Lending Club – 10 Months After with 5 Figures Invested

by David Ning · 38 comments

After 10 months, and multiple 5 figures invested with Lending Club, here are more thoughts on this alternative investment.

I’ve been thinking about and gathering notes for this article for a while now. Partly because many of you actually wrote to me with questions after my initial Lending Club review, and also because of the concerns of whether our reviews are even genuine.

The following represent what I think you need to know about Lending Club before you invest with them.

First things first. Many people, myself included, are compensated if you click through our links and sign up an account with
Lending Club. I would love to say that writing about this has absolutely nothing to do with the compensation, but the fact of the matter is that it at least subconsciously affects my decisions, whether I like it or not. Keep that in mind while you read the rest of the article.

Lending Club for the Investor

Make sure you understand every point below before you start investing with Lending Club.

  1. Fees – Not sure if many people actually read the prospectus, but Lending Club charges a 1% fee for their service, which cuts into your returns. On top of that, if you were to sell the notes before they mature, you are charged another 1% of the note amount by the company that handles the transaction.
  2. Keep Reinvesting – People pay off their loans early all the time, and some of the loans don’t even start. It’s not really a set it and forget it type investment that most people think it is. If you don’t reinvest your funds, the money will sit in your account collecting no interest.
  3. Play by the Numbers – Most people think they can pick the winners from the losers, but in reality, all they are doing is making emotional decisions based on someone’s “story”. The most successful way to invest with Lending Club is to have as many loans as you are allowed so your returns come close to the average returns and just accept that. (Remember that each note needs to at least be $25 dollars, so you can only have a maximum of 100 loans with $2,500 invested).
  4. Prime Account – If you have $10,000 or more in your balance,
    Lending Club actually has a service where they will help you invest your funds. The system isn’t perfect (for example, they don’t reinvest your funds every day and their notes are generally $100 each, but it’s a good alternative for those who don’t want the hassle of keeping up with the administrative side of this type of investment).
  5. Liquidity – Statistics have shown that selling your notes at what it’s worth takes approximately 3 days, so expect at least a week or more for your funds to get to your checking account if you absolutely need your money back (3 business days to sell, then at least 3 more business days for it to be transferred out to you). Also, imagine trying to liquidate hundreds of these notes all at once. Not exactly a piece of cake.
  6. Default – People default, and that’s one of the biggest risks. I’ve heard others do well by selling their notes at a discount when someone is late with their payments, but that’s much more work involved.
  7. No Long Term Track Record – Let’s face it. This is a completely new way of investing. The returns look pretty good so far (it’s published on their website and I am getting a good return too), but who knows what’s going to happen 5, 10, 20 years down the line.
  8. Company Risk – There’s always a chance that Lending Club will go under. Although they’ve made arrangements for another company, Foliofn, Inc., to take over all the notes, there’s no guarantee what exactly will happen in terms of how easily you can get your money back. After all, this is not the same as a FDIC insurance.
  9. High Risk Investment – This is considered a high risk investment, and definitely not guaranteed. Yet, I keep hearing everyone compare this to their savings account interest rates. IT IS NOT THE SAME. Don’t compare them that way. The Lending Club investing system can give you better returns, but it comes with more risks. Make sure you think about the consequences and are comfortable with this before you invest.

You can sign up for a Lending Club account here (and you will get a free $25 to start), but only if you are ready.

Lending Club for the Borrower

My experiences are mainly on the lending side, but a borrower with high interest debt is crazy not to at least try getting a lower interest loan with Lending Club. It’s a legitimate business, and it’s borrower’s heaven to get a lower interest rate loan. I mean, don’t go check it out just because, but if you are paying high interest debt on your credit cards, you are doing yourself injustice by not taking advantage of this new alternative investment.

And What Do You Think?

So far, my loans are working out which I’m extremely glad because while 5 figures may not be a lot of money for some of you, it is for me. What about you? Have you used the Lending Club service yet? Good or bad, help others learn from your experiences. At the very least, I will very much appreciate your thoughts as I’m a user and need to learn about it as much as possible too.

Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.

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{ read the comments below or add one }

  • Randy Katz says:

    I just wanted to extend my thinking in my example above. I am not sure if my approach is similar or opposite others. I have heard some that pull out 80% and reinvest 20% which would make the above have a cash out value of around $64/mo and a reinvest growth of $16/mo which would be very slow growth unless more funds were invested from other sources continually. In my example about with reinvesting 80% it should be noted that after 12 months the $16/mo would grow to around $23/mo if returns (profit) remained similar. I always am thinking about that figure against the total base investment and against certain monthly expenses. So if my auto payment were $500/mo I would think what would I need to have as a base in lendingclub in order to pull $500/mo out if I were pulling out 20% still, well it would seem to need to be around $310K invested!

  • Randy Katz says:

    Hi, it has been a while and I have gathered experience with lendingclub.com and have seen a) how cash flow works with a larger amount of notes b) how defaults work! and c) how the overall biz of this sort of lending goes. The main issue I have is that it is quite a boring business and I am always thinking about what the alternative would be. So at this point I have seen slightly higher then average returns using a selection criteria that I am comfortable with, however, I am never investing more then $25 in each note as I have seen a few default and they are very hard to predict! When I say it is a boring business, take the example of $10K invested, $25/note, so now you have 400 notes. And let’s say your return is average, around 9.68%, so your cash flow above base investment (or interest received) is around $81/mo. And let’s say you reinvest everything except you retain (hold back) 20% of “profit”. So you are pocketing around $16/mo and able to buy 2 1/2 new notes per month with the 80% reinvested. So now that $16/mo does not seem like much at all, however, as your loaned base increases it also increases, but quite slowly unless you put other moneys into the pool periodically. And you must set your notification criteria so you see when a reinvestment needs to happen, the notification emails are pretty good in my opinion there could be a few more granular controls but overall they are fine, not much is lost in the flux (I said a potential of 0.75/mo on a $10K investment above it could be a bit more or a bit less depending on what you do, once a week/month or immediately after receiving the report). The largest question I have after doing this for a while is this: What are my other options for growth on my cash? Especially what are my other options for growth on cash in such a diversified manner? I only came up with a few others, including buying stock in corporations, I wish there were more options!

    • GIC says:

      If you are looking to diversify, I have a $175K private note on my rental property that I am paying %10 so if you want to make %8 on safe investment with already establish cash flow. I am looking to lower my monthly payments.

      • Randy Katz says:

        Hi, thanks but no thanks, not up to putting that much into a single note at this time. Also, it would not be much
        different then lendingclub except principle is much much higher and all the risk is based on one person’s performance (well actually that person and their tenants).

        • GIC says:

          Hi,

          I was not expecting you to replace the whole note. everything over $5K is reasonable. I am trying to reach other investors as I am working on establishing positive review and history of repayments. Similar to returning borrower at LC. Actually this is very safe investment as the property is valued to $400K and already producing cashflow, and it can also be backed up by property itself. So if I default you would even make more money… much safer and predictable then LC.
          Right now I owe to one person $175K and he is getting regular payments form me, and he is ready to borrow me again if I want to get another property as I am great borrower. I am trying to get a pool of investors like him so that is why I offer other people to get into my deals.

          • Randy Katz says:

            Let’s develop a dialogue and see where it goes from there, please contact me through my blog which should be linked to my name (above).

  • John Doe. says:

    I have accounts with lending club totaling $137 K. This amount was ramped up to now – starting out around $75K.
    I’ve been investing with them for almost 2 years now. Initially, I invested using the automated features they have to choose notes. So 1/2 of the $137K was done that way. The other half I used my own criteria. The amounts are well diversifed over all A-G interest rate classifications. I’m now typically investing $300 per note. Daily, I login in to all accounts and re-invest any moneny sitting idle. One criteria I use is to look for notes that just got listed recently & look at where the smart money is flowing. So that means that 1/3 or more of a candidate note is already allocated by investers. I then apply my other criteria. This process is quick and takes only 10 mins daily. Im investing in 3 and 5 year notes although the 5 year ones make me more nervous but there is limited opportunity with all the competition. My rate of return for everything is 9.5% which is right in the middle of the average.
    My advice is to try to develop your own methodology rather than use LC’s automatic investing features. My returns increased doing this. I also suggest not to invest in A (top quality) loans. The return is just not enough inherent to the risk. LC has proven to hold up well in the 2007 recession. The biggest risk I can see is that of a depression and very high unemployment. If that happens I will try to sell all notes (all 1000 of them) ASAP at a slight discount maybe 1% or less before things start to get really grt bad. Of course, everyone else may sell too so that is the major risk. Other advise is to invest in only 3 year notes. This is the equvillant to a short term corporate bond except riskier in my case. The idea is if the economy goes to hell you will be liquid in cash in only 3 years. The reason Im not doing this is that its harder to invest this large amount of money in only 3 year notes. I wish they never offered the 5 years-too much risk! They do pay a premium for investing in the 5 yr notes of about 2-3% over the 5 years-but your paying for it in risk.

    Overall, I recommend LC. I’ve found their customer service to be good when I have a question. People seem to be overly worried about defaults. According to LC I think only about 5% of a defaulted loan on average is ever recovered. The system offsets the defaults by charging interest. My investment average % is about 14%. After LC’s fee of 1% and losing 3% to defaults I hope to end up with 10% and so far Im near that. So dont worry about defaults. DIVERSIFY to offset them. So if you have $10K you can put it in 400 loans.

  • Randy Katz says:

    @phlexicon – you do not appear to be one to actually invest, perhaps time to take action. Thank you for adjusting your numbers back towards mine. I was also eyeballing the figures, but I have a working template.

  • phlexicon says:

    and now i stopped working on th back of a napkin and actually ran th #s for my above example: ~1/5 of 1 % loss or ~ $5/mo
    definitely not worth worrying about. th float is insignificant
    i stand corrected

  • phlexicon says:

    oops, got in a hurry there.
    i forgot to divide by 12
    thats 375/yr or just 31/mo
    so if your time is worth more or less than $6.25/hr be less or more active 🙂

  • phlexicon says:

    i forgot to mention: serico’s comments were right on. that was a concern that crossed my mind as well. i’m referring to comments a), b) and c). and th comment about how they calculate th default rate.
    while they seem to possibly be a legitimate site, there is no doubt that like most financial institutions they definitely try to slant things in their favor. it’s true that they are very transparent, but if you dont read th details carefully and think about them, then it’s easy to be misled a bit.
    note on previous HW: 1000 notes at $25 = 25k investment
    1.5% = $375/m potential float loss. ~33 dep/da @12% return 250 int + 750 prin = ~33/da if u come in every day and spend 10 min to reinvest you save that $375 and it costs you ~300 min = 5 hrs of your time. so, if your time is worth less than 375/5 = $75/hr to you, then you should be active. If your free time is worth more than that to you then you should deal with it less frequently. just keep in mind that dealing with it once a month is in effect costing you 1.5%

  • Randy Katz says:

    Yes, however, if you log in once a week and do your purchases, assuming you have enough notes to justify it, it can potential reduce the 1.5% float by 3/4 (75%) to only be potentially .375%, let’s say you have $25,000 in notes I estimate this potential loss to be around $.75/month (or $1.50/mo. if you logged in once a month). Does this sound like something you could afford?.

  • phlexicon says:

    Float. an important point that i havent seen addressed is th loss (to th lender) and gain to LC due to float. it’s common in th financial world for institutions to use a float of 3 to 6 days to make money on your money. but here, since there doesnt seem to be an auto reinvestment option, your money will sit idle earning no interest unless you are monitoring your deposits continually. if you have many (100s) notes, then you are either working every day to minimize th float or if you are not willing to work that hard then you are giving a considerable float to LC.
    EX. say you come in and reinvest your deposits once a month. assuming your deposits come in scattered over th entire month then you are letting those funds make 0% for ~15 days. for 36 mo notes you receive . 1/36 of th loan every month. that’s ~3%, so you are in effect losing ~1.5% in float. th more diligent/active you are in managing these deposits then th less you lose in float but you are paying for that with your time and effort. thats a significant cost that needs to be considered. consider how often you want to do this and calculate what your hourly return is. then compare that rate with th cost of 1.5% i could do th math for you but let’s consider homework 🙂

  • GIC says:

    Partner and me ( accountant and engineer ) are raising capital for a small RE investment fund ( up to $400K ). about 30% of the fund will be own by us and rest will be funded from outside. We both have excellent credit scores, experience with investing, both owning a rental properties.
    So if there are people interesting in investing let us know. Our estimate is about 10% return on investment. ( are plans are conservative with this invest. fund )… it is more long term investment . Minimum 5K
    Partner and me ( accountant and engineer ) are raising capital for a small RE investment fund ( up to $400K ). about 30% of the fund will be funded by us and rest will be funded from outside. We both have excellent credit scores, experience with investing, both owning a rental properties.
    So if there are people interesting in investing let us know. Our estimate is about 10% return on investment. ( are plans are conservative with this invest. fund )… it is more long term investment .

  • MCO_Lender says:

    @ Moneyning

    Are you willing to share your performance in the LC on the blog? I figure since you started this it would be great to hear your thoughts on your performance.

    I hope you haven’t invested and forgot.

    MCO

  • MCO_Lender says:

    @ Andy

    You should check out the blog post on tools and tricks (video) from the Lending Club. During that video they have talk about the statistics of default. You may not be surprised but you can sustain your returns by increasing the number of notes you hold. Having only 50 is good, but over 200 is much better and so forth.

    In the beginning I held just under 100 notes (largely at $25 increments). My return was very nice 13%ish. Once I got one default it came crashing down, naturally; however, over the course of 6 months I increased my capital and picked up over 200 notes. Over this same period my defaults have increased (from 1 to 5) but my overall rate of return stabilized to 9.4%. I am not a stats expert but I understand that to be caused by the fact that most people in the LC population (that’s already been aggressively filtered by LC) will stay current – which is why they have the average default risk of 3%.

    MCO

  • serico says:

    I think the main point of my comments are in the sentence: “This investment should absolutely not be compared to a savings account. It’s not liquid, and it’s not secured, and it’s not insured. It is exactly like buying a junk bond, with all the risks entailed in that.”
    And I should not have said that it’s “Exactly like buying a junk bond” because a junk bond is secured by the borrower’s assets.
    Randy Katz is certainly right that the borrower’s creditworthiness is at risk if he defaults. This is also true of a borrower who issues a junk bond, and the lender must rely on the “credit rating agency” to do a good job of rating how risky the loan it. As we saw in the financial sector melt-down, the rating agencies, from the big houses like Moody’s all the way down to the local the real estate appraisers; they were all just shooting from the hip. The fact that they were spectacularly wrong doesn’t seem to have hurt them, unless of course the investors who WERE hurt manage to sue them successfully.
    In the case of Lending Club, who “rates” the loan applications? Is that employees of LC, or an independent agency, or what?
    Also, when I mentioned “gaming” the system, maybe I should have said “scamming” the system. The reason that the real estate market collapsed is that the controls on who gets loans, and what property is worth, were weakened because there was huge demand from investors who wanted to buy CDO paper. In the “weak control” environment, it was easy to figure out scams so that you could get big loans on crummy properties. A lot of this was done by guys on Wall Street, but they had their counterparties down on Main Street, the crooked investors, the crooked appraisers, the mortgage company loan originators who only made money on the transaction, not on the long-term viability of the loan.
    At a lower level, the internet is full with scammers working their little schemes. Nigerians trying to get you to accept a million dollars for harboring their supposed ill-gotten gains from a dead relative who did something naughty. Scammers who want to buy your car on Craigslist, and pay for it with a forged cashier’s check. Just to name a couple.
    If those scammers figure out a way to get good ratings on their LC loan applications, and simply take the money and run, then LC, and its lenders, are in trouble.

    • Andy says:

      So I’ve been a lender with Lending Club for some time now. I have approximately 50 notes. Some are $50, but most are $25. I figure the odds for default are lower when they are spread out. I’ve never had a note in collections, but currently do have a late one that is making me iffy. Either way, even if it defaults, I’ve already made more returns to cover the loss.

      I like the system. I reinvest every time more money becomes available. Obviously the downside to that is if I needed liquidity, I’d have to wait 3 years for the notes to mature or try to sell the notes at a discount price. I’m young so I figure I’ll hold out for now.

      I’m a bit biassed in my investments. I only lend for 36 months. I stay away from borrowers wanting to consolidate. I figure a new loan to pay off the credit cards only free’s up more credit cards. I try to lend towards other needs, home improvement is my favorite. It’s people with some assets. I mainly go for B-D paper which is riskier, but it’s worked for me.

      I like the system. I see my money increasing and the increase is based on my own doing, my own reasearch and my own risk. It’s a real game.

  • MCO_Lender says:

    Great post and excellent comments from the gallery. I have been investing with the Lending Club since AUG 2009. I started out small, $2k and over the course of 6 months increased the dollars to $4k. My returns have been very strong (compared to other investment options). Just last week I increased by capital input to $6k. Between AUG 2009 and AUG 2010, I increased by initial investment capital by just over $1k through the use of reinvestment (taking the monthly P&L received from the notes and reinvesting it in more notes). I have defaults – 5 to be exact. A couple of the notes went late but ultimately got caught up or went into payment plans. When I show people my performance, live on the Lending Clubs website, 95% of the time people setup an account. In those cases where the people didn’t open an account was simply due to the liquidity problem that “notes” provide – although a secondary market exists… I have an account in that market as well but found that many many many people don’t understand the duration / note valuation mathematics and ultimately overprice their notes (which explains why people like me don’t buy them). If you are going to try that market make sure you understand the Present Value and Future Value equations (as well as duration math).

    In my opinion, the most important thing to remember when working this type of investment is that even the big banks have defaults. Providing your defaults don’t (as a percentage of your total investment) exceed X% (you define what x means to you), and your return is meeting your expectations than you are making money. This is the same decision point you have to make with any investment – equities specifically. At what point do you sell the security – when X% loss exceeds your total investment OR when the return no longer meets your expectations.

    Bottom line, the Lending Club will not make you a million over night – real, sustainable, capital appreciation takes time and patience. The beauty of the Lending Club is that ordinary people, like me and you, have the chance to enter into (probably) the second oldest profession… bank lending.

    Good luck,

    MCO

    BTW, I am not compensated for my comments… 😉

  • Randy Katz says:

    muse-dung = moose-dung (hehe)

  • Randy Katz says:

    Correct me if I am wrong but isn’t the difference between an LC loan and junk bonds the fact that people’s credit is attached to whether they pay off the loan or not? And if someone is not worth loaning to at all, do you imply that it would be easy for them to get an “unsecured loan” from LC? I think the process and likelihood of loan approval is way more stringent then you want to admit in your post.

    PS – Love the analogy of the muse-dung pie.

  • serico says:

    What Lending Club (LC) issues is an unsecured loan, with an intermediary (Lending Club) in between borrower and lender. In some ways it’s very similar to all the “securitized debt” that has brought our economy down, this process of taking a single debt and dividing it up among many lenders. (Except that in the Collateralized Debt Obligatiions (CDO) of Wall Street, they add the element of piling a bunch of debts together, and THEN selling them to a bunch of lenders.
    But the process is similar. If you own a CDO, there’s an intermediary between you and the borrower. Let’s say it’s Goldman Sachs (GS). They’re the middle man, just as Lending Club (LC) is.
    So how do THEY get paid? In the case of GS, it’s fees and a cut of the action on the sale. After the sale is done, they have little incentive to make sure the loan continues to perform. And as we’ve seen from the mortgage meltdown, they have every incentive to make lots of loans, and make them cheaply. So verification and paperwork are skimped. The result is bad loans (no verification), and the lenders are finding it difficult to foreclose because the paperwork wasn’t done properly.
    So how does this relate to LC?
    As said above, these are non-secured loans. As pointed out on other sites, the way they figure percentages of loans in default skews the numbers toward showing the portfolio to be quite secure.
    But they do have a small amount of “skin in the game,” in that their money comes as a rake-off percentage from the monthly payments. So their interests coincide with the lenders, right?
    Sort of.
    Because if the loan defaults, they will lose revenue, but not capital, while the lenders will lose both. And because LC is on the hook to pay all of the costs of getting the loan to perform, they have little incentive to not be very active at this.
    Except, someone might say, their whole market appeal is in the high rate of returns from loans. So it’s in their interest to see that the loans are paid off.
    Makes sense. But consider this. If:
    a) their loan volume is increasing rapidly
    b) the default rate increases with age of loan
    c) they exclude the new loans from default calculations, except that they include the NUMBER of loans. The result of this is that the number of defaults on the old loans is divided into the number of TOTAL loans, to arrive at the loan/default ratio.
    If the volume of loans was fairly consistent, it would be easy to compensate for this. But in the case where the business is growing very rapidly in a period when the economy is in tough shape, it’s pretty hard to know what their real default ratio really is. And that’s a key figure.
    One aspect of their business model that bothers me is the emphasis on only lending $25 on each transaction, to “limit your risk.” A certain amount of that makes sense, but it’s also true that if:
    1) people start gaming the system
    2) the economy really heads south
    then all you’ll have accomplished is booking lots of little bad loans, instead of a couple bad loans.
    The idea that scattering the loans will reduce risk has some basis, but it’s worth noting that this is the EXACT SAME IDEA behind the collateralized debt obligations that sank our economy a couple years ago. Eating a dozen little slices of moose-dung pie is the same thing as just eating the whole pie.
    By gaming the system, I mean that if you can figure out how to apply for a loan, get the loan funded, then simply pocket the money and never make a single payment, you’ve got a killer business plan. The only entity in a position to come after you, LC, is not actually out any money if you default. They’re out future income. The people who are out money, the lenders, probably don’t have legal standing to come after the deadbeat borrower.
    This investment should absolutely not be compared to a savings account. It’s not liquid, and it’s not secured, and it’s not insured. It is exactly like buying a junk bond, with all the risks entailed in that.

  • Robert says:

    I am a long time lending club loaner. Don’t get greedy for higher interest or let your emotions control your actions. Stay with the “A” accounts below 6000.00 with a no default history. Overall revolving credit has to be reasonable. I only buy 36 month notes. 50 dollar max on any note. oldtimedoctor dot com

  • Alex D says:

    Does anyone want to buy my notes? I have about $2000 worth of notes, and am willing to let it go for a discount cause i need liquidity right now. If interested, let me know, i am going to be putting these up on foliofn soon.

    • Brian K says:

      If they have favorable histories I’d be happy to take a look at them. What are the major denominations and are they mainly 36 month or 60 month?

  • Nancy J says:

    I have been lending peer-to-peer for about 2 yeaers. Started out at Prosper but moved to Lending Club when Prosper had to stop new loans for lenders. I have about $3K overall. I like Lending Club better because:

    1. smaller loan amounts – it’s easier to think of the rist if I am losing $25 rather than $50

    2. I think the credit score and history requirements for the borrowers are higher.

    I have one comment to make about how to pick an investment opportunity. I have a balance of A – D rated loans at Lending Club. Of my 68 loans, the only 3 that were charged off or about to be were A-rated loans. So I don’t rely on ratings alone. I look at the expected monthly payment along with monthly gross income. It’s hard for anyone to make a loan payment of $300 or more a month..

  • Glenn Mako says:

    Though I personally like Prosper better and actively invest money with them, I do have a $25 investment with Lending Club. The reason I like Prosper is their automated portfolios (currently have Aggressive and Aggressive Plus plans). The only thing I dislike about Prosper is their reporting. For me their month-end reports are incomprehensible.

    • Glenn says:

      Actually their reports start to make sense now… I know how much money I recieve in interest and in principal payments. Those two are important progress metrics everyone should monitor. My strategy is: Min. investment is $25. D and below rated securities pay back $1+ per month. So, to keep account rolling I need to have at least $25 per month invested in at least D rated sec’s to keep account from running dry. To acchieve that you need to have $625 invested in D or below rated securities (25*25/625)=1. Right now I’m just about to double that. I have just 3 sec’s defaulted so far. Oh, to keep down the losses, I limit my commitments to $50 / sec.

  • Jason says:

    I’ve been investing with Lending Club for a while now but never really thought about selling those notes until now. It does seem like a huge hassle but I also think that 1 week (the 3+3 you were speaking of) is fine. I mean, any asset other than putting it in your checking account takes a few days to liquidate.

    • MoneyNing says:

      I think you should sell some of these notes just so you get yourself familiar with the process. The last thing you want to do is to learn how everything works when you need to liquid hundreds of notes in a hurry as you need to set your own prices too.

  • Boon for the borrower, still too nascent for the lender.

    I’m glad you have “multiple 5 figures” in Lending Club and highlighting the product. That is consistent marketing.

    • MoneyNing says:

      In a way, the prime account is like a hedge fund. You give them money, and they pretty much take over. It’s high risk but with less fees.

      You do trade investment flexibility for the fees though, but not many of us have the assets to invest with hedge funds either.

  • marci says:

    If it’s not FDIC or comparable, it’s just too much risk for me in my late stage of the game. At my age, I’d rather get 2% than risk losing it. I like the idea of it and all – just not for an old fogie like me 🙂

    • MoneyNing says:

      Great that you are sticking with more conservative investments 🙂

      Lending Club is definitely not for everyone. The returns are high, but risks are high too. I think the category of “alternative investment” actually fit this quite well because it should never replace be the primary way your money works for you.

  • Lulu says:

    I have invested with both Prosper and Lending Club and I think that Lending Club is a better match for me. I only have $250 invested in LC but I am thinking of making one loan about every other month this year (reminds me I need to do one this month…) until the money I get from the repayments is enough to fund one new loan.

    I love LC because it is easy to use (and I guess it is orange like ING so that makes me happy.) and it seems it draws a better caliber of borrower. I was a borrower there myself and paid off my loan early and decided to help out other people. I have one loan paid early, one in default and all the others are on time.

  • Matt SF says:

    Couldn’t agree more. I think the best thing to do if you’re just starting out, in my humble opinion, is to keep a small number of the “less risky” notes. This way, you’re only dipping a toe into the P2P investing space but also learning how the process works.

    Grade A’s and low Grade B’s with a net portfolio rate of return in the high single digits so you’re only investing in borrowers with a very high probability of repaying the loan because they know the importance of keeping a high credit score, and will do all they can to keep it that way.

    • MoneyNing says:

      Herein lies the dilemma right? If you dip your toe, you don’t have enough of a sample size even if you choose high credit score loans but if you have a bunch of loans, you are making a huge investment.

  • Patrick says:

    I have a few notes with both Lending Club and Prosper, all of which have combined to give me a just north of a 10% ROI. I have had one note go into collections, but that was almost 2 years into the loan, so I received the majority of it (and could possibly receive more of it).

    Unfortunately, my sample size is small and neither site is available in my current state. Given the opportunity though, I would invest more money with it. I know it’s not guaranteed, but I think it can be a good opportunity.

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