Something amazing happened last weekend: we were very fortunate to be featured in Barron’s only 2 weeks after our public launch beyond Facebook, and as a result saw more lenders signing up over that weekend than in the 2 weeks before! The Barron’s article came shortly after the Reuters piece last week, which also contributed to bringing more lenders.
Positive reviews from reputable newspapers, magazines and press agencies are nice to have. Not only did we all send the articles to our moms, but the funds that have been added by the new lenders since the Barron’s article will also help close many loans, help more borrowers achieve their financial goals and continue building the Lending Club community. Positive press contributes to establishing person-to-person lending as an alternative, more responsible way to borrow money at better rates.
We all worked hard over the last few weeks, so we thought it was time to pause and take the time to celebrate. With Renaud Laplanche and John Donovan both being avid sailors, we could think of no better way to celebrate than to take to the seas (or the Bay in our case) aboard a beautiful catamaran for a sailing adventure with our new friends at Adventure Cat.
We went in and spent several glorious hours touring San Francisco’s wondrous scenery, including Sausalito and Alcatraz Island, with an amazing ride under the Golden Gate Bridge. With San Francisco’s trademark fog and a few friendly sea lions greeting us along our journey, we were treated to a spectacular day of sailing. Only Rex Dixon, our Director of Social Media Content, who lives in St. Louis, and Peter Petras, our VP of Business Development, who was busy closing deals in Boston, were missing.
As “off-site company meetings” go, we certainly have no complaints!
(Click Image to Enlarge)
See more pictures of our sailing adventure.
Better Sailing. Together.
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Colleges will often offer student loans as part of their financial aid packages, coming in two varieties---subsidized and unsubsidized. These two types of loans differ substantially, because subsidized loans are much more beneficial to you.
If you take a subsidized loan, the government will pay the interest on the loan while you are in school. You don't have to start repaying the loan until after you finish school, but once you finish school the interest begins to accrue.
In an unsubsidized loan, interest begins to accrue immediately. You do not have to start repaying the loan principal until after you graduate, but you are responsible for making payments on the interest while you are in school.
The government puts caps on the interest rates for Stafford and Perkins loans. The cap, as of July 2006, is 6.8%. This means that each year, the interest you have to pay compounds by less than 7%.
The Department of Education site Student Aid on the Web is a portal with information about all federal student aid programs. FinAid is another site with helpful information.
Investigate these programs carefully to understand your options. Then, if your student aid package does not cover all of your educational expenses, consider taking out a P2P loan on Lending Club.
As I was browsing through loan requests on the Lending Club site, I saw one user recounting how his credit card rate jumped from 13% to 25% without warning. Such jumps are quite common. While the cause of the jump in this situation was likely the end of a teaser rate (a low rate when you first sign up for a new account) such rate changes are often the result of a practice known as universal default.
Universal default is a common method for raising rates used by credit card companies (for more information, see this GAO study). Clauses in your credit card agreement may allow card issuers to raise your rate if you have a late payment on a different card or line of credit! By monitoring your credit report, the credit card company could see that you paid another bill late and jack up your rate as a result.
While it may not seem fair that one card could change its rates because of payment activity on another account, there is actually more alarming news: the rates used by credit card companies for customers who experience universal default tend to be extremely high. Some cards will raise the rate as high as 32%.
Pressure from lawmakers and consumer outrage are slowly having an effect on credit card companies. A few have done away with universal default. In the cat and mouse game of fees and excessive charges, it will likely only be a matter of time before a new method of exploiting customers will be created to take the place of universal default. It’s not only the method that triggers the high rate that’s outrageous; it’s the rate itself.
Consumers looking for reasonable interest rates are increasingly turning to funding sources like Lending Club. The P2P loans they find there have some of the most affordable interest rates available. As loans from Lending Club have a fixed interest rate for their entire 3-year term, they aren’t subject to changes in the interest rate through universal default. My hope is that over time practices like universal default, used liberally by profit-driven credit card companies, will be eliminated completely.
CNNMoney recently published an excellent article on money rules to live by. The author wrote 20 tips based on the wisdom of some of the best investors, inventors and risk-takers of all time—so these are tips that have been tried and tested for hundreds of years. I've been recommending most of these rules since I began writing for the Lending Club blog.
Some of my favorite tips are:
#7 - Practice patience
#14 - Just do it
#3 - Have an emergency fund
These tips, when followed correctly, are your bet to become wealthy and grow your income.
It's always important to keep in mind that these are rules of thumb, but not requirements. If you notice, by reading these tips, there is a common theme running through them: invest your money for the long term, and try to be average--don't try to beat the market. If you try to spread your investments in multiple markets, finance your IRAs as best as you can, fund your accounts consistently, and be patient, your money will grow--almost guaranteed.
The best way to lose in the market is to believe that you are smarter than everyone else and to try to time the market. Your chance of knowing more than everyone else is almost nil---your financial future is better safe than sorry.
Of course, don’t be too safe. Don't invest only in bonds, put some of your money into stocks and index funds, and invest in some P2P loans on Lending Club. If you are willing to be risky, take some small risks. Just don't bet your entire portfolio on the stock tip you received in your email this morning.
Which tips are your favorites?