Boat Purchasing Poll

[swatski]

I bought my boat new and put down $10K to offset initial depreciation. I financed the balance at 2.99% while putting the cash I could have used to pay for the whole thing into www.lendingclub.com peer to peer lending. I've been earning just over 8% interest on that money which means I am earning 5% by having the boat financed.

Oh God, I would so not recommend doing that.
Unless of course you are ready for it.
Just keep in mind, there are many VERY smart people who would kill to find a formula for consistently making 8% earnings.

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[Jim Cosler]

@Jim Cosler
Tell me more about this lending Club. How long have u been doing it? Loses? I am interested.

There are two major players in the "peer to peer" lending field, Lending Club and Prosper. I feel that LC is the stronger of the two and has more people seeking loans and better metrics, though I haven't heard of many complaints about Prosper. The idea is to "invest"/loan your personal money to people who need loans. To minimize risk, your investment comprises a small amount of someone's total loan and a loan applicant must attract many investors to fully fund their loan. For example, someone seeking a loan for $10,000 may get 400 investors to all loan $25 a piece. To a loan applicant, all they see is if their loan gets funded and LC or Prosper take a cut as the middleman. I have been doing this for a little over five years and have a regular and IRA account with LC. My returns started at over 11%, but have come down a bit with the maturity of the loans and a few more defaults. I am hovering at close to 8% return on both my accounts. There are all kinds of ways to invest and filter out for risk, employment, home ownership, credit score, etc.. I stay with mostly the lower risk stuff and am very happy with my returns. They have an automatic reinvesting filter that you can dictate how to reinvest earnings. I would love to put more money into this, but frankly I am risk adverse as far as having large portions of my money in any one type of investment. Bottomline, I have been very happy and it has been the most stable investment I have ever made. Check it out..

 

[Zarrella]

@Jim Cosler
Thank You! I am going to check into it.

 

[Jim Cosler]

Oh God, I would so not recommend doing that.
Unless of course you are ready for it.
Just keep in mind, there are many VERY smart people who would kill to find a formula for consistently making 8% earnings.

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These are bonds, just like you would buy in a bond fund. Yes, there are risks and nothing is guaranteed, that said this investment has been very stable for me and I continue to roll over my profits. Lending Club has won numerous awards and named one of the top 50 industry disruptors. Deposits are FDIC insured while in cash and SEC regulated once invested into bonds. They also are a publicly traded company and release all loan data monthly..pretty transparent in my opinion. Anyway, everyone must decide for themselves what they view as risky or not. I really don't care if anyone here invests or not, just putting an idea out there for those who want to investigate. I was skeptical when I started and only used a couple thousand. Now I have about 20% of my investments with them.

 

[swatski]

These are bonds, just like you would buy in a bond fund. Yes, there are risks and nothing is guaranteed, that said this investment has been very stable for me and I continue to roll over my profits. Lending Club has won numerous awards and named one of the top 50 industry disruptors. Deposits are FDIC insured while in cash and SEC regulated once invested into bonds. They also are a publicly traded company and release all loan data monthly..pretty transparent in my opinion. Anyway, everyone must decide for themselves what they view as risky or not. I really don't care if anyone here invests or not, just putting an idea out there for those who want to investigate. I was skeptical when I started and only used a couple thousand. Now I have about 20% of my investments with them.

Look, I get it. Not debating this may be fine as an investment account. As long as you are comfortable with funding a loan shark (as in a pyramid scheme) and also realize what the issues may be. Perhaps the biggest is your gains are taxed as ordinary income — not great especially if you are in a high tax bracket. And lets not forget - these have not been around for too long, so you have no idea what they will look like in 15 years.

Which brings me to my point: if you are suggesting that is a good way to get into boating, I respectfully disagree. Few have discipline and resources required to maintain a rigorous financing scheme like that for 15 years (without cutting corners). I, for one - would not stand a chance! Importantly, with standard boat loans these days going for 15 years, one accumulates little equity for the first 10 or so, so a $10k down payment only helps that much.

Another issue is liquidity. God forbid something bad happens, if you don't have the money in the bank, you are on the hook not only for the amount financed but also for whatever your new default rates will dictate - ending up easily at 3-5 times that in total cost...

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[captras]

http://wealthpilgrim.com/lending-club-reviews/

 

[Jim Cosler]

Look, I get it. Not debating this may be fine as an investment account. As long as you are comfortable with funding a loan shark (as in a pyramid scheme) and also realize what the issues may be. Perhaps the biggest is your gains are taxed as ordinary income — not great especially if you are in a high tax bracket. And lets not forget - these have not been around for too long, so you have no idea what they will look like in 15 years.

Which brings me to my point: if you are suggesting that is a good way to get into boating, I respectfully disagree. Few have discipline and resources required to maintain a rigorous financing scheme like that for 15 years (without cutting corners). I, for one - would not stand a chance! Importantly, with standard boat loans these days going for 15 years, one accumulates little equity for the first 10 or so, so a $10k down payment only helps that much.

Another issue is liquidity. God forbid something bad happens, if you don't have the money in the bank, you are on the hook not only for the amount financed but also for whatever your new default rates will dictate - ending up easily at 3-5 times that in total cost...

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Tough crowd on this board. All I did was explain a way that I am using a big banks money to make more money for my self. I really don't get a reference to a pyramid scheme. LC takes a percentage just like a traditional bank does, so I guess Bank of America is a pyramid scheme as well. In that vein, I would argue that LC, as a business model, is more stable than traditional banks who are able to invest your money in to some pretty risky things...anyone care for some credit default swaps?

I never suggested this as a way to get into boating. That said, I don't understand the fire I am drawing for having money to pay cash, yet still taking loan money that I am investing at a higher return. If LC somehow did implode, I still have other funds I could use to cut a check for the boat tomorrow. I am upside right in my loan because I put down a large down payment and have been paying lots extra on each payment.

As for 15 years, I have yet to hold any single investment for 15 years. I hope that LC will be a good investment for that long or longer, but time will tell. So far, so good...

 

[swatski]

Tough crowd on this board. All I did was explain a way that I am using a big banks money to make more money for my self. I really don't get a reference to a pyramid scheme. LC takes a percentage just like a traditional bank does, so I guess Bank of America is a pyramid scheme as well. In that vein, I would argue that LC, as a business model, is more stable than traditional banks who are able to invest your money in to some pretty risky things...anyone care for some credit default swaps?

I never suggested this as a way to get into boating. That said, I don't understand the fire I am drawing for having money to pay cash, yet still taking loan money that I am investing at a higher return. If LC somehow did implode, I still have other funds I could use to cut a check for the boat tomorrow. I am upside right in my loan because I put down a large down payment and have been paying lots extra on each payment.

As for 15 years, I have yet to hold any single investment for 15 years. I hope that LC will be a good investment for that long or longer, but time will tell. So far, so good...

No disrespect intended. I am voicing MY OPINION here. I just happen to think that is NOT the best way to get into a new boat, for most owners:
"I bought my boat new and put down $10K to offset initial depreciation. I financed the balance at 2.99% while putting the cash I could have used to pay for the whole thing into www.lendingclub.com peer to peer lending. I've been earning just over 8% interest on that money which means I am earning 5% by having the boat financed."

You can agree or disagree.

Is it a pyramid scheme? Maybe it is not. But I don't know what you would call that. A "ponzi" scheme is where the only way many borrowers could repay their loans is to borrow more money. When the system is interrupted for any reason, it will crash.

Whether the risk-return ratio is more or less favorable than investment grade bond funds and such, I do not know. I suspect early on it probably was (as with most "new new things"). But over time, returns get squeezed. There's a lot of equity risk in P2P lending. And that's fine, as long as one does not consider P2P lending as "equivalent to" investing in safe government bonds or FDIC insured CDs.

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[BlackandTan]

That's only for one year though, right? I was wondering about it. But I think it jumps to something obscene if you slip...

Correct!