$50 Bonus For Investing At Lending Club

Posted in Investing by CrankySaver
November 13, 2009 10:56 AM - 0 Comments

With CD and savings account rates plunging to record lows every week, it may be the time to consider a more lucrative alternative — social or peer-to-peer lending.

This is where you loan money directly to worthy borrowers through a Web site, rather than putting your money in a bank and allowing its loan officers to pick the investments.

It’s possible to earn a better return than you’d ever get from a bank.

Lending Club, for example, says the net annualized return for its investors has been over 9.5% since 2007 — and yes, that includes the losses on loans that don’t get repaid.

For the rest of November, Lending Club is also offering a $50 bonus to Bankaholic readers who sign-up to be new lenders. (Use the link above and the money will be placed in your account as soon as you register.)

Then you can start reviewing applications and choose which loans to fund.

You won’t want to risk your hard-earned dollars on just one person. You can invest as little as $25 per loan and spread your money around to scores or even hundreds of loans.

The terms of each loan, including the interest rate, are established by Lending Club based on the creditworthiness of each borrower.

But its rigorous credit policy requires borrowers to have a minimum FICO score of 660 and maximum debt-to-income ratio of 25%, which has led to a low 3% annualized default rate.

Now, let’s be clear. This is not for everyone.

These loans are not insured by the FDIC or anyone else, and you shouldn’t commit more money than you can afford to lose.

Lending Club is pretty up-front about the risk and sets minimum financial standards for all lenders, requiring them to have:

An annual gross income of at least $70,000 and a net worth of at least $70,000 (exclusive of home, home furnishings and automobiles). California residents must have $100,000 in gross income and net worth.
Or, a net worth of at least $250,000.

Lending Club also limits investors from lending more than 10% of their net worth through the site.

If you know someone who needs to borrow money, Lending Club says its rates are up to 30% lower than similar loans at traditional financial institutions.