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Author Topic: Bonus Offer  (Read 12802 times)

alexpkeaton

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Bonus Offer
« on: June 03, 2016, 11:46:32 pm »

Just go an email offering a $100 bonus for a $10,000 deposit and subsequent investment. I'm not sure I want to get back into LC though. It's just a lot of busywork at tax time for such an insignificant amount of income.
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Fred93

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Re: Bonus Offer
« Reply #1 on: June 04, 2016, 01:57:24 am »

Insignificant?

It would be significant if you put enough money into it.

alexpkeaton

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Re: Bonus Offer
« Reply #2 on: June 04, 2016, 08:06:42 pm »

Insignificant?

It would be significant if you put enough money into it.

If I'm making many loans of say $100 each it's a lot of work to either write off the losses or to compute capital gains and losses on traded notes. It's not that the returns are insignificant in aggregate, but the amount of work required for $10k invested in LC vs. a junk bond is significant.

It could be mitigated by taking larger positions in each loan. But I'd rather not hold $10k worth of debt to a single irresponsible borrower refinancing his credit card debt.

FWIW, I did put $6k into Peer Street. The minimum loan size is $1k. And they're all interest only loans with a final balloon payment. This means there won't be any difficulty figuring out any losses at tax time. Again, dealing with this on LC was labor intensive. Though perhaps they've improved their reporting tools in the year since I've been an active lender?
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Cerlyn

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Re: Bonus Offer
« Reply #3 on: June 04, 2016, 11:51:26 pm »

(Obviously not tax advice; consult a CPA if you need it)

The approach I've taken to filing taxes related to Lending Club is to attach their annual Tax Statement to my return as a Form 8949 attachment.  That way all you need to do is provide the net gain/loss for each of the "Box" categories, and the IRS can reference the PDF file and see the full list of notes along with Lending Club's total calculations.

The personal tax software I use allows this.  If you use an accountant, they might have other ideas on if this is correct or not.

Note that the OID income still needs to be reported elsewhere, and I have no idea how to do any of this if you use the secondary market. 

Personally I have suspended putting or reinvesting money at Lending Club until I have a better idea what is going on.  Compared to other ways to get similar returns they are a bit illiquid.
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havastat

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Re: Bonus Offer
« Reply #4 on: June 06, 2016, 05:05:33 pm »

Insignificant?

It would be significant if you put enough money into it.

If I'm making many loans of say $100 each it's a lot of work to either write off the losses or to compute capital gains and losses on traded notes. It's not that the returns are insignificant in aggregate, but the amount of work required for $10k invested in LC vs. a junk bond is significant.

It could be mitigated by taking larger positions in each loan. But I'd rather not hold $10k worth of debt to a single irresponsible borrower refinancing his credit card debt.

FWIW, I did put $6k into Peer Street. The minimum loan size is $1k. And they're all interest only loans with a final balloon payment. This means there won't be any difficulty figuring out any losses at tax time. Again, dealing with this on LC was labor intensive. Though perhaps they've improved their reporting tools in the year since I've been an active lender?

The difficulty with the interest-only balloon-at-end approach is that it's intended for people who don't have the ability to repay the loan with their income, so the only way to get the principal back is if they refinance and leave someone else holding the bag, er, note. If they can refinance at the end, great. If not, tough noogies. There was something a few years back called the "debt crisis" where everybody who was banking that they could keep this refinancing merry-go-round going on forever found that they couldn't, and a lot of people lost a lot of money. Might be worth reading about. Just a thought.
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havastat

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Re: Bonus Offer
« Reply #5 on: June 06, 2016, 05:06:51 pm »

Lobby.
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TJGbank

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Re: Bonus Offer
« Reply #6 on: June 06, 2016, 07:48:49 pm »

Why is this in the Lobby?
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