We spend a lot of time talking about why Lending Loop is excellent, and we thought it was time to let some of our Lenders do the talking. Read on to learn more about Lori’s experience with Lending Loop.
Lori, Project Manager
1. What drew you to Lending Loop?
I heard Cato Pastoll, the CEO of Lending Loop, speak at a FinTech TO event last February. I thought it was an interesting idea. What drew me to it was that you are supporting small business in Canada, while earning money for yourself. So win-win. Being loans, it appealed to me over crowdfunding or angel investing because it’s a definite, known and immediate return. Yet you are still investing in local companies.
2. What’s your primary goal on Lending Loop?
To earn a better interest rate on money that might otherwise be sitting in a bank account earning much lower interest, while helping small business in Canada.
3. Do you have an investment strategy?
I decided to invest about the same amount of money as I would annually do in the TFSA. My strategy is to get there by investing about $100 a week, for the 52 weeks. Though if there is more than one loan in the marketplace in a week that looks good, then I flex and consider it as $400-$500 a month. I am favoring investing in loans that are in the B+ to C- range, and are 2 years or less, though I’ve lent to some 3-year loans.
As there is risk involved with any loan that the borrower might not pay, I consider this as part of the risk amount in my balanced portfolio – a balanced portfolio for me is mostly balanced funds, some conservative, some risk. I like that the risk is spread across a number of small investments. Though I have some concern if the whole economy were to shift down, then maybe more than one borrower would be strained. At this point, early in my lending experience, no one has defaulted on payments.
The interesting thing about it being a loan is that you are getting your principal back as well as the interest. If you had the comparable amount in an income-based mutual fund, you would be paid a regular income but you would still be risking all the initial capital in terms of the fund price.
At this point in time, I am keeping the earned interest and returned principle in the account to re-invest in more loans. There may be a point in time as my portfolio builds when I will periodically withdraw the interest.
4. What is your favourite part of the Lending Loop platform?
That it’s easy to make your lending decision. You are notified when new loans are on the Marketplace. Information about the loans is clearly presented, and the transaction online is simple to do. Since I’m lending a series of small amounts of money, I don’t want to take a long time to make each individual decision.
5. How has your experience been on Lending Loop and with Peer-to-Peer lending in general?
It’s been a good experience. I’m earning interest on a regular basis at a 13% annual, which is working out to be about a 1% payout per month. And it’s growing each month as I invest more. So it’s definitely achieving my goal of the money committed doing better than if it was in a bank account or conservative investment.
6. What business were you most excited to invest in?
One of the loans was for renovations at burger franchise in Squamish. I lived in Vancouver years ago. I used to take the Sea to Sky highway to Whistler all winter, and often stopped in Squamish. It felt good to know I was investing in something I had a personal connection with. There is a mix of types of company sectors that include things of interest to me, like clean energy, tech, medical supply. It’s great to know you are investing in different areas of the economy.