My bank insults me.
They slap my face and give me the bird.
One-tenth of 1% interest on my savings accounts?
C’mon. That insults my intelligence. It mocks my wallet.
But now, thanks to new crowdfunding sites that focus on yield, I can slap them back.
Today we’re going to show you 3 ways you can slap back, too – and make double-digit returns while you’re at it.
“Peer-to-Peer” Lending In a Nutshell
Unlike the type of crowdfunding we usually write about – equity crowdfunding, where you invest in private companies and receive a stake of the business in return – today’s topic is on crowdfund “lending.”
Peer-to-peer crowdfund lending (or “P2P Lending” for short) is an online trend where individuals – regular people like us – pool our capital and lend it to others.
Our capital is used to expand small businesses, help people consolidate their loans, or even build luxury apartment buildings. (I know it sounds crazy; I’ll explain more in a moment.)
There’s no traditional bank involved. Instead, various web-based businesses match lenders with borrowers, and provide independent credit checks.
By cutting out the middleman, borrowers pay less, and lenders get higher yields.
Let’s explore some of the websites that offer these crowdfunded income opportunities…
The “10% Club”
The dominant P2P site is called Lending Club. It’s for personal loans.
Check out their stats:
- $3,347,142,475 in loans
- $307,256,972 paid to investors in interest
$300 million paid out to investors on $3.3 billion in loans – that’s an average yield of nearly 10%. Makes you wonder: Are these guys for real?
We’d say so. Lending Club’s corporate board includes Lawrence Summers, the former Secretary of the Treasury for the United States, and John Mack, the former Chairman and CEO of Morgan Stanley.
What about the risks?
Those are real, too. Risks include defaults on the loans (they’ve ranged from 1.4% to 9.8% since inception, depending on the quality of the loans) and government regulation.
I’ve been investing with Lending Club for months. My portfolio of loans leans towards higher credit quality. My returns are in the 6% to 8% range. I could potentially get far more if I were willing to take more risk.
And if I want to sell my notes before they mature, Lending Club offers liquidity.
Crowdfunded Real Estate
In the last six months, investors have poured nearly $100 million into crowdfunded real estate.
Here are the stats, since June 2013, for one prominent site, Realty Mogul:
- $10,610,000 invested
- $1,114,438 paid back to investors
That’s a 10.5% average yield.
A current deal on RealtyMogul – a retail shopping center in Texas – anticipates cash flow starting in Q2 2014, and has total projected returns of 16% to 17%.
Other online platforms catering to this market include RealCrowd, iFunding, and Prodigy Networks.
Crowdfunded Peer-to-Business Loans
Funding Circle is a “peer-to-business” lender – basically, they enable everyday people to make loans to small businesses.
Since 2010, this UK-based business has made more than £200 million ($327 million) in loans.
Average returns for investors, after fees and bad debt, have been about 5.7%. As Funding Circle puts it, they aim to provide investors “equity-like returns at fixed income risk-levels.”
Are they legit?
We’d say so. They just raised $37 million in financing from top-tier venture capital firms including Accel Partners and Union Square Ventures.
Part of that money is being used to expand operations to the U.S.
I signed up yesterday for early access to their “marketplace” program. Click here if you’re interested in learning more and signing up, too.
Happy income generation!
