Comments on: Lending Club Offers Self-Directed IRAs

By: Shane

Shane — Sun, 29 Aug 2010 01:07:13 +0000

I agree, $250 is nuts! But now it is only $100 and it is waived the first year with $5000 in base and the second year with $10000 in base.

Incidentally, the key with lendingclub is to loan the smallest amount on the most loans. Also avoid the higher risk categories (the loan purpose) and stick to the more educated borrowers. Car loans are likely to have lower default rates as they can lose the car. People that are refinancing higher rate debt have achieved some level of a financial education. People that are using loans for things like weddings or dream vacations? Perhaps not the most reliable.

Don’t make P2P lending personal, treat it like any other investment.

By: Chump

Chump — Sat, 19 Jun 2010 19:30:56 +0000

Self directed IRAs are highly speculative (thus the potential for a higher return) and also higher risk as well as susceptible to outright fraud. It really should be called a High Risk Tax Deferred Investment Account so as to not lull in unsuspecting investors believing that they are merely investing their retirement into a more aggressive but otherwise traditional IRA.

By: Mike

Mike — Thu, 04 Jun 2009 00:29:03 +0000

Quick follow up. I recently added some funds to my LC IRA account and learned that Entrust charges $25 to wire funds to LC, and $5 to forward a check to them. These charges are covered by LC this year, but it’s this kind of nickel and diming that leaves a bad taste in many investor’s mouths. On top of this, it took five days for my funds to be wired, because I initiated the request on the Friday before Memorial Day, and there is a two day ‘waiting period’, according to the Entrust rep I spoke with. BOGUS!

By: Lender

Lender — Fri, 17 Apr 2009 04:00:08 +0000

There’s really no buyer for your notes, unless you sell for a loss. Recently, the number of people lending money have dropped off drastically. As for you paypal deposit, you have to use it all with LendingClub or they’ll lock your account out. Imagine that, having your account locked out when it’s not even in the contract.

A company that makes up new unadvertised rules with your money. You decide.

By: Mike

Mike — Fri, 10 Apr 2009 01:14:21 +0000

Thanks for the suggestions, Lance. I appreciate the feedback. I do own some precious metals and REIT’s and I thought that this segment of my retirement investment could stand some exposure to these types of loans. If I experience more than one or two defaults, I’ll reconsider this approach.

By: Lance Newton

Lance Newton — Thu, 09 Apr 2009 18:28:51 +0000

Unsecured lending in an IRA makes little sense to me. An unsecured loan from an IRA should probably be viewed as a gift of some sort, since you have no recourse to the borrower. They social lending networks are really nice when loans are repaid, but unless you don’t need the money you are lending, why take the chance on an unsecured loan?

On the other hand, secured lending in hard assets has gone on forever and if you don’t get paid, you have recourse to the underlying assets.

The returns on secured lending in many states more than compensate for the fees in self directed retirement plans. With your analytical abilities, you should take a closer look at self direction of investments that you understand and perhaps some new venues that counter inflation, like real estate and precious metals.

Remember that you can invest in all forms of traditional Wall Street and Insurance Company investments in a Self Directed Plan and perhaps get the best of both worlds!

By: Mike

Mike — Thu, 09 Apr 2009 03:44:56 +0000

We all hate fees, but sometimes you have to spend money to make money. Most of my stock portfolio is in Vanguard ETF’s with exceedingly low fees. The way that I look at my Lending Club IRA is that after two years of fully funding my SIMPLE IRA @ 13,500/year. my total cost for the first two years is .92%. Many ETF’s are in that 1/2% a year range. (Don’t forget that Lending Club takes a 1% cut on your loan paybacks, but it works out to be less than 1% when analyzed over an entire year, and the same applies to their non-retirement accounts.) But if I can earn 10% on my funds without the implied volatility of the stock market, I feel I will be ahead of the game. After two years if my Lending Club SIMPLE IRA is worth about 30k, it will still represent only a small portion of my overall retirement portfolio. I think this is a good option for some people, as long as you go into it with your eyes open and invest only a small percentage of your total retirement funds in it. By the way, I invested with Lending Club before they offered their IRA option, and have been very pleased with my returns and lack of defaults, so far. I do agree that if one invests a relatively small amount of money in an IRA to test the waters, so to speak, the annual fee does become quite a significant drag on your return.

By: Jim

Jim — Wed, 08 Apr 2009 21:33:25 +0000

Even if it is waived that first year, $250 is a TON of money, one of the reasons I think this is a bad deal.

By: Chuck

Chuck — Wed, 08 Apr 2009 21:04:35 +0000

Having solid 9% gains is a drag, when those gains are taxable, so I can understand the desire to stuff them into a IRA. Stuffing your dividend-bearing investments in an IRA and keeping capital gains bearing stocks in your taxable account is age-old wisdom.

However, a $250 annual fee for an IRA is unforgivable. Your 9% gain is reduced to 6.75% if it’s taxable (25% bracket assumed) but that 9% is supposed to compensate you for potential losses, and if you suffer losses, your tax is reduced. That $250/year is relentless, and will apply if you’re invested or not. Sounds crazy to me.

By: Stephen

Stephen — Wed, 08 Apr 2009 20:48:52 +0000

I don’t know if Lending Club is the best place for you to save for retirement.