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What is LendingClub?
Founded in 2007, LendingClub isnât the first peer-to-peer (P2P) lending platform. It is, however, the largest. The company has created $28 billion in loans to more than 1.5 million borrowers over the past 10 years, making it the largest P2P lender in the industry.
Simply put, Lending Club is a peer to peer lending service. That means, instead of going to a bank for a loan, you can get a loan from a group of random people. On the flip side of things, you can also contribute to funding a loan for other people allowing you to get in on the bankâs profit engine.
How does LendingClub work?
Lending Club functions similar to a mortgage company in that they help broker deals for amortized loans. Amortized loans are just loans that are front-loaded with interest payments and are structured such that overpayment simply reduces the overall term of the loan, not the monthly payments.
Loans like this are stacked in the lenders’ favor as the lender will receive a higher portion of interest earlier in the loan allowing the lender not to care too much if the borrower pays the loan off early. The one significant difference between Lending Club and a mortgage company is that Lending Club contributes no money toward funding loans. People like me or you fund all loans.
What are the requirements to work for LendingClub?
Keep in mind that there are specific requirements that you have to meet to become an investor with Lending Club.
- Income Level â In most states, you must have a gross annual income of $70,000 or more and have a net worth of $70,000 or more. In the state of California, investors must have a yearly gross income of $85,000 and a net worth of $85,000.
- Net Worth â If your total net worth is more significant than $250,000 ($200,000 in California), there is no annual income requirement. In the state of Kentucky, investors must qualify as an âaccredited investorâ under the Securities Act of 1933.
- $1,000 or $5,500 Initial Deposit â $1,000 is needed to start investing in a taxable account; $5,500 is required for IRAs.
How do you earn money on LendingClub?
Unlike a bank CD, where you only get paid once it matures, with LendingClub notes, you receive payments every month. These payments include both interest and principal.
Since the outstanding loan amount gets smaller as time goes on (and thus your investment gets smaller), itâs crucial to be reinvesting your incoming payments into new notes consistently.
How much money can you make on LendingClub?
Since June 2007, investors have earned an average of 10 to 15% interest, which more than offsets any risk or default loans that might occur in their portfolios.
Pros of working for LendingClub
- Possible to get higher returns than other types of traditional fixed-income investments.
- At no additional cost, you can create a very highly customized credit portfolio based on whatever criteria you choose.
- You donât need to be a seasoned investing expert in investing with Lending Club. If you choose, the platform can take care of pretty much all the legwork for you, which is really appealing to a lot of people.
- You determine which notes to invest in and which to pass on.
Cons of working for LendingClub
- This is the biggest con, in my view. But I donât think itâs to the point where investing with Lending Club becomes unprofitable.
- Itâs not available in every state, and there are Lending Club Investor requirements of income.
- It can be slow to get in and out of notes with Lending Club.
- Returns decrease over the life of each note since the principal amount is also decreasing.
- Unlike an auto or home loan, this debt is unsecured. Lending Club cannot collect against an asset if the borrower defaults.
How do I sign up to work for LendingClub?
Go to LendingClub web site. Click on “Join Now” link at the top right of the screen and complete the application to be a borrower or investor on the screen that comes up.
What is the website for LendingClub?
You can now see the status of your Lending Club account via the mobile app. Available for iOS and Android
LendingClub is an alternative way to invest. And with returns that fall between 3% and 8%, you could earn more than youâd make from traditional fixed-income investments like bonds or CDs.
However, it has steep income and net worth requirements, and youâll need to invest at least $1,000 to get started. Compare your options if you want to explore other investment strategies.
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