[jliptzin]

I have had a LC account for about 4 years. The returns aren't that great, around 6%. I did some random loans of mixed interest rates, but have also applied my own set of filters which brought the rate up a little bit over the last year.

The notes are also not liquid. You will suffer huge losses if you need to sell. I thought this would mean that I could get other people's notes at deep discounts...typically sellers want to offload late notes to avoid a full loss. However, in my test of buying about 30 late notes, I discovered the real problem - if a borrower makes a payment on your note while the transaction is still "settling" (typically 24-48 hours after you purchase the note), the transaction is cancelled. You can't cancel the transaction during the settling period if no payment is made though. So, what ended up happening was I was building a portfolio of junk notes that defaulted 98% of the time - the advantage is definitely with the seller and I suspect that is why there is a huge lack of buyers on their platform.

[obvious_throw]

6% returns in a ZIRP environment are actually quite fantastic. Even junk bonds yield less than that.

[AjithAntony]

But there is a market for junk bonds. You could exit your position today if you want.

[7Figures2Commas]

> 6% returns in a ZIRP environment are actually quite fantastic.

You can find yields substantially higher than 6%. There are mortgage REITs that have yields well above 10%, and there are plenty of closed end funds and MLPs that yield better than 6%. Ditto for preferred shares.

Really want yield? MORL, a leveraged ETN that tracks the Market Vectors Global Mortgage REITs Index, has a current yield of around 20%, and CEFL, a leveraged ETN that tracks the ISE High Income Index, sports a similar yield.

Investors today are not challenged by a lack of yield but rather appropriately priced risk. In most cases, today's yields do not adequately compensate for risk. The "6% returns in a ZIRP environment are actually quite fantastic" mentality is going to cause a lot of investors a lot of pain. Chasing yield and ignoring risk is a game very few people win.

[nostromo]

For comparison: I put $1000 into Prosper around 2007 as an experiment. My average annual return is 4.19% (just logged in for the first time in... forever).

However, the return has been rising. Through 2008 my annualized return was negative (-4%) and has since been closer to 8%, with double the returns coming from lower credit scores.

[Scoundreller]

Given the crash in 2009 and how hard-hit most public lending institutions have been, you've probably done very well.

[chriogenix]

Buying the defaulted discounted notes sounds like a good idea but usually the discount rate I've found on FolioFn to be not that great and will thus make it difficult to drive returns. On top of it to make it worse, Lending Club charges collection fees which makes getting a return even more difficult.