P2P Lending - a new asset class? Cheap loans for borrowers, over 9% returns for lenders.
I've read good reviews lately for a P2P site called Lendingclub.com (there are others available, check p2p lending at Wikipedia, but theirs seems to have the lowest default rate by far due to stringent credit requirements on borrowers). Person-to-person lending cuts credit card companies and banks out of the loan process, resulting in much lower rates for borrowers and much higher returns for lenders (their statistics show an average 9.05% return, but I'm not sure if that includes the continuing effects of the current recession).
If one can truly get stable 10% returns, I'll take that any day over the ponzi scheme (erm, stock market). I'm no market timer, as evidenced by my score (got too bearish in this last rally), and I'd be happy to get steady returns while fighting credit contraction. I've allocated about $5000 into 50 "notes" (loans to different people with different loan risk grades - you can allocate as little as as $25 to each and spread your risk around), and will see what happens. I shouldn't need this cash any time soon, but if I do, they have a secondary market where you can buy/sell your notes to other investors. I'll post again in another 6 months with the results, and decide if I am willing to invest more with P2P lending.
I recommend the following reviews - they offer different investment strategies and thoughts. Do use a referral link from the review if you sign up, you get a $25 sign up bonus (no bonus for the referrer, but they do have a borrower referral program). Also, at the time of initial funding, before a bank account is added, you can use a credit card (up to $5k). I used my 1% cash back card (will pay off immediately, of course), so that's a total $75 right away, very nearly risk free.
Let me know your thoughts, or if you find any other good reviews/comparisons. It seems like a good deal for investors, and a good deal for borrowers (an 8% loan here is much cheaper than the 20%+ some people pay on credit cards). If you like the idea, spread the word to borrowers and lenders.
A/B loans (8-13%)
C/D loans (14-17% APY)