The act of investing on P2P lending sites like Lending Club is generally a very active form of investing. You generally have to seek out notes that make sense for you, which can be time consuming.
In a recent blog post entitled “Why I’m Transferring Money Away From Lending Club,” Daniel Packer explains his decision to transfer funds out of Lending Club’s system and into a Vanguard Roth IRA…
Over the past several months, it’s become harder to find notes that fit my requirements. It’s not that Lending Club is issuing fewer notes, it’s that all the “good notes” (ones that fit my investing strategy) have already been fully funded by the time I get to them. What’s left are a handful of loans, and since I want to invest $25 in each loan and am expecting nearly $250 in payments each month, I would need to find 10 loans that fit my criteria. With index funds, you don’t need to spend any time investing and re-investing. With Lending Club, it’s a much more active investing style.
This underscores the bullishness around the P2P lending space right now. It’s no secret that P2P lending is generally the largest piece of the crowdfunding industry pie despite the attention given to equity- and rewards-based models. Now the question arises of whether demand is catching up with supply, and if so what does that mean for a site like Lending Club in the long term? (There has been more speculation on whether Lending Club is going through growing pains as well.)