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Lending Club: Invest in Your Friends

Written by Nickel - 24 Comments

Over the weekend, our very own Matt Jabs (FCN contributor and finance blogger extraordinaire) dropped me a line to say that he and his wife have applied a loan through Lending Club.

Why Lending Club?

As you’re likely aware, Matt is working hard to get out of debt, and has also become somewhat dis-illusioned with big banks. Following the recommendation of a friend, Matt decided to use Lending Club’s social lending platform to consolidate and effectively refinance a portion of his high interest debt.

As soon as Matt told me about this, I jumped on Lending Club, found his loan, and invested $25 $500. While some might shy away from lending money to family or friends, I’d rather invest in Matt than in a complete stranger.

Help a brother out

If you’re looking to get your feet wet with social lending, here’s your chance.

  1. Open an account with Lending Club
  2. Click the “Browse Notes” link under the “Invest” tab
  3. Search for “betsyjabs” using the search box in the right sidebar

Assuming that it hasn’t already been funded by the time you do this, you should see an $11k loan request under the username “betsyjabs” (Matt’s wife). They’re Grade A borrowers, and the loan pays 9.32% (see below).

Just be sure to act fast! Matt listed the loan Saturday, and it’s over 60% funded.

Published on July 27th, 2009
Modified on February 26th, 2013 - 24 Comments
Filed under: Saving & Investing

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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24 Responses to “Lending Club: Invest in Your Friends”

  1. 1
    LOL Says:

    I’d invest in Matt’s debt reduction, but my state is still not in the list of allowed investors:

    https://www.lendingclub.com/info/faq.action#l20

    This Note sounds like a safe bet seeing how fired up Matt is in his debt-payoff goals.

  2. 2
    Matt Jabs Says:

    Thank you to everyone who funds me.

    This is a great way to symbiotically help each other. You make interest money by lending to someone you’re familiar with… and I consolidate my debt under a lower interest rate & pay you instead of the big banks I’m unsatisfied with!

    It’s a win/win.

  3. 3
    Jeremy Olexa Says:

    Thanks for the heads up on a seemingly secure note. We shall see if funds get transferred into my LC account before the note is fully funded.

  4. 4
    Erica Douglass Says:

    I invested $2,500 in Matt’s loan. I figure if he tries to default, we can all gang up on him on Twitter. I mean help him! Help him out! ;)

    -Erica

  5. 5
    RobG Says:

    I just invested in Matt’s loan. Let’s get him out of debt, shall we?

    Rob G from LendingClub

  6. 6
    Jason R Fisher Says:

    Stupid Ohio. I can’t use LC.

  7. 7
    Bible Money Matters Says:

    Will be investing in Matt’s loan once my funding comes from my bank account. (if it isn’t fully funded already). What better way to try out lending club than with someone I know will pay me back! :)

  8. 8
    Jeremy Olexa Says:

    It has been long since funded, by a couple hours now. =P (I missed out too)

  9. 9
    Mr. ToughMoneyLove Says:

    Borrowing his way out of debt? Isn’t that how he got in debt to begin with – by borrowing?

    A recent post from Jabs’ DFA blog had this:

    “We have run into a very expensive unplanned expense that has cost us around $4,500 over the course of the last few months. It has caused me to cut back to only putting $100 on each of our 3 remaining credit cards, thus severely hampering our ability to hit our goals.”

    And this:

    “Once again, my wife had to charge and unplanned amount to her credit card. It was for a summer class she has to take once every two years that we had failed to budget for. Argh! ”

    He still has the cards and still uses them. So why feed the debt monster with more loans, freeing up more space on the cards?

  10. 10
    Matt Jabs Says:

    @Mr. TML
    You raise great points. Now we need either me or Paul Harvey to deliverThe Rest of the Story.

    The $4,500 unplanned expense was not charged to any credit card, and was actually the foundation of why I alter the Dave Ramsey idea of building only a $1,000 EF while repaying debt. It was not a sufficient amount to cover our emergencies. So now instead of having only $1,000 I continue to put 75% of my available funds toward debt repayment and 25% continually toward EF and other savings, such as my Auto Fund… so I can build money for unseen expenses while simultaneously killing debt.

    Since starting my Debt Free Adventure in January of 2009, I have NEVER used my credit cards.

    My wife used hers twice, both because of unplanned/unbudgeted expenses. Once for a car repair and once for a summer class… both of which were instances we had missed in our budget, which we all know is a living document. Our budget has only been going since January of this year, so it is yet a baby that needs nurturing & correction.

    The loan from lending club will cover $11,000 of our remaining $11,700. The other $700 will be paid off by my wife separately (it is what remains of the $800 she charged) over the course of the next 2 months with money from her checking account. The combined solution of a living budget, and continually funding our savings funds are reactions & solutions to those two charges ensuring that it does not have to happen again.

  11. 11
    LOL Says:

    #9) Assuming that this truly is a debt consolidation loan — it looks like Matt is converting his debt to a lower interest rate. 9.5% sounds really nice compared to the 15% average today for CC’s (he may even have a 29% default rate on some of that).

    Hopefully for Matt, the monthly payments on the consolidated loan is lower than the combined monthly payments on his original debts — increasing cash flow to help with whatever cash binds he may be in.

    Debt is a tool (if used wisely) — and so far, this looks like a wise decision on Matts part. Now, if he continues to use the CC, well then this scheme will turn out badly.

    Other options Matt could consider: stop retirement savings, sell assets, extra part-time jobs, build emergency fund to stop using CC, etc — which is everything I did to get out of debt. I never had bad interest rates so I didn’t do the debt consolidation ‘trick’.

    **EDIT** Looks like Matt posted just before I did :)

  12. 12
    Nickel Says:

    TML: While I realize that being “tough” is your thing, I’ve just gotta ask… Are you really suggesting that people who are trying to get out of debt *shouldn’t* try to consolidate and reduce the interest rates on their debt?

  13. 13
    skylog Says:

    as others have posted, i have been wanting to try lending club for some time as well, but alas, pennsylvania is not on the list. so irritating.

  14. 14
    almost there Says:

    After being leary of LC, I took your advice and invested 500 bucks. I like the way it spreads it out into 20 loans, thereby limiting risk of loss. If returns are good I will invest more. Gotta beat the cd rates even with the 1% vig.

  15. 15
    RB @ RichBy30RetireBy40 Says:

    I’ve been thinking about lending club as well, but it’s tough to lend money to friends. Money so often gets in the way of friendships. I’d rather lend to strangers with decent credit, or frankly common posters on Personal Finance boards! :)

    What is the maximum amount you guys would lend on Lending Club? I could loan someone 100k if i knew i would get paid, but i just don’t know. If anybody is serious about a loan, you can let me know.

    Rgds,

    RB

    Rich By 30 Retire By 40

  16. 16
    almost there Says:

    RB, take the 100K and use the Lending match that automatically makes 4000 $25 loans and spread out the risk in a and b level loans with over an 11% return. I tried that with a much smaller amount.

  17. 17
    RB @ RichBy30RetireBy40 Says:

    Almost There, but would you feel comfortable lending out 100K? Or is the threshold more palatable at say 10K or 50K?

    If I had zero risk of default, or the site shutting down and taking all my money, I would probably lend 500K for that 10% return. Alas, it’s kinda like Lasik eye surgery.. the whole concept is still early, and who knows what will happen.

    Maybe i’ll just try $1,000 and see how the experience goes yah? 10-11% return is just phenomenal, and I’d do that FOREVER if the returns were close to guaranteed.

    Rgds,

    RB

    Rich By 30 Retire By 40

  18. 18
    Jacob E Says:

    Stuck in Ohio too, so no lending for me, but also curious about the income limits too. How many people make over 70k annually? I’m financially stable and socking savings away left and right, but because my gross is less than 70k I can’t buy notes? It’s like they make the rules so the rich get richer and us ‘poor’ folk, or even middle class can’t benefit from using this service. Nanny state regulations really chap my bum.

  19. 19
    Chris Says:

    I agree with Jacob on the requirements. Not only is my state (NC) not supported but the income limit is extremely high in my opinion.

    I also have a complaint about the way Lending Club signs up new customers. It does not make these requirements very obvious until you have already signed up and possibly sent some money into your account which you then cannot spend. On top of that, if you funded via paypal Lending Club will hit you with a $15 fee to withdraw your funds. Very annoying!

  20. 20
    LOL Says:

    RB30: The golden rule is, the higher the potential ROR, the higher the risk you are assuming.

    The biggest risk you are assuming is losing ALL of your investment. As for LC folding up and you losing you money, they have documented that in their FAQ:

    https://www.lendingclub.com/info/faq.action#g9

  21. 21
    Faye Says:

    A lot of people have lost a lot of money when the economy nosedived. One of the things we can do is help out where we can. One of the nice things about the Lending Club and others like it is that as a lender you can spread the risk and make a decent return even if you have a few defaults if you do your homework. With banks, you are just a number. At this stage of the game, the Lending Club is real people helping real people. Good luck to all.

  22. 22
    Matt Jabs Says:

    Amen Faye… you said it better than I could have.

  23. 23
    LesInk Says:

    Pity Lending Club is not legit in Alabama.

  24. 24
    Lee Says:

    I can’t help but love this. It’s a fantastic testimony to the PF community, but also of meeting its goals at the same time of improving our own financial well-being.

    Superb.

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