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.
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!