What to Expect When You Invest With Lending Club
Today, lending is something that can be done by individuals with a small amount of money. Many countries now allow this type of lending and highly sophisticated platforms have been developed to connect lenders to borrowers. Lending Club is the best way to go to to pursue this type of investment in the United States. Lending Club is the largest peer to peer lending platform in the country and it has a 10 year track record of success. If you are looking for a relatively safe investment that can yield stock market type returns, then this may be the place for you. To learn what to expect when you invest with Lending Club, read this article until the very end.
What exactly is Lending Club? It is simple a website where people can go to borrow money for a personal loan, or to invest money. Bascially, it is two websites in one, since a person is either a borrower or a lender. I suppose lender could go to Lending Club to get a personal loan, and that probably does happen, but for our discussion we will consider these as two distinct groups. So, Lending Club is a peer-to-peer marketplace that would lets people who need cash get a loan that is funded by someone who has cash to invest.
In terms of net annualized returns, the Lending Club investors have made about 4% to 6% per year. You should be aware, however, that there is considerable variability among investors as far as returns are concerned. In fact, some investors lose money while others receive a return of over 8%. All in all, on a risk adjusted return basis for a diversified investment portfolio, peer to peer lending is a better investment than corporate bonds and even stock mutual funds. While this has proven to be true, you need to know that diversification and picking loans correctly are the keys to being on the right side of this equation.
For borrowers, loan rates can be as low as 6.7%. Credit history, credit score, loan amount, and loan term are the key factors that determine how much interest the borrower will pay. Loans can be for 36 months or 60 months. This can impact default rates so investors should look closely at this data point. Borrowers should base their decision on their ability to pay back the loans and current income. Learn more about loans at https://en.wikipedia.org/wiki/Loan.
Again, Lending Club is a relatively safe investment. However, they do require certain levels of income and assets to approve a lender. This is to protect investors from possible losses. A qualified investor will be able to handle losing money, while someone who puts all of their assets in this investment vehicle could lose everything they have. Lending Club is very legitimate and they do not want the bad publicity that comes with investors losing everything.
Based on the potential returns, as well as the limited risk and qualifications for investors, this is considered a mainstream investment product. Your results will, of course, vary. As mentioned earlier, you need to know how to pick loans for investing, as this is entirely up to you. Therefore, a lot of research is required before you begin Lending Club investing. Lending Club provides information about past loans, general statistics and data for currently available loans. Investors should use all of this information to their advantage.
One final thought is that Lending Club has a ten year track record of success and that should not be taken lightly. But what do we mean by success? We are defining it based on the fact that the number of investors, and the total amount invested, has continued to grow significantly each year. These numbers are definitely improving and the outlook is for continued growth. There are other factors that point to more success as well, including the public offering from 2016, improvements in underwriting and the elimination of higher risk loans.
