Savings Account Rates at Local Banks or Why I love P2P Loans

I am often asked why I like to utilize peer to peer lending and other related questions like "Is it risky?"

The biggest reason why I am so excited about this lending platform is that it bucks the trend. What I mean is, as of today in June 2013, we are in the midst of an asset bubble in the stock market thanks to the Federal Reserve's Quantitative Easing program. QE, as it's called, is a program where the Federal Reserve engages in mass government bond buying which keeps bond interest rates low and provides additional cash into our economy.

All this money printing means that those funds have to be invested somewhere and in the case of most people that is the stock market.  Assets aren't really worth any more, it's that our dollars are worth less.  This leads to why I seek these p2p lending rates at lower risk, Inflation.  It also means bond interest rates are going to stay low for some time so that is an asset class that I want to stay away from.  As interest rates rise, which they will eventually, then bond prices will fall and the value of our principal invested in the bond declines.

Inflation is here whether we want to believe it or not.  Go to your grocery store and see how much Beef costs or see those canned goods that used to be 16 ounces are now only 12 ounces for the same price. That's inflation.

Just for fun, and cause a buddy asked me to, I decided to research local bank savings accounts rates. I did so at Bankrate.  I looked at my local market, Atlanta, GA and here is a screenshot below:

 

 

Atlanta, GA Savings Bank Rates June 2013
Atlanta, GA Savings Bank Rates June 2013

Note that a minimum $10,000 investment is required to get these huge interest rates being offered for money market accounts.  So let's examine some other asset classes for where most of us Americans can and would put their money:

1) The Stock Market: There's an asset bubble like I mentioned above but probably a place to put some funds but there are very clearcut winners and losers so we have to choose wisely. Thanks to our last recession no one believes this is an investment at low risk.

2) The Bond Market: Thanks to QE and superlow rates, this is no place to put our money. We won't even keep up with inflation here.

3) Real Estate: Properly selected properties in a market you know might be an excellent investment.  Good credit is required nowadays and it's also not liquid at all, and has to be maintained

4) Currencies and Commodities/Futures: This is possible for some but most of us don't have the market specific knowledge to make this profitable

5) Bank Savings and Money Market Accounts: See rates above

So how many other choices do typical US investors have to put their money to work? Not very many.  THIS is why I love P2P loans. Low risk, good rates, liquid, and the market is easy to learn.

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

21 thoughts on “Savings Account Rates at Local Banks or Why I love P2P Loans

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