesn’t its own homework when assigning a loan grade). Lending money to these more credit worthy borrowers is, therefore, less risky, at least on theory. On the other hand, I am into this to make money, good money even though at a small amount. Since high grade loans pay lower interests, buying A grade notes will not make me achieve my goal faster. Besides, as I said yesterday, people with low credit score won’t necessarily be late in making payments. When I first got my credit score in 2003, it wasn’t a very good score. If I use that score to get a loan on Lending Club, my loan won’t be a grade A either, but then I never missed any payment. So I am going to bet on lower grade loans to make more money
Anyway, I should be receiving my first payment of a grand total $0.80 ($0.59 principle plus $0.21 interest) very soon. A small step, but a good one
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