Lending Club

I have been investing with Lending Club since about May of 2014.  I'll let you read up on the details yourself from their website, but they are basically an avenue for P2P Lending or Marketplace Lending, or whatever term is the catch phrase these days.  They host a site where people are able to get loans.  The catch is that the loans are not funded by a big bank, but investors like you or me. These days, the individual investors are also having to compete with other big banks that are seeing the benefits of this form of lending.

Loan Recipients

Personal loan clients can often get a better rate than what they are dealing with now.  Many people are asking for loans to cover credit card loans, loan consolidation, small business, medical expenses and others.  Borrowers still need to clear common loan qualifiers (like proof you can pay it back, credit checks and such).  Borrowers are also required to pay back or suffer the consequences of lack or repayment.

Investor Benefits

This is where it gets good for us.  We supply the funds for the loan, and in return we benefit from the interest payed by borrowers.  Lending Club of course takes some fees off the top, but investors commonly gain returns between 5-7% in the long run.  You can choose to fund a loan with as little as $25.  Small amounts over several different loans gains the benefit of diversification.  An investor also has the option of filtering loans from which to choose for factors such as how much the client makes, credit score, interest rate, delinquencies.

Many people choose to set up and save filters.  Other websites have popped-up to scour the data from Lending Club over the years and you can even perform mock-filters to check historic performance.

There are other options to take advantage of including IRA, Roth, automated investing and a trading platform through Folio.

Risks/Considerations

As with any investment option, there are risks associated.  Lending Club itself notes that an account should attain a minimum number of notes (loans invested) of 100.  This is the first of my goals that I am still trying to reach.  Borrowers will, at times, not be able to repay their loan which will result in a charge-off.  This brings down your total return rate.  This is where diversification comes in to help as you may only lose up to $25 per loan.

The rate of the note you invest in will not be the rate of actual return.  This is due to the above mentioned fees as well as possible defaults/charge-offs.  In general, the higher the rate offered, the more risky the investment.

Lending Club is also lacking a bankruptcy remote vehicle (BRV), which would cover loans if the company should fail.  As I understand it, Prosper (a rival but also successful P2P outlet) does carry one.  This is something I'm not totally up on, but should also be a consideration.

The option to invest in P2P loans is not universal.  Some states do not allow participation.

The company is currently pursuing an IPO.  IPOs can be good, but it can also expose companies to a broader market, with many more eyes and dollars flying around.  The turbulent waters can take you in unknown directions.

Lending Club releases batches of new loans at certain times of the day.  There is always a feeding frenzy on new loans and it is often believed the best notes get taken right away.  In effect, "if you snooze, you lose."

Other Places for Info

There are many places for info or to sink your money.  Here are but a few:

• Prosper is another P2P platform
• Nickel Steamroller is a great place for info and testing
• Lend Academy is an excellent source of info and forum
• Bluevestment is one of the auto-investing platforms
• Peer to Peer Quant is one of the auto-investing platforms
• Lending Robot is one of the auto-investing platforms

Note: these are only a few of the supporting/analysis sites out there.  I am not intending on alienating or promoting any of the above.  I just wanted to give a list to start from.  It is your choice as to where and how you wish to invest.

My Current Set-Up

I started small (seems like I'm starting all my accounts small).  I was testing the waters and using the funds available, which is sometimes not so much.  I still have to increase my note count up to the desired 100 minimum.

I do not auto-invest yet.  Since I am small, I have the time to hand-pick my notes.  I may change that in the future.  Also note, auto investing is not offered until you reach an account balance of $2500.

My current filters are:

• No delinquencies for the last 2 years
• No inquiries the last 6 months
• Max debt-to-income ratio of 35%
• Minimum credit score of 700
• Monthly income of $7000
• All states except Florida and California
• Interest rates of C (13.67%) and above

I had tried more filters from various categories, but found this to be a little more simplified.  My average age of notes is still small.  It still remains to be seen if any of this will continue, but I have had good luck so far.  I'll try to give a monthly status report with links below.  What are your thoughts?  Are you in on the P2P action or want to stay as far away as possible?

Monthly Progress - Interest Received

Nov 2014: $12.25
Dec 2014: $15.77
Jan 2015: $17.74
Feb 2015: $19.76
Mar 2015: $23.95
Apr 2015: $23.74
May 2015: $25.02
Jun 2015: $26.50
Jul 2015: $28.93

Disclaimer: I don't know what I am doing (see below).  Past results do not guarantee future results. Lending Club is only one of other platforms out there, it's just that it's the only one I've tried.  I am no professional, seek help if you so choose.  Don't blame me for anything.  Good Luck!