Sunday, January 25, 2015

P2P Accounts (Update) - January 2015


On January 1st, our Lending Club account balance was at $9,092.76 (an increase of $11.94 from last month). We received $563.57 in payments from our active notes; of which, we received $60.59 in interest (an increase of $7.11/mo.).  The principal balance of our active notes was $7,950.03 (a decrease of $388.37 from last month), with $250.00 of loans in review or funding and a remaining cash balance of $904.57 (an increase of $150.21).  We are currently generating 5.00% on our seasoned notes. No loans were charged off this month.
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On January 1st, our Prosper account balance was at $8,834.32 (an increase of $76.32 from last month).  We received $476.63 in payments from our active notes; of which, we received, $63.46 in interest (an increase of $6.70/mo.). The principal balance of our active notes was $7,826.65 (a decrease of $70.34 from last month). We are currently sitting on a cash balance of $1,007.67 (an increase of $146.66), of which a total of $100.00 is  pending investments.  We are currently generating 7.57% on our seasoned notes, and 7.32% on all notes invested to date (includes profits from paid off notes).

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Total Value of Both P2P accounts: $17,927.08
($76.32 increase from last month)
 
Total Interest Earned in December: $124.05
($12.81 increase from last month)
 
Estimate Average Interest Earned: 6.28%

A few months back, we started to automate our note buying process but still continue to struggle putting our money back to work. I guess as along as we continue to see the account grow (albeit, at a slow pace!), we won't panic.  Plus, I'd rather buy notes at our desired criteria then to open ourselves up to riskier notes.  Worse case, we'll simply find another investment tool and put our money to work elsewhere.

Click below to view our peer-to-peer lending accounts history

PEER-TO-PEER LENDING ACCOUNTS

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NOTES CRITERIA:

Our family has been investing in peer-to-peer lending notes for approximately 3 years now. And because of past defaults, we have now refined our search criteria. As a result, we now take a slightly more conservative approach with the notes we invest in. Currently, we only invest in notes that fit the following initial criteria:
  • Amount requested is under $6,000;
  • Credit score of 700 or more; and
  • Monthly payment will be less than $250.
From those we evaluate (Employment Status):
  • The borrower's income (prefer > $50,000 but depends on amount requested);
  • Length of employment (must be > 2 years); and
  • Their occupation (certain occupations, known to be more secured, are more desirable).
We then look at (Ability To Pay):
  • Their credit history;
  • Revolving balance; and
  • Debt to income level, etc.
We do not invest in any notes where borrow is currently delinquent, of if they have had  a public record within the last 12 months. We also do not invest in notes where the description provided is "Other." We feel that there is too much risk involve when the borrower is not willing to reveal why he/she needs the money.

 

10 comments:

  1. AFFJ,

    I can't wait until we Texans can invest in Lending Club. I like the idea of earning interest as well as having your capital partially returned each month. That could really help with the cash flow when retirement starts.

    MDP

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    1. Surprised it has not caught on in all states. I'm sure it will eventually make it to your state soon. Truthfully, it is not the best investment tool out there but it is another egg in the basket. :) AFFJ

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  2. Your struggle to find notes is likely less a result of the quantity that meets the criteria and more of the institutional demand that is absorbing any growth in volume. My post just last month (linked in my name) laid this out pretty well. I know you are hesitant to review your criteria, but perhaps looking for something equally as restrictive in terms of borrower quality but less so in volume of notes might be worthwhile. You shouldn't be having too many issues finding loans in the higher grades of AA-A and A-B.

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    1. W2R - Couldn't agree with your more...it certainly appears that the institutional investors are getting first crack at the notes. They are not leaving enough quality notes for us small investors. :(

      I also think that part of my problem is that the larger my account grows, and the more notes I have paying me each month, it gets exponentially harder to keep up with the pace of your payments (especially when there are few that meet your criteria.

      AFFJ

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  3. I enjoy reading these posts from others that are involved in the P2P lending world as I am not into it at all. These updates give me a clearer real world example of how the system works with real world results not just some hype or marketing material from a company. Similar to what we do with our dividend blogs. It's all real world results for better or worse. Thanks for sharing and look forward to your next update.

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    1. Thanks DivHut...some transparency has always been the goal of our blog. We definitely plan to continue sharing our results and stay accountable to our readers and hopefully help us stay on track with our goal towards FI. Thanks for following along. AFFJ

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  4. P2P lending sounds interesting but seems like you need to spend a lot of time doing your homework to make sure you lend your money to responsible people. I thought about entering P2P lending a while ago but kinda glad they don't allow this in Canada.

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    1. Tawcan - I think the longer you invest, the more work it becomes. As you begin to receive more capital back (and if you continue adding capital), it does become harder each month to spend all of your capital.

      One thing I have considered recently is buying larger notes. Based on the results I've been seeing these last few months, I think I may have no choice but to up the ante. Wish me luck!

      AFFJ

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  5. Peer to peer lending is on my list, there has been a lot of things going on that I haven't had time to get to it. It is nice to see someone doing it and putting out some awesome number, it beats the 0.017 banking saving rate. :)

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    1. Vivianne - It definitely beats the interest you get from savings. And I would also say that it is less risky than stocks. But is the time spent worth the difference you get in return versus a 3-5 year CD. Right now, my response is just barely. I was hoping that automating my purchases would reduce the amount of time I spent looking for notes but it has not proven to be as great as I hoped. AFFJ

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