There’s a good reason why Lending Club is the largest peer-to-peer lending network, with over $13 billion in loans under its belt as of September 2015. Borrowers get better rates than they would at a bank, while lenders get profits that are tough to match with more traditional investments. Since June 2007, lenders have received an average return of 9.65 percent. Whether you’re a first-time investor or a seasoned investor, Lending Club might be a good addition to your portfolio. What you need to know about being a Lending Club investor is as follows:
Initial Requirements
Lending Club does not accept everyone as a potential investment. Maryland and Ohio have laws prohibiting residents from investing directly with Lending Club. In contrast, Alaska, Massachusetts, New Mexico, North Carolina, and North Dakota only allow individuals to trade notes rather than invest directly. (See below for more information about Lending Club’s Note Trading Platform.)
In addition, investors must meet the income standards of their jurisdiction. A gross yearly income of at least $70,000 and a net worth of at least $70,000 are required in most states, while those with a net worth of more than $250,000 have the income requirement dropped.
California is the only state with a different requirement: investors must have a minimum gross yearly income of $85,000 and a net worth of $85,000 or more, or a net worth of more than $200,000. Californians who do not meet the income or net worth requirements can invest in Lending Club Notes for $2,500 or less.
Additionally, all investors are forbidden from investing more than 10% of their net worth in Lending Club Notes.
How Does Lending Club Investing Work?
You can start investing with as little as $25 once you’ve registered an investor account with Lending Club. You have two options when it comes to choosing which Notes to include in your portfolio:
Manual investment entails browsing and selecting individual loans.
Automated investing—You select your investment criteria, and Lending Club places your orders automatically as Notes that meet your requirements are discovered.
To protect yourself from the risk of a borrower defaulting, diversify your Lending Club portfolio like you would any other investment. Defaulting is an unavoidable lending component, as the corporation emphasizes throughout its promotional materials. Because Lending Club is not a bank and your funds are not protected by the Federal Deposit Insurance Corporation (FDIC), it’s important to diversify your investments.
Lending Club assigns a letter to each loan, ranging from “A” to “G,” to represent the borrower’s risk of default. While A loans have a lesser chance of default, they also give investors lower rates of return. Grade A loans have an average return of 5.2 percent, Grade E loans have an average return of 9.54 percent, and Grades F and G loans have an average return of 9.01 percent, according to Lending Club’s own historical statistics.
Notes have either a 36-month or a 60-month loan period. During the loan length, Lending Club collects monthly payments of principal plus interest from borrowers. As payments are received, they are disbursed to investors. Investors can withdraw or reinvest their money at any time after receiving the monthly payout.
Lending Club is the world’s largest and most successful peer-to-peer lender. They have a strong track record of giving investors exceptional returns. If you want to jump in and create an account, simply click the link in the box below:
Party Investors 