Thursday, October 27, 2011

What Lending Club did for Our Timeshare Loan - Our True Story

Featured in this weeks Carnival of Personal Finance!

In September we made a leap and took out a Lending Club loan to replace our timeshare financing. I wanted to give you the details of this deal. And see, I'm a numbers kind of gal. I'm logical to a fault and numbers just make sense to me. So although this post might be a bit tedious to read for some, it sheds a lot of light on the subject of debt to me. Please read on whether you like numbers or not. It's truly shocking.

Here are the down and dirty details of that deal:

Original Cost for Timeshare: $17,820.00
Down Payment: $4,716.69
Total Amount Financed: $13,103.31

That was in February of 2008. 

Balance of Loan September 2011: $10,906.17

Whoa!  WHAT?! three and a half years after paying $238.78 a month on time every time with no penalties, we had knocked down that loaning a massive $2197.14.


Yep...that's the horror of 17.9% interest. That's the horror of ANY interest. (cash is king, people!)

So, in September of 2011 we took out a Lending Club loan for $12,000 at 9.99%.  This would cover our timeshare debt as well as the loan fees associated with taking out the loan. It left us about $300 that got us through a rough period in a tight month.  But that's another story.

So we made our first payment on October 9th to our Lending Club loan in the amount of $387.15. 

So notice that our payment is now about $150 higher.  We could have settled for a payment that was closer to our previous payment but we chose a 3 year loan with a lower interest rate rather than a 5 year loan with a higher one.  We did they math and saw that we could work in the extra $150 for the hugely improved (over 17.9%) interest rate.

Of our first payment, $287.25 went to principal.  That's 74.2% of our payment that went towards principal.  One month earlier, of our $238.78 that we paid, only 31.0% (or $74.05) went towards principal. one month we've already paid more than 3X the amount of principal than we would have on our old loan.

To make it even crazier...we are paying $148.37 more a month for this loan, but in the first month, paid off $213.20 more in principal.


And as crazy as it may sound to some of you, I actually care that my interest is going to people who are responsibly investing their money in Lending Club rather than a financial company that financially rapes people like they were us.

So, if you had any questions about whether Lending Club works, I can tell you that it has certainly worked for us. Even in one month's time.

So if you need a loan, go check it out.  Do the calculator they provide on their site. Go through the pre-approval process to see if the payments would do the wonders for you that they have done for us. Interest rates start at 6.78%.

And if you're looking to invest wisely, consider Lending Club. You may not put a large sum in, but the current returns for investors average 9.6%.  Because I invested with $50 of free money, I invested in more risky loans, and my current return is 18.01%.  Either of those beats anything you'll get with a CD or even the more risky current stock market. You can rest assured that Lending Club does not lend to just anyone; in fact, the only approve about 10% of the requests for loans before people even get a chance to decide if they want to fund them. And you can know that you are helping people who are working their way out of debt the honest, hard-working way.  

Links provided are affiliate links, but the story is all mine and all true. It really does work for us and I couldn't be happier about it.

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