During our inaugural Yakezie Tweetchat a few weeks ago, we were talking about social lending and P2P loans. I love the idea of choosing my own loans based on the criteria I’ve been developing so I can get the lowest default rate and a higher return on my loans, but active investing isn’t for everyone.
Sam from Financial Samurai asked if there was an amount he could invest to get “concierge service.”
As it turns out, this type of service is offered at very low balances at Lending Club. Sam assumed (and I did too) that in order to get someone to do the investing for you that it would be only for investors with big balances, but that’s not the case.
For Lending Club, it’s called Lending Club PRIME.
Lending Club PRIME is a full service account for investors with at least $5,000 to invest. That’s not much for a service that does all the investing work for you. All you do is choose the rough interest rate of the loans you want to invest in (high, medium, or low risk loans) and then Lending Club does the rest. There is nobody there to filter your loans for you, so you can’t be choosy about not lending to someone looking for over $30,000 to start a business, but your money will be invested into a diverse group of loans based on the interest rate you attempt to get.
Everything about the PRIME account is the same as a regular account in that you can always log in and check your returns and notes, but you don’t do the investing, Lending Club does it for you. The fees associated with the PRIME account come via a one-time 0.8% of the initial investment. On the minimum $5,000 to open a PRIME account, that comes out to $40. Not bad for those who don’t want to actively manage their loans.
At the beginning, this is actually very similar to the ‘Build a Portfolio’ feature offered. That feature takes your balance and automatically invests it in notes based on the rough interest rate you choose.
So why go with the PRIME account if you can get the same feature with the click of a button? There’s one major difference: when you start to receive payments from these loans, your account balance grows but the money just sits in your account until it gets invested in new loans. Well, if you don’t like logging into your account each week (or day depending on your balance) to invest in new loans, the PRIME account could be exactly what you’re looking for.
With $5,000, you’ll receive about $10 a day, so logging in each week or two to pick new loans isn’t terribly time consuming. But an account with a $50,000 balance will bring in about $100 a day, so the account would likely need to be maintained more often to avoid having money sitting in an account without earning interest. For those with larger balances, the PRIME account makes a lot of sense and is likely the way to go, especially considering the relatively low cost to start and the fact that there are no future costs associated with the account.
Don’t forget that Lending Club is still offering up to 2% bonus on initial investments!