Ironically, Lending Club promotes the desirability of automatically re-investing investment earnings. Here is a quote from their 12/21/07 blog: “Automatically reinvest – Set up your accounts so that any interest or income you receive from investments and savings are automatically reinvested for you. This way you will start compounding your investments and they will grow at a faster rate.” But surprisingly they fail to provide this valuable investment strategy for their members. Prosper doesn’t pay interest on idle cash either, siting regulatory prohibitions. Yet PayPal seems to be able to place their members’ cash into a MMF and pay a very competitive rate to boot.

The bottom line is that the quoted loan portfolio returns must be netted against the lost earnings on any idle cash Maximizing ones returns would take lots of time and effort withdrawing funds or promptly re-loaning funds over $25. It would be labor intensive at best and still would fall short of an effective re-investment strategy.

If these sites start using an interest bearing savings account/MMA for money sitting around this could be a good deal.

I’m not sold on these but will keep an eye out for more Lazy Man articles in the future as new investment models are always interesting.

I completely agree with Cheapster that there are many investments that should be considered before P2P lending. If you are completely unfamiliar with Lending Club’s investment procedures, I recommend the video I made while selecting my first loans. Also, the potential bonus for a new lender is much higher than mentioned which could increase any lender’s return.

Lazy Man’s affiliate link to Lending Club can also bring you that thank you.

I completely agree with Cheapster that there are many investments that should be considered before P2P lending. If you are completely unfamiliar with Lending Club’s investment procedure, I recommend the video I made while selecting my first loans. Also, the potential bonus for a new lender is much higher than you mentioned.

Lazy Man’s affiliate link to Lending Club can also bring you that thank you.

Why would someone with impeccable credit want to pay over 12 percent interest on a loan when they can get a better rate?

This is the mystery of the lending sites and their extravagant statistics. Is the draw of these sites the fact that you do not have to supply any collateral??

As always, I remind the readers that only extra money you have to play with should be going into these types of investments. First money always goes into 401 or Roth, second into emergency savings account, third goes into your companies stock purchase plan for 15 percent minimum return and THEN anything left over goes into places like Prosper and Lending Club.

Also be sure to contact the websites directly and demand current default rates.

Competition is good for the P2P lending market. It will force all the players to improve their offerings.