I took the plunge, and I signed up as an investor with Lending Club. I am excited to see what my results will be as I have been debating whether to sign up or not for a while. I do not have any loans that are ripe for a consolidation so I will not be using the borrowing feature.
I first heard about Lending Club about a year and a half ago. My friend Matt Jabs used Lending Club toconsolidate debt and after a while he even started investing through Lending Club.
At first I didn’t give Lending Club much thought because I didn’t have the borrowing need and I was happy with my investments. Over time I have slowly learned more and more about Lending Club and peer to peer lending. The more I learned the more intrigued I got.
Why I signed up
- Attractive returns (9.5% plus average)
- Help others with their borrowing needs
- Limited initial invest (if I lost everything it wouldn’t kill me)
- Share my experiences with others
Signing up and funding account
I was able to sign up and fund my account within the time of sitcom. The sign up process was very easy, it only took about 5 minutes.
Lending Club offers 3 main ways to fund your account 1) 4 day bank transfer 2) One day wire 3) 15 minute “instant” with a credit card. I decided to use my credit card because I get 2% cash back giving me an instant return on my money. Don’t worry, I am paying my credit card back as soon as the money moves from my savings account to checking.
My Initial Strategy
I am going to start with what I think is a conservative approach.
My initial allocation:
- 60% Grade A Notes (currently 5.42% – 7.66%)(Credit score above 714)
- 20% Grade B Notes (currently 9.63% – 11.11%)(Credit scores between 679 – 713)
- 20% Grade D Notes (currently 14.54% – 16.02%)(Credit scores below 660)
I also plan to keep my individual loans small, no more that $25 for B and D notes, and no more than $50 for grade A notes. This strategy should help to reduce my risk by forcing me to diversify my investments over a variety of borrowers. Also by keeping my investments small it limits my loss potential on any one loan.
Even though I was able to sign up and fund my account I still have to wait a couple of days until my FOLIOfn account is approved. When I get approved I will follow up with a post about the initial investing process.
I also plan to do a quarterly update about my trial of Lending Club. I will share my successes and failures along with tips and techniques that I learn along the way.