Lending Club.com, a peer to peer lending company, has made a name for itself in the financial by allowing members on its site to issue loans to one another, creating what some are calling an entirely new class of investment.
Some investors that have been disappointed in the stock market during the last few years have sought alternative investment vehicles, such as commodities and bonds, to diversify their investments. Some investors have also begun to look at putting loans into peer to peer loans via Lending Club.com and Prosper.com. Instead of loaning money to companies through a bond, these services allow you to invest in consumer debt by issuing loans to borrowers on the website.
Unfortunately the process for investing in loans is rather tedious. Essentially you are becoming the bank and choosing which loans to fund and which loans to avoid. This works well for small investors that want to put money in in $25.00 chunks, but not so well for investors with $50,000 or $100,000 to invest with.
To get started you’ll need to talk to Lending Club’s investor services department, which can be contacted via phone or email, then fill out a “Prime Investment Account Order Form” which will allow them to pick out loans for you. You’re given three target interest rates based on your risk, 11%, 13% or 15%. The company will then fund notes in $250.00-ish increments and take a few weeks to complete depending on the amount of money you’re putting in.
If you spend a lot of time researching borrowers and notes, you might be able to fare better by cherry-picking loans, but that would require a substantial amount of time to work on your portfolio. If you’ve got the time, it might be worth it, but otherwise, the Lending Club Prime account might be a way for you to get some exposure to consumer debt in your investments.
