I've noticed there are at least several similar questions but I don't think that they are asking for exactly the same thing.

I am planning to put some money in a P2P platform and invest (I won't mention the name of the platform unless asked explicitly because I am not trying to make an advertisement just want to acquire some knowledge/best practices)

So that being said, the platform I plan to use is offering loans from several credit companies. I mention that because I've read some related question who specifically ask for Lending Club and Prosper.com, which I haven't investigated personally but from what I've read, it seems that those site themselves offers loans (maybe I misunderstood that) and the platform I use is just to connect the credit companies with investors. They claim that if the loan is 60 days overdue you are paid back the money you put at the beginning. This one is particularly interesting to me, since in some of the questions that I've read, people are writing about actually losing money and I wonder if your base amount is 100% guarantee (well nothing is 100% in this life but say it's pretty safe in a short/mid term) then how you actually losing money, and is it actually losing or more like missing profit? So I guess this is my first question.

The second one is, given that my base amount is guaranteed what would be a good strategy for investment? The credit risk is scored between "A" very low to "H" very high and most "A"'s have about 5.5% interest on them, and "H" are around 14%.

I plan to put 2000 units (prefer this term rather than money so we don't have to talk about currencies and stuff like that) and I don't know if the site has any restrictions about min/max sum of investment, but it seems that most of the loans are for about 10 to 100 units.

I am trying to think of leaning more towards the safe side separation of my investments. I don't understand a lot about finances but from logical point of view it seems that buying 10-20 units from 100 different loans (just example figures) is a pretty safe approach and the site seems to offer high enough volume of loans so those numbers are realistic.

So I guess, my questions here are:

  • Is it a good idea to invest like this?
  • What are the possible risks if I split all my money into small chunks buying only parts of "A"-rated loans?
  • Are there some known strategies where you can actually invest in wider range of loans, not just "A"'s where it's still considered good practice per say?

Having the base guaranteed makes me feel more like experimenting with high risk - high reward loans, but on the other side I don't want to turn this into complete gamble.

And again, I've kinda asked this at the beginning, but when people are talking about actually losing money, what exactly does it mean. And if it's something to be considered is it a good idea to not actually invest randomly in a lot of different "A" loans knowing that I will at least get what I put in and pretty likely a bit more, or should I maybe spent some more time investigating particular loans which would possibly mean making fewer investments for bigger amounts, but with some better understanding.

1 Answer 1


Is it a good idea to invest like this?

The devil comes down to the details. Using lending club, I found that it was not a good use of my money for a variety of reasons. Relevant ones to any lending platform are:

  • Waiting for loans to be funded, money sat idle for long periods of time
  • It took a lot of time to pick loans, while it would not be significant amount of time for $2000, it would have been overwhelming if real money was involved.
  • It turns out that being a loan officer is a skill. One that I was not very good at.
  • It was a lot of extra tax documents, that also made it not worth my while.

What are the possible risks if I split all my money into small chunks buying only parts of "A"-rated loans

That the loans will be defaulted. In Lending Club I had plenty of A rated loans that defaulted, or were slow pay.

Are there some known strategies where you can actually invest in wider range of loans, not just "A"'s where it's still considered good practice per say

The common wisdom is to average your risk. Buy some lower rated loans to boost your earnings, but some higher rated loans to give you some security. I would say this is a losing game, because you just increase the number of loans that will default. Good in theory, horrible in execution.

My findings were it was just better to buy brokered CDs. Currently I am getting about 2.4% interest rate on 3 month CDs with no risk. This is probably a much higher return than you can expect from a peer-to-peer lending site, and certainly higher than I experienced. Also very easy to manage.

My spit is as follows: Peer-to-peer lending: 0% Actual investments: 100%

  • 1
    Thanks for the answer. If possible can you elaborate on this: That the loans will be defaulted. because I really want to get this part right in order to make my decision. When we have 100% base guarantee and the loan defaulted, from my understanding this means that I will have some amount of X invested in this loan, and after 60 or 100 days I will get back my X units without any profit? Or are you talking about scenario where I actually lose this X amount too? And how this can happen if so?
    – Leron
    Jun 7, 2019 at 12:15
  • Lending Club was terrible about collections. Even when their were late fees they kept them and did not pass them on to the lenders. They also seemed to do very little in attempts to collect. There was no guarantee. So yes, I lost both principle and profit. In the end, I made a little money but it involved a whole lot of time and effort.
    – Pete B.
    Jun 7, 2019 at 12:29
  • "2.4% interest rate on 3 month CDs". Where? Places like Ally only offer 0.75% on such short term CDs.
    – RonJohn
    Jun 7, 2019 at 13:16
  • @RonJohn Maybe Pete B. extrapolated the per-Annum interest rate from those short term loans?
    – Philipp
    Jun 7, 2019 at 13:39
  • @Philipp no. I googled (should have done that first!) and found some high yield CDs. Not so much better than Ally Savings, though, to expend the effort.
    – RonJohn
    Jun 7, 2019 at 13:44

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