Comments on: Why P2P Lending is Not a Substitute for High-Interest Savings

By: Dana

Dana — Sun, 22 Mar 2009 12:25:59 +0000

Great reminder that investing in any form can be risky. And peer-to-peer is no exception. Thanks.

By: I Need Your Vote + Links

I Need Your Vote + Links — Sat, 21 Mar 2009 01:48:21 +0000

[...] Mrs. Micah wrote an excellent post which reminds us that peer-2-peer lending is no substitute for a savings account. [...]

By: TStrump

TStrump — Fri, 20 Mar 2009 19:38:00 +0000

Very true – I guess you should only invest in P2P Lending if you don’t need the money or can afford to lose it (if the loan goes bad)

By: Roger

Roger — Thu, 19 Mar 2009 04:34:15 +0000

Good post. It’s too easy to forget that the purpose of savings is that those savings be there when you need to access them. Guaranteed access is the key; if you can’t your money (and aren’t able to ensure just how much money will be available), you’re not really saving. It seems too many people don’t understand the distinction between investing and saving.

By: mrsmicah

mrsmicah — Wed, 18 Mar 2009 18:18:40 +0000

@Wiseclerk, that’s a great feature of LC. But you still have to sell, meaning that there has to be a market for it. That doesn’t seem to be a problem right now, but if one day that market dried up—it’s still not as guaranteed as money in the bank.

By: Wiseclerk

Wiseclerk — Wed, 18 Mar 2009 17:22:18 +0000

re 2) true for most platforms. But at lending Club you have a chance to sell your notes (loans) if you want to get out early on the secondary market

By: Jeff@StretchyDollar

Jeff@StretchyDollar — Wed, 18 Mar 2009 17:10:08 +0000

Great post. I especially liked point number three. We’ve been spoiled getting great interest rates on our savings these past few years, but the primary point isn’t to make money – it’s to be there when we need it.

By: mrsmicah

mrsmicah — Wed, 18 Mar 2009 16:16:10 +0000

@Miranda, I like the phrase “capital preservation,” that gets right at it.

@Geo, precisely. It’s a good investing alternative as long as you’re prepared to lose some of the money.

@P2P Lending News, I’m also in favor of buying the market “on sale.” But I think diversification is good. I’d probably put no more than 10% into P2P myself, but that’s based on my risk tolerance.

By: P2P Lending News

P2P Lending News — Wed, 18 Mar 2009 16:07:01 +0000

Great post – I am also a big believer in P2P Lending (hence my blog), but you make a great point that it should not be compared to savings accounts. I keep asking my wife if we can start investing in the stock market now that it’s so deeply on sale, but she argues the same point you do.

By: Geo

Geo — Wed, 18 Mar 2009 13:31:57 +0000

Agreed it’s not a replacement for savings. In fact, nobody should put all their savings into ANY investment vehicle that could result in loss of capital. However, I think the point was that it is a great alternative to invest money that is sitting there, if you don’t need it (emergency funds, etc). I invested a year ago in Lending Club, and even though I started small ($2K), having realized about 9% after my first year, I am moving some of my idle funds into it. Admitedly, it is money I can afford to lose, and I’m still keeping my minimum savings balance to where I feel comfortable. But any money I would typically keep in a CD, I am investing in P2P lending.