In our last edition of Reader Stories, we met Logan from Colorado. For this one we get to meet Jack, a tech reseller from Illinois. The continued purpose of Reader Stories is to add a bit of emotion and humanity to this often-dry online investment, helping to warm the nation to peer to peer lending. Also, I do enjoy sending bags of gourmet Stumptown coffee by mail.
Jack has been involved with peer to peer lending since 2008, nearly since it began. He has sizable accounts in both Lending Club and Prosper – over $200,000 total. An experienced investor in his late forties, Jack probably represents a more common investor in peer to peer lending than myself.
Meet Jack: Husband, Father, and a Truly Seasoned P2P Investor
Lending Club Account
#1. In a sentence, talk about your family, where do you live, and what do you do for work?
I live in Downers Grove, Illinois and work as a technology reseller. I am married and have two teenage daughters.
#2. How did you discover peer to peer lending?
I was looking for ways to leverage my discretionary income outside of stocks and bonds. My savings account was just not producing any money — I believe at the time is was a scrawny 0.25%. I did find an online bank that provided me with 0.85%, but that still was less then my worst year in peer to peer lending. In early 2008, I googled alternative investments and found Prosper.
#3. What convinced you to take the plunge and open an account?
Sometimes you just have to say, “What the heck.” I jumped in with a small amount of money to figure it out. My first Prosper account went though the whole financial crisis, including their “quiet” period. I opened my first Lending Club account in 2011 since I wanted to spread my risk across two platforms.
#4. What is your return today? Are you happy with it?
I have taken my lumps. I made a bunch of mistakes at first, like over-reading the loan descriptions of why people needed the money (and not really filtering them at all). Also, I used to invest too heavily within individual loans, so my account was not evenly diversified.
I am happy with my returns since I changed my risk tolerance from ultra-conservative to somewhat aggressive. At that time, we were coming off of the 2008 financial crisis, so I only invested in A and B-grade loans. After one year, I started coming across the various peer to peer lending blogs and switched my strategy to loan grades of C and below, since it seemed people were getting better returns in these riskier loans without a large increase in defaults. On Lending Club I went from an 8% to almost a 10% return in the past 18 months by switching to this strategy. On Prosper, I am still hovering around 8% since it is very difficult to find the riskier loan grades without an API. Also on Prosper, once a loan goes late you cannot sell it on the secondary market.
I am learning all the time, but am on my way to returns that are copacetic with in this environment.
#5. What does your family or friends think of your investment?
I tell many people about this industry and its potential for a rapid paradigm shift, but many of them are still skeptical. I believe this asset class is going to dramatically change the landscape of lending and banking as we know it today, particularly after the Lending Club IPO. This will allow them to lend and borrow in every state and challenge the banking industry for years to come.
#6. Has anything been disappointing or unexpected?
Oh sure: the Prosper quiet period, a lack of quality loans, the dinnerbell-like feeding times, and the loss of Prosper-Stats when you could compare yourselves to other investors [Ed: Investor data on Prosper used to be public]. I could examine how these folks were lending and getting better returns. I was regularly adding money to my Prosper account, so I also enjoyed watching my name move up the charts each month in regard to how much people were investing.
Basically I miss the good ol’ days of peer to peer lending. :) Now there are many sites like LendingMemo that I save as my favorites to get the latest and greatest news about peer to peer.
#7. What is the best part about peer to peer lending?
You make money and you help others out at the same time. Win-win!
Share Your Story on LendingMemo – Get Coffee
Getting spotlighted on LendingMemo is simple. In 1-3 sentences each, answer the following questions:
- In a sentence, talk about your family, where do you live, and what do you do for work?
- How did you discover peer to peer lending?
- What convinced you to take the plunge and open an account?
- What is your return today? Are you happy with it?
- What does your family or friends think of your investment?
- Has anything been disappointing or unexpected?
- What is the best part about peer to peer lending?
Email your answers to readerstories|at|lendingmemo.com with (1) a picture of you or your family & (2) a screenshot of your Lending Club or Prosper home screen.
Note: The national climate will change through stories like these. If you care about spreading the word of p2p lending, let’s hear from you!