Saturday, June 20, 2009

Withdrew 60% of my Kiva funding

I went ahead and withdrew 60% of my Kiva micro-lending funding (back to my PayPal account). I intend to keep the remaining 40% in Kiva and reinvest in new Kiva loans as repayments come in.

I have been quite happy with Kiva, other than the one limitation that there is no interest paid on my investments. If they paid even a modest level of interest, say 1-2%, I would happily invest A LOT MORE in Kiva. A 2% return would cover most defaults and make Kiva investment money self-sustaining.

I may move the money over to Lending Club, or I may park it over at where it can earn 3.05% APY.

-- Jack Krupansky

Thursday, June 18, 2009

Progress with Lending Club P2P loan investments

I got off to a great start with my initial peer-to-peer (P2P) loans ("notes") through Lending Club, but then things bogged down. Now I am starting to catch up again.

I started by making five small $25 investments in five different notes. I was done, for now. Or so I thought. But only two of the notes were eventually issued. For various reasons, the other three fell through. Two days after I made the investments those three were showing as 100% funded, but still "In Review." At first I thought that simply meant that Lending Club review staff was behind and would eventually catch up. Not quite.

The review process is really two steps. First, the credit bureau is consulted and credit history and credit score and all of that credit history stuff is evaluated. That is actually an automated process. Then the loan is made available for us investors. We get to see a combination of that auomated credit information as well as unverified employment and income information. Why unverified? Well, simply because it takes time and separate manual processes that can only be automated in some cases. The loan description actually does indicate whether the employment and income information has been verified (with an asterisk if it has been verified) and Credit Status Review does say "Under Review" if the displayed information is still unverified. The status will change to "Approved" once Lending Club has completed the employment and income verification. Lending Club is up-front and transparent with all of this, but you (I) need to understand the jargon and I had failed to do so initially. Now I know.

At least now I can understand why so many mortgage originators were so willing to issue "no doc" mortgages back before the financial crisis -- it is a real pain to verify income and employment.

Lending Club says that they are in talks with a number of payroll service providers so that they will gradually be able to automatically verify employment and income for an increasing portion of loans.

Why not wait until Credit Status Review says "Approved" before selecting a loan for investment? Simple: Because a lot of the "best" loans will already have gotten to 100% funded by that time and no longer be available for you to make an investment. There is no risk selecting an "Under Review" note, it is simply the inconvenience that your investment will be returned within a few days and the money is tied up during that review period.

So, I went ahead and selected another four loans (total of ten). My goal is still to get five or six loan investments.

So far, another loan has been issued (four so far), two more are "In Review" (fully funded), and three are "In Funding."

It is difficult to say how many of those five "open" investments will finally be "issued." I did not intend to do five more, but it's okay if all five get issued. Maybe only one or two will ultimately get issued and that would be ideal for me. Or, maybe they all fall through and then I will have to go back and search for new loans to invest in.

But the bottom line is that I am starting to get into the swing of the whole process.

I actually got to meet the executives of Lending Club last week. I'll post about that separately.

-- Jack Krupansky

Wednesday, June 10, 2009

Invested in my fifth Lending Club P2P loan

I made my 5th investment in a peer-to-peer (P2P) loan ("note") through Lending Club, $25 in a note for $11,000 for someone to buy a wooden sailboat, at an interest rate of 14.74% for a term of 3 years. The loan grade is D3, which is higher risk due to the borrower's credit score being in the 660-678 range.

Read about my fourth investment loan.

-- Jack Krupansky

My first Lending Club peer-to-peer loan investment is now fully funded

The first Lending Club peer-to-peer (P2P) loan ("note") that I invested in yesterday is now fully funded, closed, and "issued." It was only 60% funded when I invested yesterday, but things move fast on Lending Club. This loan ("note") is for $10,000 intended for credit card refinancing. It is a low-risk loan (grade A5) with an interest rate of 9.63%. The first payment (interest only) is due on July 17, 2009.

I am still considering investing in another one or two loans in the very near future to round out my initial portfolio.

-- Jack Krupansky

Tuesday, June 09, 2009

Made my fourth Lending Club peer-to-peer loan investment

I just made my fourth investment in a peer-to-peer loan ("note") through Lending Club. This note was for someone to remodel their kitchen and bathroom. The loan is for $5,000. My investment is for $25 of that note. The interest rate is 9.32%. The term of the note is 3 years. The loan grade is A4, which is low risk. The borrower's credit score is in the 714-749 range. The note is still "In funding", with 13 days left in its funding period, so it is possible that it does not get fully funded and I get my investment back, but it is already 43% funded in just one day.

I may do another one or two investments in the very near future, but my initial four investments cover a wide range, from two low risk notes, to one moderate risk and one higher risk note, with a variety of purposes, including educational expenses, a motorcycle, home improvement, and debt consolidation.

That's enough for one day!

Read about my third investment loan.

-- Jack Krupansky

Made my third Lending Club peer-to-peer loan investment

I made my third investment in a peer-to-peer loan ("note") through Lending Club. This note was for a student for educational expenses. The loan is for $4,000. My investment is for $25 of that note. The interest rate is 15.37%. The term of the note is 3 years. The loan grade is D5, which is a lot riskier. The borrower's credit score is in the 660-678 range.

For my next loan... Maybe I'll fund some home improvement.

Read about my second investment loan.

-- Jack Krupansky

Made my second Lending Club peer-to-peer loan investment

I went ahead and made my second investment in a peer-to-peer loan ("note") through Lending Club. This note was for someone here in New York buying a motorcycle. The loan is for $7,700. My investment is for #25 of that note. The interest rate is 12.53%. The term of the note is 3 years. The loan grade is C1, which is a bit riskier. The borrower's credit score is in the 679-713 range.

For my next loan... Maybe I'll fund some home improvement.

I will also consider a somewhat higher-risk note in the 13% interest range.

Read about my first investment loan.

-- Jack Krupansky

Just made my first Lending Club peer-to-peer loan investment

I just now made my first investment in a peer-to-peer loan ("note") through Lending Club.  I opened a Lending Club account as an investor (lender) last Wednesday. The initial funding transfer from my bank account (actually my Fidelity brokerage account) completed yesterday.

I am starting with a modest $1,000 initial funding and intend to invest $25 in each peer-to-peer loan (called a note.) That will eventually spread my risk over 40 loans (notes.) After I get at least six months to a year of experience (and depending on my own financial condition) I will consider how much more to invest.

A typical Lending Club loan (note) would be in the $5,000 to $25,000 range, so my little $25 is only a small amount of the risk of default for a given loan (note.)

The standard Lending Club note is for a 3-year term.

I am still a little concerned about the dicey state of the economy and the risk that even people with good jobs today might lose them and default on their debts, so I am currently thinking of investing only a small portion of my funding up front, then a little more over the summer, then some more in the early fall, and maybe the rest as we start to see some economic strengthening and reversal of job losses later in the fall and into early next year. At least that is my initial "plan."

I'll probably invest about $100 to $150 upfront just to get some experience with the whole process. That would be small pieces of four to six loans (notes.)

I'll probably spread my investments over a range of credit risks, just to see how different risk levels perform and to average up to a higher return.

My first investment was for $25 of a $10,000 note intended for credit card refinancing. The loan grade is A5, indicating low-risk. The interest rate will be 9.63%. The borrower works for Best Buy. Their credit score is in the 714-749 range. There are a lot of other credit-related details that Lending Club provides. The note is still "In Funding", indicating that it has another 8 days left in its 14-day funding period. If investors do not buy up the entire note by the end of that period that note will not "close" and our investments will be returned.

For my next loan... I guess I'll get it over with and loan somebody money to buy a motorcycle!

-- Jack Krupansky

Wednesday, June 03, 2009

Opened a Lending Club account to be a peer-to-peer lender

I just finished opening a Lending Club account as an investor (lender.) This online Web site supports what is called peer-to-peer lending. It lets people like me who have extra money to lend to... other people like me who need money. As the web site says:

Lending Club is a social lending network that brings together investors and creditworthy borrowers to offer value beyond traditional banks.

Borrowers with good credit can get personal loans from $1,000 to $25,000 at interest rates that are often significantly better than rates from conventional sources.

For lenders, money invested goes immediately to Lending Club's approved borrower members. Most lender members spread their investment across tens or hundreds of qualified borrowers. Notes (that correspond to specific borrower loans) are offered only by means of a prospectus.

The next step is to complete the initial funding of my account so that I can start matking loans. I initiated the transfer of funds this morning, but it may not complete until next Tuesday.

My expectation is that I will be able to make some initial loans in a week.

I am starting out with $1,000. I still need to do some more reading and strategizing, but I expect that I will spread my risk by only contributing $25 to each loan. That would give me 40 loans initially. Also, I may only commit half or even a third of my money at the beginning and wait a few months to see how things play out.

A typical loan might be in the $5,000 to $15,000 range with an interest rate in the 9% to 13% range, based on the grade of the loan.

A lot of credit background information is available for each "note" (loan), including income and credit score range and loan "grade", so a decision can be made based on verified facts and risk.

Unlike Kiva which is great as a non-profit charity for helping the working poor around the world, Lending Club actually permits me to make a decent profit from my lending.

I do have a fair amount of concern about lending in the current economic climate. Even if somebody has a great job today, they might lose it by the end of the day. I might in fact decide to defer most of my lending until later in the summer just to minimize the chance of lending too much to tomorrow's unemployed.

-- Jack Krupansky

Made my Kiva micro-loan for the month of June

I made a new micro-loan through Kiva for the month of June. My intention is to make a new micro-loan every month, in large part from repayments for past micro-loans.

This one was for a group of 18 micro-entrepreneurs in Tanzania who are making furniture. It is a 6-month micro-loan for a total of $4,550, of which I lent $25. The money is to be used to buy leather, cloth for sofas, and varnish for wood. Its first repayment is scheduled for August 2009. The micro-loan was already disbursed to the micro-entrepreneur group on May 27, 2009 by the local partner. Kiva is raising funds to essentially buy that loan from the local partner.

Here is my Kiva public lender page:

Note: This is all real and good, but these micro-loans do not net any interest to us micro-lenders. Kiva's fine print:

Lending to the working poor through Kiva involves risk of principal loss.
Kiva does not guarantee repayment nor do we offer a financial return on your loan.

Still, at least we know our money is really helping somebody better their lives in a visible way rather than put the money in a bank account or money market fund where who knows what it helps to pay for or what good it does and for only a few pennies of profit in our pockets.

-- Jack Krupansky