Category Archives: P2P Lending

Lending Club Opens PRIME to Accounts With Over $5,000

We’ve discussed Lending Club’s PRIME concierge service in the past, but now they’ve updated their rules to allow more people to invest using this strategy. Instead of the old $10,000 account minimum required, PRIME now only requires having $5,000 invested with Lending Club.

The New Lending Club PRIME Features

The email I received today gives the following information:

• PRIME is now available for all customers with at least $5,000.
• With PRIME, you maintain full control over your investment criteria.
• You have the flexibility to place manual orders or pause PRIME at any time.
• And, of course, PRIME is free.

PRIME Can Help You Invest Passively

I had too much cash in my account and about 6 months ago, transferred $1,000 into my Vanguard Roth IRA instead of keeping it with Lending Club and effectively earning nothing. At the time, PRIME was not an option for me, but with this new announcement, things get interesting.

Lending Club is great, and has been very consistent. While my performance has dipped over the past few years, it’s not unexpected and has been very steady over the past 12 months as the loans have gotten older.

I don’t have the desire to be searching for loans frequently within Lending Club. I don’t make frequent trades in my other investing account (I prefer index funds), so Lending Club should be no different. There are certain criteria I look for, but I don’t want to be searching for loans every few days. With PRIME, I can now sit back and relax (and still have PRIME select based on my criteria).

PRIME Isn’t For Everyone

While all of this sounds great, the truth is that there are some major caveats that you should be aware of:

It may take some time for your cash to be invested depending on the amount of available cash in your account relative to other PRIME investors, available inventory on the platform, and your investment criteria. Your account will be reviewed every business day with the goal of placing at least one order per week. There may be some weeks where no orders are placed. Over time, your cash will be deployed as long as matching inventory becomes available.

Having a target allocation concentrated on Note grades with limited inventory (e.g., F and G grades) or in grades with high demand (e.g., C, D, and E grades) will also increase the time it takes to invest your capital.

You can apply any saved filters to your PRIME selection. Keep in mind that using filters can greatly increase the time required to deploy your available cash as filters tend to reduce available inventory.

emphasis mine.

At $25 per loan and $5,000 invested, earning $200/month can be expected, which would mean that one order per week may not be enough. I have not used PRIME before (but I’ll start now), but if this became an issue, it would simply not be worth it to continue with lots of cash on hand.

If you are like me and want to use Lending Club but don’t want to spend time picking out loans frequently, PRIME could be a great option. Hopefully it doesn’t get too crowded in there!

Do you/Would you use PRIME?

I’m Transferring Money Away From Lending Club

After more than two years, I am taking a portion of my money out of my Lending Club Roth IRA. I’m not selling any current notes, I’m simply taking some of my earnings out and transferring them over to my Roth IRA in Vanguard.

I am not leaving Lending Club for good, but it is time to reevaluate the platform as the best use for my funds. There have been a few issues that makes it not the best for me personally.

Why I’m Transferring Money Away From Lending Club

Over the past several months, it’s become harder to find notes that fit my requirements. It’s not that Lending Club is issuing fewer notes, it’s that all the “good notes” (ones that fit my investing strategy) have already been fully funded by the time I get to them. What’s left are a handful of loans, and since I want to invest $25 in each loan and am expecting nearly $250 in payments each month, I would need to find 10 loans that fit my criteria. With index funds, you don’t need to spend any time investing and re-investing. With Lending Club, it’s a much more active investing style.

I don’t have the patience to be looking for loans to invest in a few times a week. I could set reminders, but in reality, it’s just not something high on my priority list. And worse than finding the time to log onto Lending Club is that I have built up over $1,000 in cash the past few months that’s sitting there earning 0% interest. I might as well put that money to good use by moving it into my Roth IRA account in Vanguard and let it track the S&P 500, which requires no time or effort at all.

Transferring Funds to Vanguard Is Very Simple

It was a pleasant surprise to find out that the transfer process is very simple and can be done rather painlessly. First, I am having $1,000 transferred (that’s how much available cash I have in Lending Club right now) from my Lending Club account to my account with Self Directed IRA Services. They’re the ones that my actual Roth IRA is with. Once those funds have been transferred (which can take a few business days to clear), I can move on to step 2.

Step 2 is very simple, thanks to Vanguard. They have a page set up for people who want to transfer their existing IRA accounts to Vanguard. Simply click the ‘Start your transfer online’ button and they will guide you through the rest of the process. If you already have a Vanguard account, you can sign in, tell them how you want your new-to-Vanguard money invested, and provide them with the old account information and amount you’d like like transferred. They take care of the rest.

I’m Not Saying Goodbye To Lending Club

I really like the idea of Lending Club and if I was finding more notes to invest in at $25 each, I’d continue adding more funds. But at this time, it’s not a great fit for me. Maybe I’ll find more time in the future to dig through notes, but at the moment, I’m moving funds away and will revisit the idea if I get another large chunk of cash sitting in my account.

Lending Club Returns at 11.22% in July 2013

As you know, I’m a big fan of Lending Club as an alternative investment (this is just a small portion of my overall portfolio), and it’s time to do a biannual check in on performance.

Recent Activity

I invest in mostly C and D grade loans and anything above a 10% return is very good (and I believe Lending Club is a more consistent and less risky investment than the stock market).

I’ve spent less time looking for loans this year, and as a result I sometimes find myself with several hundred dollars sitting in the account earning 0% waiting to be invested. I want to get those funds invested at all once, but sometimes there aren’t loans I’m invested in. As a result, I have started investing $50 to each loan, which means I have slightly less diversification.

Still, this strategy allows me to only invest in loans I am actually interested in and using my lending criteria, I hope to keep defaults to a minimum.

Performance

Because I am investing in riskier loans with interest rates mostly in the 13-19% range, I expect there to be some missed payments and charge-offs occasionally.

In the past, I’ve complained about loans that have been paid off early, but let’s take a look at the account as a whole.

lending club

Out of my 307 loans, 50 have been fully paid off early (I opened the account less than 2 years ago, and loans are either for 36 months or 60 months).

The best news I see is that only 1 loans is Late 16 – 30 Days and only 10 are Late 31 – 120 Days. It may sound like a lot, but in my mind, it’s not. I know that out of the 230 loans active loans, only 11 are behind schedule. That’s 4.8%, lower than the 7-9% estimated default rate on C and D grade loans (though overall, I’m right around 9%). Even better, I am very confident that at least 3 of the late loans will get back on track. The notes indicate that the users have contacted Lending Club and are either on payment plans or have made partial payments.

Future Lending Club Plans

I will continue to check the account once or twice a month I won’t be doing much other than simply staying the course by investing in new loans and watching payments come in.