Liann and I are spending 2019 researching and learning about different investments. We began this journey last year with taking a stab at Peer-to-Peer lending, which has been an interesting and good investment avenue for us. This is our experience with owning notes through Lending Club.
What is Lending Club?
Lending Club is an online marketplace that facilitates loans between borrowers and investors. As an investor, you purchase small portions of loans, which are called Notes.
These Notes come in varying amounts. The goal is to earn interest on these Notes, though this is not always a guarantee. Owning Notes has the potential to earn some rewarding return rates. The Lending Club’s platform is easy to use and has features that can satisfy the both active and passive investors.
Lending Club Benefits
Lending Club serves as a great alternative investment option for those who are looking to diversify. Here are some of the benefits to investing with Lending Club.
- On average, their Individual Investment accounts historically have return rates between 3-8%.
- Automated investing keeps your money constantly reinvesting without you having to do anything. This means your money works for you.
- Diversifying your portfolio yields better chances for greater returns. Lending Club encourages owning many smaller Notes to spread your risk.
- Customizing your investment strategy allows you to control how risky you want your investment to be. An investment strategy allows you to allocate a percentage of your funds to specific Note grades which range between A-E. More about Note Grades
- Low entry cost for investing makes it easy to start investing and seeing returns within the 1st month.
- Easy to use platform makes it a breeze to invest and keep track of performance.
Lending Club: What You Should Know
Before starting with any new investment, you should make sure it is right for you. With that being said, here are a couple of things you should be aware of:
- Lending Club investments are long-term. After all, you are purchasing Notes that are either 36 or 60 month loans.
- There is risk of loss. Borrowers can default on their loans, which means you will have lost the Note principle. Diversifying your portfolio will reduce the risk of this occurring.
It has been almost a year since we started investing with Lending Club and I am fairly happy with its performance. At the start of 2019, our return rate across all Notes was around 10%! Unfortunately, over the past few months, 2 of our Notes defaulted, which dropped our rate to 2.75%. This is the risk with owning others’ debt. Ultimately, we are still earning more than our High-Yield Savings Accounts and this investment isn’t as risky as the stock market.
My favorite part of investing with Lending Club is working with their Automated Investing feature, which automatically reinvests your returns into new Notes using your configured strategy. I don’t have to constantly spend my time on browsing and selecting Notes to make sure my money is continually vested. Also, if I want to, I can easily change my investment strategy at anytime or continue to just let Lending Club do everything for me.
Here is our current Note allocation in Lending Club, courtesy of Lending Club’s account dashboard:
Start Investing with Lending Club
Start investing with Lending Club now. In just a few simple steps, you can create and fund your account and start investing.
Have any questions or concerns about Lending Club Investing? We are here to help…Comment below!