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Crowdlending Services like lendingloop.ca
February 1, 2021
4:53 pm
Save2Retire@55
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Hello. Anyone has any experience or advise regarding crowdlending sites? I could only find 1 in Canada (There are many in the US both just for loaning to businesses or individuals or REIT). lendingloop.ca (5% - 8% is a good return if it really works).

They have an automated plan where they choose where the money goes which I assume takes the headache about researching and choosing away.

Not sure if it works but I might give it a try with a small amount.

Thanks

February 2, 2021
4:53 am
file
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It doesn't work imo. I put in the minimum a few years ago, used the automatic investment thing, and I've lost... let's see... $130 of it. That was with investments across various risk levels (which seemingly meant nothing). 65% of the notes I was in were charged-off.

February 2, 2021
6:00 am
savemoresaveoften
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I got in about 3 years ago, and sprinkled $50-100 over a lot of names. My estimate is I am prob break even to up small, definitely not 5-8% a year. Now keep in mind covid prob killed a lot of the small biz that borrowed from lendloop, but I also have biz that stopped paying and eventually charged off even before covid.
I pegged the "non-performing" loans ratio to be at least 20% regardless of credit ratings.

One reason why the return will be much lower is because biz that does well will pay off their loan early (reinvestment risk), while those goes under will stop paying.

February 2, 2021
11:13 am
Save2Retire@55
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Thank you both. Good to hear from those with first hand experience.

savemoresaveoften - Can you give me more info? Like how much money did you put in to get that $50-$100? Would you recommend it or it is a don't get close to it? If not, did you pull out?

February 2, 2021
11:19 am
Norman1
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Red flag: Why can't I find historic investor returns on their web site?

Their statistics pages has some fancy graphs and numbers. But, no useful loan interest rates and default rates that one can calculate what someone investing would end up with.

One should be suspicious of investments that hide or don't disclose historical returns. Instead of disclosing actual rates of return, the site has meaningless "projected" 5% to 8% rate of return that are "projected" loan interest rates combined with "projected" loan loss rates and "projected" default rates!

From time to time, we provide projected net returns on the Website. The projected net returns are a portfolio weighted estimate of the annual return. To calculate the net return, we use the projected gross yield, the projected loss rate, the projected slope of the default curve and the servicing fee for the Borrower Loans made. The average return is compounded monthly and shown before tax. …

Given that, the experience file and savemoresaveoften had does not surprise me.

According to September 2019 Globe & Mail subscriber-only article Lending Loop offers a novel way for business owners to get funding, they are funding business loans that are declined by the big banks and lenders like BDC.

savemoresaveoften said
…One reason why the return will be much lower is because biz that does well will pay off their loan early (reinvestment risk), while those goes under will stop paying.

That's insightful. Kind of like investing in bonds where the borrower can redeem the bonds should they become successful and can borrow from a bank at a much lower interest rate. But, the investor can't force the borrower to repay when the borrower stumbles and no-one else will lend, not even with an interest rate of 30%!

February 2, 2021
12:00 pm
Kidd
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Isn't prostitution a form of crowd lending? Canada has limitation laws on the books against this. Try Denmark.

February 2, 2021
12:18 pm
savemoresaveoften
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Save2Retire@55 said
Thank you both. Good to hear from those with first hand experience.

savemoresaveoften - Can you give me more info? Like how much money did you put in to get that $50-$100? Would you recommend it or it is a don't get close to it? If not, did you pull out?  

I meant just "lend" $50-$100 to a whole bunch of names (ranging from 5%-25% interest) just to get a feel of this type of crowd funding. Prob put in a measly $3-4k in total and maybe 40 names in total ? Quite a few ended up in limbo and 1-2 completely charged off (as in dead and no chance of recouping my remaining principal). You would imagine 40 names over various credit ratings is a well diversified portfolio. Because of covid, I cant proof it one way or the other. But a couple of "good credit" names as ranked by LendingLoop ends up defaulting and stop paying after a few months.

You can withdraw the return cash (interest and principal repayment) anytime you want, with a minimal withdrawal of $100 each time. Each loan has a term and you cant call it (as in get ur money back sooner).

I played it with the mindset from a credit card issuer perspective, which is charge a high enough interest with a diversified customer base to turn a profit and minimize my net loan loss probability. Its an interesting exercise. For the record, I have not put any new money into any new loans even a few months before covid hit.

February 2, 2021
1:12 pm
Save2Retire@55
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Thanks. Guess it is not even worth the hassle and too risky. Very long time ago we had this community thing were we all put money in a pool. Let's say 20 neighbors each put $100 for a total of $2000 per month. We then decide (Based on the need) who will get the $2000 loan each month. Those who don't need, won't put their name on the selection. The ones who need will say so and others will decide. Sometimes it is voting other times everyone agrees on one neighbor. After 20 months everyone gets a $2000 back. The ones at the end might got in just for helping out others and not needing the money.

It was a great way of lending / borrowing without any interest. It wasn't always about $$.

February 2, 2021
3:24 pm
Norman1
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Save2Retire@55 said
Thanks. Guess it is not even worth the hassle and too risky. …

It looks that way. But, it could be worth losing a few thousand to become experienced and "inoculated" against these kinds of "opportunities" in the future. sf-laugh That 5% to 8% per year return looks really juicy compared to 1.9% per year on a 5-year GIC.

Very long time ago we had this community thing were we all put money in a pool. …. After 20 months everyone gets a $2000 back. The ones at the end might got in just for helping out others and not needing the money.

That sounds nice. But, what happens should a few of the participants turn out to have an substance or gambling addiction and squander their $2,000 loan instead of using the money for "medical" expenses?

February 3, 2021
3:40 am
Loonie
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I like the story about neighbours helping neighbours. It's innovative, builds community strength when it works. It may not be perfect, and it may not work all the time, but the intentionality is great!

Investments in small business are inherently risky, but that doesn't mean they are not worthy. You just need to understand that the risk is high.

Under the right circumstances, great things can be accomplished. Think the founding of Blackberry, for instance, with a little help from his friends and relatives, who became fabulously wealthy. But that is the exception.

If you are interested in this phenomenon, suggest you search "microfinance" in your public library catalog You'll find some inspiring stories and history, and also some negatives.

A lot of people feel that the banks are not interested in them and that this lack of interest is not always well-founded. They would clearly rather loan large amounts to very large businesses with greater potential for both profits and losses. This week's example, Laurentian University in Sudbury, has just filed for bankruptcy protection and owes many millions to RBC and other banks, but they might not risk $10,000 to a small entrepreneur. Whether or not that is true in specific cases, alternatives are being developed to fill the gap. lendingloop is one, I guess, although I'd never heard of it. Others are the sale of community bonds to invest in specific undertakings at a specified rate of return. There are others if you hunt around but they are not well known and they don't all operate the same way. Labour-sponsored mutual funds were another, and that one failed. Wealthy venture capitalists (think Dragons' Den and Shark Tank) look for a specific business to invest in that they think has great potential; they can afford the risk and have a lot of confidence in their own judgment.
Another interesting option is kiva.org It is structured as a charity, I think, and arranges for your money to fund people who are trying to become self-sufficient throughout the world. I don't think they pay any interest, but you can choose your project. When the loan is repaid, you can choose another one. They have a 96% payback rate. Could be an interesting thing to take up with your children as you try to teach them about money. We tried it with a couple of nephews but we aren't close enough to them to be involved and it wasn't much of a learning experience for them, but might work for one's own children.

February 3, 2021
6:30 am
Save2Retire@55
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Norman1 said

Save2Retire@55 said
Thanks. Guess it is not even worth the hassle and too risky. …

It looks that way. But, it could be worth losing a few thousand to become experienced and "inoculated" against these kinds of "opportunities" in the future. sf-laugh That 5% to 8% per year return looks really juicy compared to 1.9% per year on a 5-year GIC.

Very long time ago we had this community thing were we all put money in a pool. …. After 20 months everyone gets a $2000 back. The ones at the end might got in just for helping out others and not needing the money.

That sounds nice. But, what happens should a few of the participants turn out to have an substance or gambling addiction and squander their $2,000 loan instead of using the money for "medical" expenses?  

No! I have my fun trading stocks and got burned couple years ago. Now happy with my dividends paying ETFs and my still going 3.75% Meridian GIC and Oaken 3%.

Honestly, the community kept monitoring the participants for any red flags. It is all part of the agreements plus there were official signed with witness documents saying who took what. Filing a law suit against that person was always on the table. They all had cars at least. Worst case scenario would be .. sell your car and pay off. I don't recall anyone bailing on paying though.

February 3, 2021
6:50 am
Save2Retire@55
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Loonie - Thanks for your detailed reply. Yes, it is all about risk and reward. Honestly, I think I am not into the headache or researching who gets the money and that's why I only do GICs / Robo investing in the past couple years.

kiva.org is very interesting. I will check out their projects. We usually donate $1.5-2K a year to some randomly chosen poor community in a any poor country in the world. The money goes directly to the hand of those in need without any middle man getting a cut (And of course no charity tax receipt which is totally fine). Then they send us photos and videos of what they are doing with the money. It can be from feeding multiple houses in a devastated village for a month to help building a school or a farm or anything of that nature.

February 3, 2021
8:25 am
Bill
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Save2Retire@55, that's interesting, I've done similar things locally, i.e. directly to families in need, no charity receipts, etc. How do you find the communities in need in other countries? And how do you ensure 100% of your gift is used as you intend?

February 3, 2021
9:33 am
Save2Retire@55
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Bill said
Save2Retire@55, that's interesting, I've done similar things locally, i.e. directly to families in need, no charity receipts, etc. How do you find the communities in need in other countries? And how do you ensure 100% of your gift is used as you intend?  

The only reason I don't do locally is because we have a kind of "caring" government which pays a lot under different names. 90% of the world don't have a government paying them anything. Another discussion. How I find them is easy and there are many different ways. Many good travel vloggers out there who I connect with and they give me directions. Or I ask on TripAdvisor. Or me being a traveler find them myself. Late 2020 I went to Ecuador and the money went there. Or it is friends of friends. etc

I guess I will never no for sure 100% is used as proposed or intended but as far as I know 100% goes in hands of those who need the money and then show me the progress of the project is good for me personally. I mean, there is no way for me to stop them from buying cigarettes', drugs, etc. That is why I prefer to do a project based donation.

February 3, 2021
10:34 am
Norman1
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Save2Retire@55 said

Honestly, the community kept monitoring the participants for any red flags. It is all part of the agreements plus there were official signed with witness documents saying who took what. Filing a law suit against that person was always on the table. They all had cars at least. Worst case scenario would be .. sell your car and pay off. I don't recall anyone bailing on paying though.

I see. It was more than passing a hat around, giving the hat of money to a selected person, and writing down the person's name and repayment date on a sticky note somewhere.

February 3, 2021
11:00 am
Save2Retire@55
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Norman1 - Yes pretty much. Wish there was still enough trust in the community to do similar practices so people won't have to pay those stupid high rates to borrow for necessary reasons (Not to go for a vacation or buy a furniture they don't really need).

February 3, 2021
11:57 am
Bill
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Thanks, Save........I'm the same re 90% of the world people get no help, but I don't travel outside USA/Canada or read travel stuff so I guess it won't work for me. Plus I'm old enough to know/think there are bad apples absolutely everywhere who'll take what they can get their hands on, so doesn't sound like it would work for me.

February 3, 2021
1:01 pm
Save2Retire@55
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Bill said
Thanks, Save........I'm the same re 90% of the world people get no help, but I don't travel outside USA/Canada or read travel stuff so I guess it won't work for me. Plus I'm old enough to know/think there are bad apples absolutely everywhere who'll take what they can get their hands on, so doesn't sound like it would work for me.  

I think your help locally is very valuable too so thank you for that.
Here came the 2021 money to cover part of a kidney transplant for a teenage girl in devastated Yemen. I had had experiences before where even after paying for a surgery or medical care the child was lost 🙁

February 3, 2021
5:57 pm
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Transplant funding is tricky because the recipient, if the surgery is a success, will need medications for the rest of their life and monitoring by specialists twice a year. They may also require additional hospitalizations if something needs more attention. If these things can't be arranged and funded, there isn't much point, sadly.

February 3, 2021
9:42 pm
Save2Retire@55
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Loonie said
Transplant funding is tricky because the recipient, if the surgery is a success, will need medications for the rest of their life and monitoring by specialists twice a year. They may also require additional hospitalizations if something needs more attention. If these things can't be arranged and funded, there isn't much point, sadly.  

Sadly there are 2 choices. Either let her die now (One kidney is already dead and the other won't last a month the doctors said) or do what we can to give her a 2nd chance. The medical care is not the best there due to all the reasons we all know. I gave my word so they are hopeful. She is young and other than this there is no other medical issues. I didn't ask why they failed but my guess it is water / diet related.

Sorry took this way off topic!

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