I’ve now owned a home for about a week and I spent a lot of money on the down payment, closing costs, and of course all the tools and materials to do renovations in my new home. I pulled money out of my Roth IRA and took a 401k loan for the down payment, and have been using money from my savings account to pay for the renovations.
But there’s one place where I haven’t touched a dime: my Lending Club account.
I haven’t withdrawn anything from my Lending Club account because 1) it’s not easy, and 2) the returns are too good.
Selling Lending Club Notes Takes Time
When you are looking at a Lending Club account, you have two different kinds of assets. You have notes, which represent money owed to you by a borrower. You also have cash, which is a combination of cash you have deposited and cash received from monthly payments on your notes.
The cash is easy to get to; it can be withdrawn at any time via a wire transfer or bank transfer.
The notes can’t be withdrawn because they are not actually money. A note can be turned into cash, but that means it needs to be sold to someone else who is willing to take on the loan.
To sell a note, you need to determine which notes you want to sell, how much you want to sell them for, and then hope there is someone looking to buy notes that finds yours priced appropriately. You might sell a note in a few hours, but it could take days or weeks and a few price adjustments before you get a fair price for your note.
If want an investment that is liquid then Lending Club is not right for you. On the other hand, if you like the idea of making your money hard to access (thus forcing you to save) then Lending Club is a great option.
Lending Club Returns are Hard to Pass Up
The other reason I’m not cashing out my Lending Club investments is because I’m making too much money!
The stock market scares the crap out of me (even though I still have a lot of money in the market through my 401k) and I want to get decent returns outside of the stock market.
How does 13.38% sound to you?
In the stock market I never know what’s going to happen and I have no idea what the companies I invest in are really doing with that money.
With my Lending Club investments I am getting a solid 13% return, I know exactly what the money was used for, I’m getting cash payments every month, and for the most part I’m helping my fellow Americans pay off high interest debt (because almost all of my Lending Club notes are debt consolidation notes).
I’m Keeping My Lending Club Investments
I sold every stock I owned (aside from 50% of my 401k) to buy my house, but I didn’t sell one single Lending Club note because I believe in peer to peer lending and the returns speak for themselves.
Let me be clear: if you want a liquid investment then Lending Club is not the place for your money.
But if you are content to buy and hold and enjoy monthly cash payments then Lending Club is as good as it gets as far as I’m concerned.
Readers: Do you have any investments that you aren’t willing to get rid of for any reason (barring emergencies)?
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