Become the banks, without all the economic meltdown "stuff"

Peer-to-peer lending is one potential investment opportunity that many financial professionals don't include in a client's portfolio. But why? Any client can lend their money at as much as 21.64% APR, where else can you get a definite 20% return on your initial investment?  There are some risks of default but it's very rare on this site considering that borrowers have to show, and update their credit scores.

The two major lending sites are Prosper and Lending Club. These two companies have taken advantage of the fact that banks have dried up most of the resources for consumers, and entrepreneurs to borrow money.  In a lot of cases, these two sites serve as a place where average consumers can borrow money at a lower interest rate to pay off other debts.  A refinance of sorts, but for consumer debt.  They each have a collections process in case an account becomes delinquent, and Lending Club even has an in-house "No-fee" IRA account option. 

For the investor, the sky is the limit with these two companies.  With both internal and external collections agencies on call, they are able to make sure that the principal is returned to the lender.  Where Prosper has claims of ROI's high as 16%, Lending Club offers risky loans as high as 20%.  Of course this wouldn't be a blog post of ours if there wasn't a way to creatively implement an investment portfolio at a no-cost basis. How would it sound if you can potential borrow at 6% from Lending Club, then turning around and lending that cash out at 20% (with only 0.7% going to processing). How does a 13.3% return sound with no cash coming out of your pockets? We can hear the cash registers ringing in your head.

As with all of our creative investment processes that we present to our clients, there is a caveat. We would not recommend going through with any kind of lending procedure without consulting a lawyer to make sure the "terms of use" are fully understood by all parties involved. Also, an accountant wouldn't hurt either. They would serve to help you realize what this could do to your taxes come 2011. You wouldn't want to make just enough cash to bump you up into the next bracket, while still having the same income.  Lastly, due diligence is always the key to your investment success. Vet all options and make sure that the lender you choose is reliable. Even with each company having a collections agency on tap, there's still a chance of delinquency

Want to learn more about creative investment opportunities? E-mail a consultant at info@cloud9-financial.com for any questions.