ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Peer to peer lending - Micro finance and Lending Club

Updated on June 8, 2015
Source

Peer to Peer-Small amounts with BIG returns

In recent years the wave of micro finance has steadily gained momentum. The concept is based upon the peer-to-peer lending, in which an investor is allowed to buy small shares (called notes) to fund another individual's loan. Each loan is pre-screened by the lending company before it is available for investment, and assigned a fixed interest rate based upon various financial factors of the applicant. The return on these loans can range from 5% all the way up to 18% or more. The average CD (certificate of deposit) rate is no higher than 1.5% for one year. While the risk in micro investing is higher than CDs, there is a much higher, consistent reward as well. Lending Club, one of the peer-to-peer lending sites, has a Net Annualized Return (percentage amount returned on one's investment each year) of 9.64% since its inception.

Micro Finance and Lending Club

I'm assuming that you're you're reading this, you already are interested in earning passive income through investing, but that you have little to no experience in doing so. First, you need to decide what platform your going to use to invest. The two big ones that I know of are Lending Club and Prosper.com. I'm going to use Lending Club as the example because I have most of my experience using their platform (both are very similar conceptually). One quick note, when deciding which to use, know that you may not be able to use one platform or the other in your state, or there may be certain limitations (which we'll discuss later). 

Getting Started

There is no minimum to start an account, all you need is your bank account info to transfer funds, which takes a few days to get money transferred in and out of the account. There is no charge or penalty to withdraw funds anytime, as long as its available money that is not tied up in investments. How much you ask? That's entirely up to you, Lending Club recommends that you only invest a small percentage of your income (a wise choice) but ultimately you'll have to decide how much you feel comfortable with. A good question to ask is- Will the potential loss of this money be significantly detrimental to my overall finances? Remember notes start at $25 so you don't have to invest much. I would recommend a small amount that you're comfortable with to begin learning how the process works. Once you have some money, you're ready to invest.

Buying Notes

So to recap-

You invest your money by purchasing notes, which are small pieces of a requested loan amount, and these notes have a fixed interest rate which pays out to the lenders (you) on a monthly basis as the borrower pays back his loan. Each payment received will be part of the principal (the original loan amount) and the rest is the interest on the loan.Read through some of the material on Lending Club to gain a better understanding of how to trade or check out more on Buying and Trading notes in Lending Club

Things to Note

One drawback with Lending Club is that it is not available in all states and some states can only use the trading platform to buy and sell notes. (As you go through the sign-up process you will be notified if this is the case) If you reside in a state that does not allow you to purchase notes as soon as they are approved by Lending Club, don't fret, you may still be able to purchase notes using the trading platform where lenders buy and sell notes. (which sometimes makes for great deals on notes!) If you have any questions just leave them in the comment box or if this hub on peer to peer lending, micro finance and Lending Club was helpful please vote it up!

Do you have a better sense of what Lending Club and Peer to Peer financing entails?

See results

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)