Lending Club Investment Strategy Platform Tutorial

Lending Club is one of my favorite investment options. It pays at a much higher rate than other fixed annuity investments, and the Lending Club investment strategy platform gives you a plethora of options to manually handpick the loans you feel comfortable investing in.

Investors can use Lending Club's P2P platform to see potentially higher returns than from traditional fixed-income investments. The platform is easy to use.

The best part of using Lending Club is the opportunity to assist others in consolidating debt, paying off credit cards, and meeting other financial needs.Click To Tweet

Peer-to-peer lending platforms have grown in popularity over the last several years. A couple of years ago when I was looking for alternatives to the stock market to further diversify my investments, I dabbled around with Lending Club and invested $1,000 on 3-year loans.

During the loan-choosing process, I learned that navigating the Lending Club investment strategy interface is a key to successfully maximizing your rate of return and minimizing risks from losses.

Before we dive in to the details, here's an overview of P2P lending:

What is peer-to-peer lending?

The definition of peer-to-peer lending: Peer-to-peer (P2P) lending provides a platform for individuals to obtain loans directly from other individuals, cutting out financial institutions as middlemen. Popular platforms include Lending Club, Prosper, Peerform, Upstart, and StreetShares. Because my P2P experience lies primarily in Lending Club, this post focuses primarily on that platform.

Like with any investment, do your own research and make sure you understand the risks involved.

How to Invest in Lending Club Offerings

The first step to investing with Lending Club is to open an investment account. After your account setup is complete, the next step is to link a bank account so you can transfer funds into your Lending Club investment account.

After your account is linked, you can initiate a transfer of funds from your linked bank account into your Lending Club investment account. The funds typically settle within five business days, and you'll need to wait on that before you can invest.

Lending Club Investment Strategy

Lending Club allows you to choose from automated investments and manual investments.

Automated investment strategy on the Lending Club platform consists of the following parameters:

• Amount to invest per note
• Term of note
  • 3 year notes
  • 5 year notes
  • a mix of both
• Note grades
  • A
  • B
  • C
  • Mix of all three – choose exact mix
• Cash reserve amount

Interest rates increase as note grades decrease.

Manual investment strategy on the Lending Club platform is an option if you want to be very specific and hand-choose which loans you invest in. Figure 2 shows a view of the manual investment selection screen.

The Lending Club manual investment platform has the following features:

• Choose individual notes
• Filter based on a variety of options (Figure 3)
• Select your level of risk and interest rate potential by focusing on which grades of loans you want to target
• Select how much of your funds to invest in each loan – you don't need to fund the entire loan, just a piece
• Simply click a button to pick a loan and add it to your portfolio

 

My Experience With Lending Club

I invested $1,000 in Lending Club two years prior to the time this article was written. In two years, my effective rate of return was around 7%, and I'd collected around $650 in principal of the $1,000 I invested initially, plus the interest.

I'm pleased with the results of my investment, and plan to use Lending Club extensively as part of my investment portfolio.

Purchasing Existing Notes from Other Investors

If you don't want your funds tied up for years, you can buy loans from other investors that are close to maturing. In fact, you can select the exact number of remaining payments you want to choose using the 3rd party site, Folio Investing. You can access the platform within your Lending Club account.

Watch a video of me investing $5,000 on the Folio Investing platform to see how it works:

The downside of buying loans from other investors is that you can't purchase pieces of loans like you can on the Lending Club platform. You have to purchase the entire loan.

Conclusion

The Lending Club investment strategy platform is simple to use, and provides an array of factors to filter on in order to control your risk and maximize your rate of return based on your risk appetite.

What I love most about Lending Club is the opportunity to help your fellow citizens who are consolidating debt or paying off credit cards have a chance to get ahead.

For more ways to invest your savings, check out the 10 best investing books from Financial Expert.

Have you tried Lending Club or other P2P platforms? Share below.