You are going to explore a fun and unique investment that can provide passive income every month
Are you investing in Lending Club? If not there are several reasons you should consider at least putting part of your savings in a Lending Club account. Lending Club, is easier to understand than the stock market. It offers consistent month returns similar to a bond, and your money is never locked away like in a Bank CD.
Lending Club, is simply what is known as a Peer to Peer Lending Platform. View the following example to see how it works. You neighbor Bob, is maxed out on two of his credit cards and paying over 20% interest on each card every month. He is doing his best to save his credit score but his minimum payments are not keeping up with the growing balances and he doesn't know what to do. In years past, Bob may have applied for another credit card to help him pay the mounting debts. Or he would have humbled himself and asked for a loan from a family member or friend to help him buy some time till he could find a way out of this high interest rate trap.
But today Bob, can go to LendingClub.com, and apply for a debt consolidation loan with a simple interest rate over a 3 year or a 5 year period. These loans can have payments that are close to the minimum payments Bob is paying on his credit cards. However, Bob's interest rate will usually be 30% lower on this simple interest loan. Instead, of the 20+% on the revolving interest credit companies charge.
So what makes Lending Club, different from other lending and Banking sites? Well that's where you come in. When Bob, applies for a loan on Lending Club. He creates a loan profile. This has his loan description, his credit profile (pulled from credit reporting agencies), loan terms (amount of loan, interest rate, and length of loan), and his income (verified by Lending Club). Once the loan is listed on the site. You can come along and review Bob's loan application. Of course you may not know it's Bob, for privacy reasons you will not see a name instead you will just see a member number. Once you review Bob's Loan taking note of his reasons for the loan, the interest rate you will earn on his loan, and his credit profile. You are then able to invest in his loan if you so choose. But you don't have to give the full amount of the loan. You can invest as little as $25 up to the remaining balance of the loan.
Each month Bob, is billed by Lending Club for his loan payment. Lending Club, will take payment and keep a small 0.5% fee for their efforts and distribute the rest of the money plus interest to the investors on Bob's loan. If you choose loans with very strong credit profiles, you will be earning payments consistently each month for part principle and part interest. You can reinvest this money into more loans or simply withdraw it to your bank account. The choice is yours. I hope you find Lending Club, as unique and profitable as I do.