Inspired by Mr. Money Mustache, I’ve decided to add peer-to-peer lending to my investment portfolio. I opened an account with Lending Club and just invested in my first two notes today.
The way it works is that Lending Club acts as a loan originator and servicer for consumer loans. They then allow investors to fund a portion of the note (minimum $25). The interest rates run from approximately 7% for A borrowers up to 24% for G borrowers. The low minimum investment lets you spread the default risk across a portfolio of notes instead of taking a risk on any one borrower.
Basically, you get to be a credit card company.
I started with $1,000 and will post periodically on how it’s going.