# lending club/loaning



## donald (Apr 18, 2011)

Has anybody heard of lending club?from what i get its small scale loans and you loan out with interest im guessing its legal and legit?Ive heard about people talking about it in money/finance blogs.

Is it legit?whats the catch?Anybody know anything about it?


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## ddkay (Nov 20, 2010)

I hope ur not talking about shark loans? Those are definitely illegal


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## Causalien (Apr 4, 2009)

The catch is, socially based micro loans will cause tremendous problems after 5 years. You won't hear anything about it now, because nothing is up for renewal and everything is fine and dandy.

Look no further than Kiva at the horror stories. At a grander scale, look at China's first capitalist city. Where loans are made based on social connections instead of from banks.


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## marina628 (Dec 14, 2010)

I have been loaning at kiva for years and have never had any issues.


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## the-royal-mail (Dec 11, 2009)

I believe they're called pyramid schemes.


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## Four Pillars (Apr 5, 2009)

the-royal-mail said:


> I believe they're called pyramid schemes.


This is nonsense. TRM - do you ever do any research before replying to a topic that you know nothing about? 

LC is a legitimate company which does peer-to-peer lending. Basically the difference from a bank is that the loan approval is in the hands of the private lender, instead of the bank.

For example - someone might request a loan of $5,000 for renovations. They would post their info online (including credit score) and lenders (ie private investors) would peruse the available loans and decide if they want to fill part or all of any given loan. The loans are filled on a competitive basis - ie the lender who offers the lowest rates will "get" the loan.

LC has rating systems for borrowers and they also have options for portfolio borrowing so you can just invest $N and buy up a portion of various loans, which is easier than investing individually.

If this sounds interesting to you and you live in Canada - too bad. They are only available to Americans.

I'm not a fan of this type of investing myself, but it does provide a different (if somewhat inefficient) option for diversification.

I have several articles on the topic on my site if anyone is interested.


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## andrewf (Mar 1, 2010)

donald said:


> Has anybody heard of lending club?from what i get its small scale loans and you loan out with interest im guessing its legal and legit?Ive heard about people talking about it in money/finance blogs.
> 
> Is it legit?whats the catch?Anybody know anything about it?


I don't think the regulations in Canada make this straightforward. So, probably not entirely legit. Nothing stops you loaning money, but once a third party facilitates the process, I think things get murky. Check out CommunityLend for a Canadian version. It took them several years to get a model that passed muster with the regulators.


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## andrewf (Mar 1, 2010)

And boy is it inefficient. I think investing in short duration high yield bonds is a much more sensible investment than unsecured consumer credit. Some of the US websites got slaughtered through the credit crisis.

This space is okay if you're just playing and/or want to offer microloans as a charitable activity (as with Kiva).


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## marina628 (Dec 14, 2010)

Yes I seen kiva on Oprah years ago and i loaned not with expectation of getting back ,although I have.I funded $400 years ago and to date have give 91 loans with that same $400. You do sometimes get messages from the people you help which is very fulfilling.To do it to make a higher ROI I would not be comfortable doing.


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## Causalien (Apr 4, 2009)

It's the intermediaries in kiva that is the problem. The way they enforce the loan repayments to people who had little concept of loans caused some suicides. I am going to wait out a few years until there are more data so I can see which intermediaries fits my style morally and which ones don't.


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## m3s (Apr 3, 2010)

I'd wager that the suicide rates are higher among young Canadian men and rock stars than Kiva recipients. Good example of media hype

I've loaned $400 through Kiva recycled a few times, currently 1 delinquent but they tend to pay up eventually. I wonder if Kiva just pays to keep the delinquency rate down. People also point to the high interest rates but fail to understand inflation in those countries

I'd be open to peer-to-peer lending. Anything to avoid the middle man's highway robbery


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## donald (Apr 18, 2011)

Thanks for the replys,seems interesting,like angel investing to people.From what i read "most" investors recieved @ least a 5-6% yield return on there money.

Its a different concept,i was just wondering if you got protection from the lending company but it appears to have alot of risk.(im canadian anyways)stubbled on there site(lending club)


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