Friday, December 26, 2014
Lending Club is a no-go in Texas
One of my goals for 2015 is to diversify my income streams. After seeing many bloggers report their peer to peer lending successes, I thought it might be a good idea to jump in the waters as well. There are many bloggers out there who are exceeding 10% in interest returns which I find very exciting. I actually set up a LC account back in 2007, but I never entered my banking information and for whatever reason I didn't pursue the matter further.
After spending a few hours browsing through many different types of loans, I finally went through the different application pages and set up a transfer. The whole process was incredibly easy and I was certainly excited to make my first loan.
While browsing through the many types of loans, I noticed that the credit scores were all over 680 and I was also surprised to see some individuals with high 700s and low 800s credit scores who were prepared to enter into loans in the 6-8% range. I actually find this difficult to believe because people with credit scores in the high 700s and above have a virtually 0 percent default rate. While many investors might chase some of the high risk borrowers, I would probably stay with the more stable loans and could live a 5-7% rate of return.
Once my initial transfer of $500 went through, I saw the standard "Welcome to Sharebuilder" acknowledgement, but they also mentioned that due to restrictions from the state of Texas I could not initiate any loans right now. I find it funny that in Texas, which probably has the fewest number of business regulations in the country, one cannot enter into LC transations. I guess it is easier to erect an oil derrick in your back yard than it is to loan money in Texas.
LC did say that I could purchase existing loans on another website called Foliofn I believe. At this time I will probably pass on this option. Hopefully sometime during the next few years LC will become available in Texas.
It has been almost a year since I have purchased any high yield bonds, so I might start adding to my bond positions as an income alternative. Also I have noticed that many BDCs have been dropping in value recently. I may investigate this option as well.
If anyone has any other ideas, I am very interested in hearing about them.