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Municipal bonds will yield 5-7%, very safe, all will be state tax free, some are also federal tax free. LendingClub can yield 10%+. You have to be pretty engag

Municipal bonds will yield 5-7%, very safe, all will be state tax free, some are also federal tax free. LendingClub can yield 10%+. You have to be pretty engaged, since you'll need to loan a small amount to a lot of people. At $1M, probably $2,500 to each of 400 people so the risk of default (there will be defaults) is diversified. You'll have to actively re-invest the principle/interest. But it pays back monthly and is kind of like paying yourself a salary in some respects.

hpvic03 13y ago
Do you have personal experience with LendingClub? I'm curious as to how reliable their returns are and how much work it takes.
- 11thEarlOfMar 13y ago
  Yes. I've been experimenting for about 8 months. You need to attend to it at least on a monthly basis. The payments start to add up and you either want to take them out for spending, or reinvest them to keep the interest coming. The key metric for LendingClub is the predicted default rate. If they are accurate, you can have good predictability of results and good returns. If not, then it's a long term problem for them. One might assume that their algorithm should improve as they get more data, and I'd love to hear from their modeling statisticians how that works, though it seems pretty close to their core IP. So I am taking it on faith a bit that they will get that part right. My experiment was to lend $25 to 100 people. I loaned to the same rated borrowers so I did not have to deal with too much tracking. All pay 17.6% and there was a 5% predicted default rate and about 0.65% fees. Net yeild to me was predicted to be 11.95%. Fees are only paid on what is actually paid back to me. At this time, 8 months in, I have 99 current 3 more than 31 days late 0 defaulted 0 charged off 2 repaid in full 11 sold at full price The reason there are 115 total is that I loaned to more borrowers as payments came in. I also put 15 up for sale on LendingClub's sister site to see how one might exit. 11 sold in a couple of days. The other 4 are still offered. Not sure why they have not sold yet, I put them up for sale last Friday. The actual 'Net Annualized Return' as calculated by LendingCLub on my notes is 18.07%. That is expected to drop each time there is a charge-off. I do expect some of the >31 day late to fall into charge off, but you can review the contact history between LendingClub and the borrower when LendingClub is trying to collect late payments. Checking one right now, I see that a payment is processing, so it looks like they are back on track.

hpvic03 13y ago

Do you have personal experience with LendingClub? I'm curious as to how reliable their returns are and how much work it takes.

11thEarlOfMar 13y ago
Yes. I've been experimenting for about 8 months. You need to attend to it at least on a monthly basis. The payments start to add up and you either want to take them out for spending, or reinvest them to keep the interest coming. The key metric for LendingClub is the predicted default rate. If they are accurate, you can have good predictability of results and good returns. If not, then it's a long term problem for them. One might assume that their algorithm should improve as they get more data, and I'd love to hear from their modeling statisticians how that works, though it seems pretty close to their core IP. So I am taking it on faith a bit that they will get that part right. My experiment was to lend $25 to 100 people. I loaned to the same rated borrowers so I did not have to deal with too much tracking. All pay 17.6% and there was a 5% predicted default rate and about 0.65% fees. Net yeild to me was predicted to be 11.95%. Fees are only paid on what is actually paid back to me. At this time, 8 months in, I have 99 current 3 more than 31 days late 0 defaulted 0 charged off 2 repaid in full 11 sold at full price The reason there are 115 total is that I loaned to more borrowers as payments came in. I also put 15 up for sale on LendingClub's sister site to see how one might exit. 11 sold in a couple of days. The other 4 are still offered. Not sure why they have not sold yet, I put them up for sale last Friday. The actual 'Net Annualized Return' as calculated by LendingCLub on my notes is 18.07%. That is expected to drop each time there is a charge-off. I do expect some of the >31 day late to fall into charge off, but you can review the contact history between LendingClub and the borrower when LendingClub is trying to collect late payments. Checking one right now, I see that a payment is processing, so it looks like they are back on track.