By Peter Anderson2 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited February 11, 2017.
I‘ve been writing about peer to peer lending on this site for some time now, mainly in reference to the P2P lending company called Lending Club. I’ve been lending money with the site for around 2 years, and to date I’ve enjoyed some pretty amazing returns. Right now my net annualized return with Lending Club is sitting at about 11.13%, which would be tough to equal in the stock market right now.
My returns have only been increasing since I’ve started following advice from a variety of other sites like nickelsteamroller.com and SocialLending.net. I’ve increased my returns from about the 8.5-9% range to the 11.13% that I’m sitting at now. I’m starting to come around to the idea that diversifying some of your holdings and putting it into P2P lending may be a much more solid proposition than some had thought in the past. I think it can be an important component of a well diversified portfolio.
Because I’m becoming more interested in social lending through sites like Lending Club and Prosper I’ve also been looking into places where I can educate myself a bit more about how this whole peer to peer lending paradigm works, and how to maximize my earnings.
While doing some research on the topic I came across a variety of good educational resources that I thought I’d share today.
Peer To Peer Lending Educational Resources
First, there are a ton of great blogs out there that focus mainly on the social lending sphere. Many of these sites have been extremely helpful for me. Here are a few of my favorites:
As with any topic, it’s a good idea to read a variety of sources, and then bring together the best of what they’re all telling you and apply it to your situation.
Video Education On P2P Lending
While the blogs mentioned above are great resources, to some degree they only scratch the surface of what’s going on when you sign up to become a P2P lender. They also tend to jump from topic to topic without giving a comprehensive guide or tutorial on how social lending works. There really is so much more depth to the strategy of P2P lending.
This past week a blogging colleague of mine, Peter Renton over at Social Lending Network, launched a new educational resource for people wanting to take their social lending experience to the next level – and set themselves up to succeed.
He launched his new video course called P2P Lending Wealth System that is designed to help investors get the most out of their P2P lending investments. It goes over both the Lending Club and Prosper platforms, and looks at how to best use their tools, as well as outside tools to improve your returns.
From an email he sent out last week, Peter describes the course:
Next week I will be launching the world’s first ever video course dedicated to p2p lending. It will be called the P2P Lending Wealth System. It is a practical, hands-on course that provides investors with everything they need to be successful.
The P2P Lending Wealth System digs deeply into the investment platforms of Lending Club and Prosper. We talk a lot about loan filtering on both platforms and we also show investors how to leverage p2p lending statistics sites Lendstats.com and Nickelsteamroller.com.
The course will have some informational slides but I really wanted to leverage the power of screencasts where I take investors through the most important components on the various websites.
He goes on to talk about some of the topics that are covered in the video program. Among them:
An Introduction to Peer to Peer Lending: He gives a background and overview of the P2P lending space talking about it’s dramatic growth and why it’s done so well.
Risks of P2P lending: He discusses some of the risks involved in social lending and what to look out for. He also talks about some of the government regulations involved.
Investing with Lending Club: He goes over the Lending Club site in depth talking about their tools they have available to you, as well as some site specific things to be aware of.
Investing with Prosper: A tutorial of the Prosper site and tools, as well as strategies to make the best of Prosper.
Maximizing your ROI: To me this is the meat of the class as it talks about how to improve your returns when lending with Prosper and Lending Club. Important stuff!
Note Trading Platforms: He goes into how to use the note trading platforms at Lending Club and Prosper and how to use them to maximize returns.
Peter’s investment strategies: Peter goes into some of his own strategies for making the best of social lending, and gives some of the tools and spreadsheets he uses to maximize his returns.
As mentioned previously I’ve already been using some of the strategies espoused by Peter, and my returns thus far have been awesome. I’ve now been watching the videos in Peter’s course, and it really extremely helpful, even for someone who’s been using Lending Club for a while like myself.
If you’re seriously considering adding P2P lending to your investment portfolio (and you should!), I’d highly recommend checking out Peter’s video course and the hours of training contained therein. You’ll be setting yourself up to have the best chance at succeeding in this new and exciting investment arena. Want to hear more about the course first hand from Peter? Click on the banner or link below to check it out.
As investor interest in peer-to-peer (P2P) lending grows, a number of automated investment services that act something like robo-advisors to P2P investors are springing up to help investors manage their portfolios of notes. One of them is BlueVestment.
This is becoming increasingly important. Diversification on a P2P lending platform can involve hundreds or even thousands of individual notes, since those notes can be purchased in denominations as small as $25. If it’s difficult to manage a portfolio of 30 or 40 individual stocks, it’s infinitely more difficult to manage a portfolio 500 or more loan notes.
Here’s what BlueVestment has to offer in the cause of automating your P2P investment activities.
Who Is BlueVestment?
Founded in 2013, BlueVestment is a P2P account management service. It gives you the ability to configure automatic management of your investments on Lending Club.
The platform actually has two primary components. The first is the BlueVestment website, which you use to configure the second component, which is the BlueVestment engine. The BlueVestment engine runs on the platform’s servers and is not something that you need to install yourself.
BlueVestment is a third-party service that only interacts with Lending Club, but is not directly affiliated with Lending Club. However, you do need an account with Lending Club in order to use BlueVestment.
BlueVestment performs your investing activities on Lending Club on your behalf. For that reason, you will need to provide the platform with your Lending Club API. The information will be securely stored on BlueVestment servers. The service then runs continuously throughout the day to take advantage of investment opportunities as they arise.
Here is a summary of just some of the tools and features that BlueVestment has to offer investors in the P2P space:
Multiple account support. If you have two or more accounts with Lending Club, BlueVestment can manage them all for you. Best of all, the account will be combined to determine the fee that you will pay. This is good news because BlueVestment uses tiered pricing, with lower fees charged for a higher volume of account activity. See the BlueVestment Pricing section below for more details.
“Lightning quick investing.” Since investor participation in P2P lending, particularly with Lending Club, is increasing rapidly, speed becomes ever more important to investor success. An automated system like BlueVestment can give you the speed that you need to get access to the most attractive notes to invest in, before they’ve been scooped up by the growing pool of P2P investors.
Automatic investing. You create simple loan filters, or use advanced loan filters which enable you to filter on over 90 different metrics. You can also prioritize your loan filters, if you decide that certain filters are more important than others. You can also specify the dollar amounts to invest in each note, and even invest in multiple notes on the same loan. The platform enables you to maintain a minimum available cash balance, beyond which no additional funds will be invested.
Fee refunds on charged off notes. If BlueVestment acquires a note for you and charges you a fee, and the loan is charged off, the fee will be refunded to you.
Security. BlueVestment uses industry-standard SSL encryption to protect all data transmitted between your web browser and the BlueVestment servers. All sensitive data is encrypted, using the same encryption methods used by banks. In addition, your payment information is stored off-site in BlueVestment’s PCI compliant payment processor.
BlueVestment Pricing
BlueVestment has four separate pricing tiers, based on your account activity (not account size).
Less than $1,000 invested per month – Free – the fee is based on notes issued only
Between $1,000 and $5,000 – 0.45%
Between $5,000 and $20,000 – 0.30%
Over $20,000 – 0.20%
The fees are applied to the investments made each month in loans that are actually issued that month, and not to your total account balance. As an example, if you were to invest in notes totaling $50,000 in one month, the fee structure would look like this:
On the first $1,000, no fee
On the next $49,000 – 0.20%, or $98, since $50,000 in total investments for the month is over $20,000, and therefore qualifies for the 0.20% fee rate
Total fee – $98
There is a $2.00 minimum of all monthly non-zero fees. In addition, the fee is based on the sum of all of your P2P accounts managed by BlueVestment. This is similar to other investments like Betterment or Wealthfront.
It’s also important to understand that notes invested into in one month may not be issued until the following month. In that case, the fee will be applied when the notes are actually issued.There is no annual fee, and no charge for un-invested cash. In addition, fees do not apply to notes that have been charged off at any point. That means that if a note is charged off at any time that you own it, and you paid a fee to BlueVestment to acquire it, the initial fee charged on the acquisition will be refunded to you.
Will BlueVestment Work For You?
Let’s start this part of the discussion with the obvious strike against BlueVestment – it only applies to Lending Club. If you invest through Prosper, Funding Circle or any other P2P lending platform, BlueVestment will not be available.
But assuming that you have one or more accounts with Lending Club, then BlueVestment is definitely a service worth investigating. Not only does the platform offer lightning-fast investing, but they also provide support for multiple accounts, and fee refunds on charged off loans. That last benefit is almost unknown in the investing universe.
But the basic fee is another area where BlueVestment stands out. Not only is the free investing of up to $1,000 per month attractive to new and small investors, but the tiered fee schedule, that lowers the fee to 0.20% retroactively on all of your investing for the month in excess of $20,000, is a real bargain compared to competing services.
And just as important, the fee is applied only to notes that you purchase in a given month, and not on your cumulative note portfolio. This means that BlueVestment is acting primarily in a broker capacity for the purchase of your loan notes, rather than in complete management of your portfolio. That’s a fee structure that would make traditional investment managers extremely nervous.
Given the level of service that BlueVestment provides, as well as the fee structure that is more than fair, this is a service that you need to check out. Seriously.
If you are familiar with peer-to-peer (P2P) investing through sites such as Lending Club and Prosper, then you may be interested in learning about NSR Invest. The company provides a software service that works with major P2P lenders in helping investors on those platforms to better manage their portfolios.
NSR Invest will be particularly beneficial for people who want to invest in P2P loans, that don’t fit the do-it-yourself investor mold, and prefer to have a generous amount of help and support in the process.
In addition to helping individual investors, NSR Invest also enables financial advisors to offer plug-and-play Marketplace Lending investment opportunities to their clients.
About NSR Invest
Based in Denver, Colorado, NSR Invest began operations early in 2015, through the merger of Lend Academy Investments and Nickel Steamroller. The company is a registered investment advisor, bringing innovative financial products centered around a private fund and individually managed accounts. NSR Invest now assists thousands of clients managing more than $100 million in P2P loan investments.
The company specializes in the investing side of P2P lending sites. P2P lending is sweeping the lending world, by bringing borrowers and investors together on the same platforms to create loans without using the services of traditional banks. That direct relationship is resulting in what are often lower interest rates for borrowers, yet higher returns for investors. The elimination of the “middle man” – a.k.a., the bank – makes that possible, because it eliminates the lending costs that are part of mainstream banking.
NSR Invest works to streamline the investment process for P2P investors. Investors on P2P platforms must sift through hundreds of loans in order to find those that meet their own personal lending criteria. They must also build a portfolio of loans – or slivers of loans referred to as “notes” – that will minimize their downside risk.
That’s where NSR Invest comes into the picture. They provide the following resources to P2P investors:
Proprietary credit algorithms that target a higher rate of return, while reducing default risk
Auto-investing execution speeds allow faster access to the best quality loans
The ability to make P2P lending a totally hands-off effort for the investor
They provide a team committed to providing you with an “awesome experience” at every point in the investing process
In short, NSR Invest takes the mystery out of P2P investing, empowering you to improve your returns, while expending less effort in the process. They act as an investment management service for P2P investing, which frees up your time for better things.
Due to regulatory issues, NSR Invest is not yet available in the following nine states: Alabama, Maryland, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Pennsylvania, and Tennessee.
How NSR Invest Works
NSR Invest works with Lending Club, Prosper, and Funding Circle, and you can add those platforms to your NSR Invest platform right from the NSR Invest site. The site has full API integration with all three P2P platforms.
Fully-managed accounts. As the name implies, these accounts are directly managed by NSR Invest. They provide higher target returns, with lower target risk and volatility, all with a hands-off investment strategy, that requires little effort from the investor.
Fully managed accounts provide three account strategies:
Conservative – this strategy targets a 5% net return (after fees and expenses)
Balanced – this strategy targets a 7% net return
Assertive – this strategy targets a 10% net return
As of October 31, 2015, NSR Invest has achieved net performance of 5.48% on the Conservative strategy, 10.44% on the Balanced strategy, and 11.42% on the Assertive strategy. If these are better than the returns that you are now getting through your investments with Prosper or Lending Club , you need to check out NSR Invest.
Self-directed accounts. With these accounts you can choose to either use pre-built NSR Picks credit models, or fully customize your own investment strategy. You can also use a combination of methods.
Minimum account balance. Fully managed accounts require a minimum of $10,000. Self-directed accounts require a minimum of $5,000.
Accounts with NSR Invest can be canceled at any time, but require 14 days notice.
NSR Invest Features and Benefits
NSR Invest offers several advantages to the person who wants to invest in P2P loans, but either doesn’t fully understand that process, or doesn’t want to put in the time and effort that are necessary to build a large, well diversified portfolio of loans and notes, especially across several P2P platforms.
Back-test filter. This tool allows you to create and test your own filtering strategies. And once tested, you can use these strategies to create an auto investing capability.
Pricing and fees. NSR Invest charges fees only on the amount of idle cash and any investments made by NSR Invest, and only then when the aggregate balance of your account exceeds $20,000. For example, let’s say you have $100,000 in cash, and $50,000 in notes invested through Lending Club before signing up with NSR Invest. The fee would be charged only on the $100,000 in uninvested cash, and not on the existing $50,000 in notes that you already hold.
There are no setup fees of any kind when you begin the program. The annual fee on self-directed accounts is calculated on an account-by-account basis, and uses a mathematical equation to determine specifically what that will be. No estimated ranges are provided.
On Fully Managed Accounts, the annual fee is 0.60% of the account balance.
IRA and Trust accounts. You can set up an IRA through NSR Invest, and even roll over an existing 401(k) account into the IRA. You may also be able to set up a trust account, depending on the P2P platform that you are working with.
P2P Fund. This is something of a mutual fund for P2P investment platforms that is available through NSR Invest. The fund invests in loans originated by Lending Club, Prosper, Upstart, and Funding Circle. The fund targets a 10% net return after fees and expenses.
The minimum to invest in the fund is $250,000 – you must be an accredited investor in order to invest in the fund. The fund charges an annual fee equal to 1.5% of the investor’s account balance, charged on a monthly basis (0.125%).
Will NSR Invest Work For You?
If you have been attracted by the interest rate returns on P2P loan investments – and who wouldn’t be – you may want to consider doing it through NSR Invest. The service can handle investment selection for you, as well as the execution of purchases and the maintenance of your portfolio.
P2P investing can be highly rewarding, but it does require a considerable amount of time and attention. NSR Invest can remove that burden from you, and help you to best accomplish a low risk, high return portfolio balance.
If you have been toying with the idea of investing in P2P loans, or you are already doing it now but finding it tedious and time-consuming, give NSR Invest a try. Whether you are ready to invest 20,000 dollars or need to know what would be the best way to invest 500000 dollars, Good Financial Cents is here to help you!
Editor’s note: Lending Club no longer offers peer-to-peer lending on it’s platform.
LendingRobot is a service that fully automates peer-to-peer (P2P) lending platform investments. The service is available for individual investors, and is both cost-effective and easy to use. LendingRobot attempts to bring superior returns at low risk by combining cloud technologies with machine learning algorithms. The platform is an SEC Registered Investment Advisor, able to provide investment guidance.
The platform concept started in 2013, when Emmanuell Marot and Gilad Golan began developing a script to automate their own investments on Lending Club. Eventually, they also added support for Prosper Marketplace. The platform was publicly launched in April 2014, then added Funding Circle to the mix in 2015.
What has developed from this evolution is a platform that assists individual investors in acquiring and managing their loan investors on three of the prime P2P lending platforms on the web. In effect, LendingRobot is a robo-advisor for peer-to-peer lending investing. The service has continued to grow steadily.
How LendingRobot Works
Investors begin by linking their Lending Club, Prosper or Funding Circle accounts to a single LendingRobot account. You simply add your API credentials to LendingRobot. In this way, LendingRobot enables you to automate investing on all three platforms, if that’s what you choose to do. The platform can even create an account with each of those three P2P lenders if you don’t already have an account established with them.
You can choose the type of investment strategy that you want to use, conservative or aggressive. The platform even has a “slider” that lets you adjust the risk level in your portfolio. You can also use the “advanced mode” feature to specify multiple rules for your investments on both the primary and secondary markets. You can even use LendingRobot if you want to invest on your own, and use the service to help you manage your portfolio of notes.
LendingRobot scans new loans as they appear, and will automatically invest your idle cash. It also has the capacity to sell your notes, if that’s what you choose to do. You will receive a daily summary report that will keep you informed of the activity in your account.
LendingRobot has a wide range of benefits available for P2P investors.
Create custom investment parameters. LendingRobot enables you to create investment rules, based on their proprietary research, that will enable you to pinpoint the types of loans that you want to invest in. You can choose certain credit score ranges, loan terms, debt-to-income ratios – the choices are nearly endless.
LendingRobot secondary market. One of the fundamental limitations that P2P investment has had up until now is the lack of liquidity. That is, once you purchase loans or notes, you have to hold them for the duration of the term. There is often no secondary market for the loans and notes that you purchase on most platforms.
But LendingRobot uses unique secondary market automation that puts thousands of notes for sale, and reprices them on an ongoing basis until the target price is reached. This will be an advantage to you as an investor, both with selling loans and notes that you no longer want to hold, but also in buying existing loans and notes under more advantageous circumstances.
LendingRobot accomplishes this by adding any notes that you want to sell with Lending Club’s secondary market partner, Folio Investing. LendingRobot will gradually lower the price point on the notes for sale over a term of five days, until all notes are sold. This will enable you to liquidate an entire portfolio of notes in a matter of days.
You will also have the option to purchase notes on the secondary market through Folio, giving you an opportunity to purchase them at a discount, and for a greater profit when they finally pay off. This will become an increasingly important feature as P2P investing matures.
Investing speed. LendingRobot needs only seconds between the time a new loan comes on the market, and the service is able to invest in it. Since competition for the best notes in the P2P space is becoming increasingly intense, that kind of speed will give you the advantage of being able to get to the most desirable investments in the least amount of time. As more money pours into P2P lending investments, this will be an increasingly critical advantage for the individual investor.
Automatic reinvesting. Another limitation with P2P investment is that as notes pay off, your investment position declines. Staying fully invested is a huge task when you try to do it manually. But LendingRobot offers continuous reinvesting of loan proceeds. That will maximize the money in your portfolio that will be invested and earning interest on a continuous basis. This is another critical advantage for individual investors when it comes to P2P investing.
Transparency. LendingRobot enables you to see expected returns, cash flow forecasts, and the risk profile of a given portfolio. That will give you an opportunity to measure expected performance from various portfolio mixes. And that will help you to create the best portfolio for your investment needs.
LendingRobot is getting better. LendingRobot represents a new concept in the automation of P2P investing – which itself is only a few years old. The point is, while LendingRobot’s machine-learning algorithms are the result of years of research data science and optimization, the system is continuing to learn and grow. You can be part of that growth.
Lots of free information. The site provides a wealth of information covering an overview of the P2P lending industry, including statistics in regard to Lending Club, Prosper and Funding Circle. This enables you to see comparisons between the three platforms side-by-side, to help you decide where best to invest your money.
For example, the comparison chart indicates that you can invest with Lending Club or Prosper if you are not an accredited investor, but you can’t with Funding Circle. That’s the kind of information that you need readily available in one place.
They also provide you with performance charts, that show how each platform’s returns compare with both the marketplace average, and with US bonds. There’s even a list of the latest loans available with both Lending Club and Prosper.
LendingRobot Pricing and Fees
The first $5,000 of your account value is free. After that, there is a fee of 0.45% of the account balance over $5,000. That applies only to amounts invested by LendingRobot; it does not apply to loans purchased prior to starting your LendingRobot account.
There are no setup fees or termination fees.
Is LendingRobot Right For You?
P2P investing is simple in concept, but it can become complicated in the execution. Since you need to spread your investment capital across so many notes in order to achieve a reliable level of diversification, you virtually must automate the process. LendingRobot handles that for you, and has the advantage in that it can be used across three of the most popular P2P platforms on the web.
We generally think of investing in fixed rate assets as being the low maintenance part of an investment portfolio – and that’s exactly what it should be. LendingRobot let’s P2P investing be low maintenance.
There are a couple of caveats I would like to point out. The first is the potential that automation could cause you to underestimate the risk involved in P2P investing. You are, after all, investing in unsecured loans for people with varying degrees of credit, as well as a wide range of employment and income situations. That is an inherently risky investment, and automation should never cause you to underestimate that risk.
The second is the secondary marketing feature available through Folio Investing. Don’t get me wrong, it’s a great feature to have. But at the same time, you don’t want to over-rely on it either. The service is currently available only on Lending Club, not Prosper or Funding Circle, though that may change in the not-too-distant future.
Even on Lending Club there may be some limitations to secondary market transactions. Lending Club makes the following statement in that regard: “Note Trading Platform was designed to provide investors with the chance to realize some liquidity in transactions with other Lending Club members”. It’s also important to understand that notes are more likely to sell at a discount than at a premium, so it may prove to be primarily a market where you can unload unwanted notes, but do so at a loss.
It’s equally important to realize that notes cannot be sold on the secondary market if they are in default or charge-off status.
That said, the secondary market can be a major advantage to you as a buyer, for all the same reasons that is not necessarily a failsafe for you as a seller. It represents a real opportunity to buy notes for below – maybe substantially below – par value. And that will add a gain on payoff of the note to the interest you’re collecting on it. That’s a double win!
If you are an active investor on Lending Club, Prosper or Funding Circle, you need to give LendingRobot a serious look. It offers a real opportunity to take this growing and profitable asset class and set it on automatic pilot. It offers a serious chance to increase your rate of return on investment, while reducing the risk of default.
Upstart is one of the newer peer-to-peer (P2P) lending platforms available on the Internet. But the platform is coming up quickly, drawing interest from both borrowers and investors. Despite the fact that the service is barely two years old, Upstart could be one of the better P2P platforms to use, whether you are a borrower or an investor.
About Upstart
Based in Palo Alto, California, Upstart is a peer-to-peer lending platform that began operations in 2014. Despite Upstart’s tender age, the platform has already arranged more than $300 million in loans. The company was “founded by ex-Googlers” (former Google employees) to provide personal loans using very different lending criteria than is common even for P2P lenders, to say nothing of banks.
All loans made through Upstart are made by Cross River Bank, which is an FDIC insured commercial bank that is chartered in New Jersey, but funded through independent investors.
Upstart Borrowing Review
In most respects, borrowing through Upstart is similar to the process on other P2P lending sites, like Lending Club and Prosper. The application is completed entirely online, your loan request – if you qualify – is graded and priced, then the loan is funded.
But what makes Upstart different is the way they underwrite your loan. They check your credit score, your years of credit, and your job history, just like every other lender does. But those aren’t the only criteria that Upstart uses in determining whether or not to make a loan to you. They also consider your education and your area of study.
The idea is that “you are more than your credit score”. Upstart also considers your future potential, which they believe is demonstrated through your education experience. They will take into consideration the college that you graduated from, your grade point average, and your major – obviously certain major fields of study are considered to be an advantage from a lending standpoint. The Upstart system seeks to identify and make loans to what it refers to as “future prime” borrowers.
The Upstart target borrower. Because of the consideration of a borrower’s education, Upstart is well suited to new and recent college graduates. The company is less concerned with how deep your credit history is, or even your employment history. Your potential for future income becomes an essential consideration.
Traditional loan requirements. Upstart does require that you have a minimum credit score of 640, however there is no minimum credit history requirement. You must also not have any bankruptcies or other negative public records on your credit report.
There is also no required minimum income level, nor is there a maximum debt-to-income ratio (DTI). That could be a major advantage if a bank turned you down for a loan due to insufficient income.
Minimum/maximum loan amounts.The minimum loan amount on Upstart is $3,000, and the maximum is $35,000.
Loan term. There are two loan terms available with Upstart, 36 months or 60 months.
Loan purpose. Upstarts loans are generally classified as personal loans, but you can use them for just about any purpose you can imagine. For example you can use the proceeds to pay off credit cards, consolidate debt, refinance student loans, take a course for boot camp, pay for college or graduate school, make a large purchase, relocate, pay medical bills, start or expand the business, buy a car or anything else that you like.
Loan qualifications. In order to qualify for a loan with Upstart, you must be a US citizen or permanent resident alien, be at least 18, not live in West Virginia, have a valid email account, be able to verify your name, date of birth, and Social Security number, have a full-time job or a full-time job offer starting within six months, or a steady part-time job or other source of regular income, and have a US bank account.
Application process. The application is online, and requests information about your academic credentials, work experience and the purpose of the loan. All information provided on the application must prove to be correct. You can complete the application in as little as two minutes.
If you accept your loan no later than 5:00 pm (Eastern Time), your loan proceeds will generally be available on the next business day. Otherwise they should arrive after two business days. However, if the loan is being used for education purposes, there is a three day waiting period between when you accept your loan, and when the funds arrive. In any event, the loan proceeds will be wired to your bank account.
Documentation requirements. Upstart will run your credit report, and you will need to upload documents that support your income. If you are a full-time employee you’ll need to provide your most recent pay stub. If you will be qualifying using bonus or commission income, you will need an offer letter from the employer spelling out the terms and expected income. If you have multiple jobs, you will need the latest pay stub for each.
Rental income will require a copy of a lease on the rented property. And if you are self-employed, they will need the most recent year’s income tax return, as well as copies of current year’s invoices.
And since your college background is an important part of the loan evaluation process, you may also need to furnish a copy of your college transcript. A college transcript will be required if you graduated within four years of your application date.
One more point on income, and it’s a big one. Since the loan that you will be applying for on Upstart is a personal loan, you cannot include other household income on your application. That includes your spouse’s income, if you’re married. Your qualification is based on your income only.
What if you lose your job and can’t make the payments? Upstart doesn’t provide specific information on this point, but they do make the following claim on the website:
“If you are experiencing hardship and cannot pay, please contact us immediately. If you are unable to pay, we may be able to work on an alternative payment plan that will avoid additional fees or penalties.”
You also have the option to change your monthly payment date to better suit your schedule. However, the new payment date needs to be set before your actual due date, otherwise you will accrue additional interest.
Collateral. There’s more good news here; Upstart doesn’t require collateral on any of its loans.
Interest rate and fees. Your interest rate is generated by the model and is based on your application and a “soft pull” of your credit report. Rates range from 4.66% APR to 29.99% APR for a 36 month loan, and between 6.00% APR and 27.32% for 60 month loans.
Like many other P2P lenders, Upstart does charge an origination fee. That fee is equal to between 1% and 6% of the loan amount (putting it squarely in line with Prosper and the other lenders). However, there is no prepayment penalty should you choose to payoff your loan early.
Upstart Investing Review
Upstart is all about lending money to borrowers, but it’s equally accommodating if you want to join the platform as an investor.
Here are the highlights:
Minimum investment. You need just $100 to open an account and invest with Upstart.
Loan quality. Upstart claims that about 98% of their loans are either current or are paid in full. Only about 1.1% of their loans are more than 30 days late, and just 1.2% are listed as charged off.
Borrower quality. The good experience that Upstart has on its loans has to do with the profile of the typical Upstart borrower. Here are some statistics:
Average FICO score: 691
Average income: $105,842
College graduates: 90.9%
Refinancing credit cards: 76.2%
Refinancing credit cards needs some explanation as to why it is seen as a positive factor as a borrower profile. Loans generally perform better when they represent some form of refinance of existing debt. If the borrower has successfully managed that debt in the past, there is a credit track record, and a better chance that the new financing will be similarly well-managed.
In a borrower is using a new loan from Upstart to replace high-interest revolving credit card debt, with a fixed rate installment loan, the borrower’s financial situation improves immediately, particularly if the new monthly payment is lower than what the total payments were on the credit cards that were refinanced.
Expected Returns. As you’ll see below, you can expect to earn rates of interest on your Upstart loan portfolio that are well above what are available through banks and brokerage firms.
Here are the modeled returns listed on the site, based on loan grade:
AAA – 3 year loans 3.79%; 5 year loans 5.67%
AA – 3 year loans 4.50%; 5 year loans 6.18%
A – 3 year loans 5.60%; 5 year loans 7.14%
B – 3 year loans 6.88%; 5 year loans 9.13%
C – 3 year loans 7.93%; 5 year loans 11.92%
D – 3 year loans 9.01%; 5 year loans 13.67%
E – 3 year loans 10.57%; 5 year loans 15.57%
Modeled returns for each grade and loan term are net of the annual loss rate, which is different for each grade and term. For example, on AAA loans the annual loss rate is less than 0.1% on three year loans, and less than 1% on five year loans. At the opposite end of the spectrum, there is a 13.60% annual loss rate on three year loan grade E loans, and 11.19% on five year loan grade E loans.
Income tax reporting. Upstart will report taxable interest income earned on your account with the filing of Form 1099-INT with the IRS. Naturally, you will receive a copy of the document, which must be sent to you no later than January 31, following the year in which the interest income was earned.
Income taxes may be withheld from your interest income for a number of reasons. If you did not complete lRS Form W-9 when you opened your account with Upstart, then withholding will be required. It may also be necessary in the event that the name, Social Security number or taxpayer identification number that you provided to Upstart doesn’t match IRS records. In addition, withholding will take place if Upstart is notified by the IRS that it is required for any purpose.
Withdrawing funds from Upstart. You can have cash balances in your Upstart investment account transferred to your bank account at any time you choose. There can be a delay of up to seven business days with the transfer, depending upon your bank.
IRA accounts are available with Upstart. You can set up a self-directed IRA account with Upstart that allows you to invest in loans through the platform. Given that interest rates are so low at banks and brokerage firms, the higher interest income that an Upstart account can provide could make an excellent place to hold your fixed income IRA allocation.
Fees. There’s really good news here – Upstart charges no fees to investors. What’s more, Upstart doesn’t earn fees on loans that default. Even better, if the loan defaults, Upstart turns the fees that were collected when the loan was originated over to investors in the loan. This is where that origination fee of between 1% and 5% of the loan amount could loom large.
No FDIC or SIPC insurance coverage! There is one caveat in regard to investing with Upstart. In the event that Upstart goes out of business, there is no federally sponsored insurance agency or fund that will cover your investment with the platform. However, this is another factor that is common with P2P platforms.
Upstart claims that they have a backup servicer and administrator in place so that the loans held for the platform will continue to be serviced, and you will get paid as an investor in those loans.
Upstart Review Summary
If you are a borrower, Upstart uses innovative methods in approving loans. This is an excellent loan source if you are recently out of college, and have not fully established yourself financially, or if your bank thinks your income is insufficient to support a loan. The platform will accept a very short employment history, or even a written promise of employment. It gives you an opportunity to be approved for a loan, even though banks may decline your application.
From an investor standpoint, Upstart’s loan quality is providing solid returns. The emphasis on “future prime” borrowers may be allowing Upstart to tap into a market that other lenders are ignoring. That assures more good investment opportunities in the future.
Whether you’re looking to borrow or to invest, check out Upstart as one of the P2P possibilities.
When you look at Peerform reviews you first need to understand the difference between conventional loans and peer to peer loans. While traditional loans come from a bank and can take months to get done, P2P loans are done through a platform that connects investors and borrowers.
Peer-to-Peer lending sites are rapidly becoming preferred destinations for both borrowers and investors. Peerform is a newer member of the P2P Market and it provides opportunities for both borrowers and investors to get better rates than what they can get from banks or other traditional loan and investment sources.
About Peerform
Peerform was founded in 2010 by Wall Street executives with backgrounds in finance and technology. They started the platform because they realized that traditional lenders like banks seemed unwilling to provide loans for individual and small business owners.
The solution was to create a peer-to-peer lending platform that would bring both borrowers and loan investors together. This would also give investors an opportunity to earn much higher interest rates on their investments than what they could get through traditional bank investments like savings accounts, money market accounts, and certificates of deposit.
The platform is able to offer lower rates to borrowers, and higher rates to investors, because it lacks the physical infrastructure and employment base that banks have. The reduction in operating costs from running a technology driven online lending platform could be passed on both borrowers and investors.
Peerform is headquartered in New York City and has been featured in major media outlets, such as Time and The Street. Peerform is currently eligible to make loans to residents in the 36 following states: Alaska, Alabama, Arkansas, Arizona, California, Delaware, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Hampshire, New Jersey, New Mexico, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Vermont, Washington, and Wisconsin.
Loans made on Peerform are underwritten by Cross River Bank, a federally insured New Jersey chartered bank and FDIC member.
Borrowing Through Peerform
The Peerform borrowing process is quick and simple, and you can use the loan proceeds for just about any purpose, including for business related needs.
Here are the highlights of the Peerform lending process:
Loan purpose. Peerform makes personal loans that can be used for a wide variety of purposes, including debt consolidation, credit card refinancing, home improvement, major purchases, car financing, business purposes, medical expenses, moving and relocation, wedding expenses, vacation, home buying, or other needs.
They also have a category referred to as a “green loan”. That’s where you take a personal loan and use it to purchase alternative energy equipment for your home. This typically can be something like solar panels for heat and hot water, or even the generation of electricity.
Loan amounts. Peerform will make loans that range in size $1,000 and $25,000.
Loan terms. All loans made through Peerform are for a term of 36 months. All loans are also fixed rate, installment loans that will be fully paid off at the end of the term. Peerform does not offer any other loan terms at this time.
Minimum borrower qualifications. In order to qualify for a loan with Peerform, you must have:
A minimum credit score of 600
No delinquencies, bankruptcies, tax liens, judgments, or non-medical related collections in the past 12 months
A minimum of one revolving account ever opened
A maximum debt-to-income ratio (DTI) of not more than 40% (not including mortgage debt)
A minimum of one open bank account
Although you don’t need to be employed, you do need to have an income which can be documented and verified. Also in regard to income, if you’re married, your spouse’s income cannot be used to qualify for the loan. Peerform provides personal loans, so you cannot include a cosigner for qualification purposes, nor make joint applications.
The loan application process. Peerform’s loan application uses a five step process:
Registration – This is an online registration that you can complete within a few minutes
Personal loan selection – After completing the online registration, the platform will review your information, and offer loan terms or alternatives.
Personal loan listing – After you have selected the loan terms that you want, your loan request is listed on the platform so that it can be evaluated by potential investors.
Verification – You will be asked to submit documentation that supports the information that you supplied in your registration form, or that will be needed to verify your identity.
The loan registration process will ask you to provide basic information, such as the loan amount you are requesting, the purpose of the loan, your credit score range, your full name, address, phone number, date of birth, email address, and annual salary and wages. You will then be asked to create a password.
Once you complete the registration form, you will be informed immediately if you qualify for a loan, and what the rate for that loan will be. Again, all loans are for a term of 36 months.
If you accept the offer, your loan request will be placed on the platform for investors to review and consider if they want to invest in it. You will also be taken through a step-by-step process to complete your application. Making application does not have any impact on your credit score.
Identity verification will involve you uploading copies of one of the following: your drivers license, military ID with photo, passport with photo, or US federal or state government ID. You will also be asked to verify your income. This will include two recent pay stubs, but they may also request recent tax returns and/or a copy of your bank statements.
Loan funding. In a best case scenario, your loan funds will be available shortly after the loan is put on the personal loan listing platform. However, all listed loans can remain on the platform for up to two weeks, which is known as the two-week listing period. You can track investor interest in your loan during the process.
But it is possible that your loan will not be fully funded within the two-week listing period. If it isn’t, you can either accept a lower loan amount (up to the amount funded), or you may need to reapply.
Interest rates and fees. Just like Lending club loans, interest rates with Peerfrom range between 7.12% APR and 29.99% APR. Rates are based on your Peerform Grade, and broken down into four alphabetic groups, each with its own rate range:
AAA, AA+, AA, A+ and A: 7.12% APR to 13.94% APR (credit score range: 700+)
BBB, BB+, BB, B+ and B: 14.86% APR to 19.44% APR (credit score range: 680 – 699)
CCC, CC+, CC, C+ and C: 20.87% APR to 26.92% APR (credit score range: 600 – 679)
DDD and DD+: 28.33% APR and 29..99% APR (credit score range: not indicated)
There are no application fees. There are however origination fees, typically 5.00% of the loan amount on all loans grades, except Peerform Grade loans AAA (1.00%), AA+ (2.00%) and AA (3.00%). The origination fee is deducted from your loan proceeds. For example, if your loan is $10,000, and the origination fee is 5.00%, you will receive net loan proceeds $9,500. The origination fee is payable only if the loan is issued.
The preferred loan repayment method by Peerform is by direct debits from your bank account. But you do have an option to pay by paper check. If you do, there is a $15 check processing fee for each check.
Late payments are assessed a fee of 5% of the monthly payment, subject to a $15 minimum per occurrence. There is also an unsuccessful payment fee in the event that your payment is refused. That fee is $15 per unsuccessful attempt, or a lesser amount as determined by state law.
There are no prepayment penalties in the event that you want to make a partial or full early payment on your loan.
Loan payments. You can repay your loan either by automatic draft from your bank account, or by mailing in monthly checks. However, Peerform does charge a fee of $15 per payment if you pay by check. There is no charge if you pay by automatic bank draft.
Site security. Peerform follows bank level security protocols, which includes encrypting and storing sensitive data in dedicated 24 hour maintain servers, which are protected with firewalls and housed in a secure facility. Servers are equipped with Secure Socket Layer (SSL) certificate technology to ensure encryption.
You also don’t need to concern yourself with the fact that investors will have access to your personal information. They will get only the information needed for investment purposes, but will not have access to any information that personally identifies you. In that way, you can apply for a loan anonymously, and not concern yourself that the information is available to someone who is either unintended or inconvenient, and certainly not for general public consumption.
Investing Through Peerform
If Peerform is a great place to get a loan, it’s also a rich source of investment opportunities.
Here is how investing through Peerform works:
Investor qualifications. In order to invest on Peerform, you must be an accredited investor. That’s an investor who is either high income or high net worth, or both, and who is generally recognized as a sophisticated investor who understands risk, knows how to invest into it, and is prepared to lose all of his or her investment (the temperament factor).
According to the US Securities and Exchange Commission, an accredited investor is defined as anyone who…
earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
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Investments offered. Peerform offers two types of investment products, whole loans and fractional loans. Whole loans are just what the name implies – you’re buying an entire loan. These investments are typically offered to institutions. Fractional loans are portions of loans, that are offered to individual investors.
These are not unlike investments on other P2P sites in which you can either invest in an entire loan, or in small pieces of many loans, commonly called notes.
All loans available for investment on Peerform are subject to analysis by the Peerform Loan Analyzer. The tool uses a highly advanced and dynamic algorithm for pricing loans. It uses empirical methods rather than filters (which are used on most P2P platforms) in order to better calculate consumer credit risk.
Custom portfolio. The portfolio enables you to diversify by customizing your investments to meet your needs. You can set investment goals, and the customization tool will outline how to invest your capital in order to reach your investment goals in the most concise way.
Fraud protection. Loan fraud is not uncommon and increases loan defaults, so Peerform takes extra steps to weed it out. In addition to requiring documentation to verify the borrower’s identity and income on the loan registration form, Peerform also uses both proprietary methods and commercially available licensed technologies and solutions to both detect and prevent fraud.
This includes third-party services such as Lexis Nexis for user identification, TransUnion for credit checks, and OFAC compliance.
Peerform also verifies that there is a variation of no more than 10% in the income stated by the borrower on the registration form, and that which is proven by the income documentation. If needed, IRS Form 4506T will be completed and sent to the IRS to verify the borrower’s income tax records. A small debit is taken from the borrower’s bank accounts, and verified by the borrower to make sure that the bank account is valid. The borrower’s phone number and email IP location are also verified.
Investment returns. Peerform offers rates of between 6.44% and 28.33% (net of origination fees). This rate range refers to returns before deducting for loan defaults, so your actual returns will be something less. .
Summary
Peerform is one of a growing number of P2P lending sites that also offers investment opportunities. The platform is using cutting edge technology to set the most accurate loan rates, which will also reduce the number of defaults that lowers the investment return on so many P2P lending sites.
Until a few years ago, small businesses were limited to obtaining business loans from banks and other traditional sources. But in the last few years, another source has opened up, and that’s peer-to-peer (P2P) business loans.
These are loans tailored specifically for small businesses, and they provide greater credit options than what small business owners can find at banks.
P2P Lenders Have Become Important Sources of Business Loans
It’s fortunate for small businesses that P2P platforms that make business loans are coming into the market. Banks – the most traditional source of loans of all types – are not particularly interested or generous when it comes to making loans for business purposes.
If you are a business owner and have attempted to get business financing, you’re likely well acquainted with the difficulties of the process.
This is especially true in the small business space. Banks make loans to businesses, but those are primarily well-established businesses. More typically, they represent medium- to large businesses.
Banks see these as lower risk lending niches since companies have strong track records, as well as large revenue streams and asset bases to secure the loans. That kind of stability is usually not as obvious with small businesses, and banks make getting a loan particularly difficult.
Complicating the process is that banks often don’t make business loans for less than $100,000. They usually see smaller loans as not worth their time and effort, based on the profitability of the loan. That means that if a small business only needs $50,000, they may not even be able to find a bank willing to talk to them.
But P2P lending is opening up for small businesses. Here are five of the most prominent P2P lenders in the sector:
Lending Club
You always have the ability to use personal loans for business purposes with Lending Club, but Lending Club has been gradually segmenting its loan types, which includes dedicated business loans and business lines of credit.
The personal loans are still available, which will enable you to get an unsecured loan for up to $40,000 to use for your business. But the business loan programs will enable you to borrow much larger amounts.
In fact, you can borrow an amount of up to $300,000. Business loans are installment loans with terms that run from one to five years They are fixed rate, with fixed monthly payments, and will be paid in full at the end of the term.
Business credit lines, on the other hand, are revolving credit arrangements, that function like credit cards or home equity lines of credit.
Lending Club does not require business plans or projections, nor do they generally ask for appraisals or title insurance. No collateral is required for loans for less than $100,000, and when collateral is required for higher amounts, it’s usually a general lien on the business and personal guarantees from the owners of the business. What’s more, loan proceeds can be used nearly any purpose.
In order to qualify for a Lending Club business loan or business line of credit, you must be in business for at least 24 months and have at least $75,000 in annual sales.
You must also own at least 20% of the business and have at least fair or better personal credit. This generally requires a credit score of at least 660, with no recent bankruptcies or tax liens.
APR runs between 6.95% and 35.89%, and there is an origination fee equal to between 0.99% and 6.99%. But there are no application fees and no prepayment penalty.
Funding Circle
Where Lending Club and other P2P lenders offer business loans as part of their loan mix, Funding Circle is expressly set up to provide business loans specifically.
Funding Circle provides business loans for a minimum of $25,000 up to a maximum of $500,000. Like Lending Club, business loan terms can range from one year to five years, and you can use the proceeds to just about any purpose – refinancing existing debt, hiring more employees, buying inventory or equipment, or moving or expanding your business operation.
In order to qualify for a business loan with Funding Circle, you must have a minimum credit score 640, and not have any bankruptcies or judgments within the past seven years, nor any outstanding tax liens or unsatisfied judgments.
You must be in business for 24 months and showing a profit in at least one of the last two years. You must also have a minimum annual revenue of $150,000 in each of the two most recent calendar years.
Business loans will not require any specific physical collateral, but you will have to execute a Form UCC-1 filing as well as provide personal guarantees by each owner of the business.
Interest rates can run between 5.49% and 27.79%, and there is an origination fee that ranges between 1.49% and 4.99% of the loan amount.
Learn More About Funding Circle
Prosper
Unlike Lending Club and Funding Circle, Prosper doesn’t have a dedicated business loan program available. However, you can take an unsecured personal loan of between $2,000 and $35,000 and use it for business purposes.
In order to qualify for a loan with Prosper, you must have a minimum credit score of 640 with Experian (that’s the credit bureau that they base your credit score on). You will need to furnish a copy of your recent income tax return if you are self-employed.
Interest rates run between 5.99%, to a maximum of 35.97%. Prosper also charges an origination fee equal to between 1% and 5% of your loan. There is no application fee and no prepayment penalty.
Upstart
Like Prosper, Upstart doesn’t have a specific loan program for business loans but does allow you to take a personal loan which can be used for just about any business need that you have.
Upstart is a little bit different from other P2P lenders in that they look beyond traditional credit criteria, but they also consider your education. This includes your major, your grade point average, and even the college or university you attended. They consider that certain major fields of study have advantages over others, and it figures into the underwriting mix.
You can borrow from a minimum of $3,000 to a maximum of $35,000. They have two loan terms, 36 months and 60 months. Though they are not specifically business loans, they have a major advantage in that they require no collateral for the loan.
As a self-employed person, you will need to provide the most recent year’s income tax return, as well as copies of current year invoices for your business. They will also likely require a copy of your college transcript if you graduated within four years of applying for a loan. You must have a minimum credit score 640, and not have any bankruptcies or other negative public records on your credit report.
Interest rates run between 4.66% and 29.99% for a 36-month loan, and between 6.00% and 27.32% for a 60-month loan. It’s likely that they also charge an origination fee since that is the practice with P2P lenders, but it is not disclosed on their website. Assume that will be in line with other P2P lenders origination fees.
PeerForm
PeerForm follows the same path as Prosper and Upstart in that they don’t have a specific business loan program, but they do have personal loans that you can use for just about any business purpose you choose.
Loan amounts range between $1,000, and $25,000, and all are for a term of 36 months. These are installment loans that come with fixed rates and fixed monthly payments and will be paid in full at the end of the loan term.
Interest rates range from 7.12%, up to 29.99%. There are no application fees and no prepayment penalties. However, PeerForm does have an origination fee between 1.00% and 5.00% of the loan.
In order to qualify for a PeerForm loan, you must have a minimum credit score 600, which is lower than any other P2P lender on this list. However, your credit report must also reveal no delinquencies, bankruptcies, tax liens, judgments, or non-medical related collections within the past 12 months.
You can have a maximum debt-to-income ratio of 40%, but this does not include mortgage debt on your personal residence. Your credit report must also show a minimum of one revolving account, you must also have at least one open bank account in order to qualify for a loan.
The P2P Business Loan Advantage
That’s five major P2P lending platforms that have business loans available in one form or another. If you are in need of a smaller loan amount – less than $35,000 – and you are looking for a simple unsecured loan that you can use for business purposes, then Prosper, Upstart and PeerForm should be able to provide you what you’re looking for.
But if you need a larger amount, like several hundred thousand dollars, and your business is a little bit better established as far as the length of time in business and cash flow, then you will want to go with either Lending Club or with Funding Circle.
Whatever you choose, the upshot is that you are no longer limited to getting business loans strictly from banks. You can now take advantage of P2P platforms, and likely have a greater chance of getting the financing you need for your small business.
And you likely have every reason to believe that you will also get your loan a lot faster and with fewer questions and less documentation.
By Peter Anderson9 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited November 17, 2017.
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My Lending Club account has been kind of hands off the last couple of months, with no new loans being bought or sold. The good news is that my returns are continuing to improve. My returns are now up to 11.93%, getting close to the 12% I said I was looking for a while back. By moving away from purchasing only A and B grade loans, and selectively choosing more C, D and F grade loans I’ve been able to boost my returns significantly. Hopefully next month I’ll be over that 12% hump.
Lending Club continues their steady growth, as they added an another 42.1 million in new loans for April 2012. From SocialLending.net
When you look at the numbers Lending Club issued almost $42.1 million in new loans this month. The total number of new loans was up substantially (over 10%) from last month with 3,230 loans issued. This meant for the second month in a row their average loan size reduced – in April it was $13,019. The total loans issued since inception is now around $612 million and with eight months left in the year it is clear that Lending Club will cross over $1 billion in total loans before the end of the year.
Lending Club has continued to show strong growth, and should be able to cross $1 billion in total loans by the end of the year. I think that goes to show that they aren’t just a flash in the pan. Peer to peer lending is here for the long haul! Prosper has also continued to show growth as well, and may be worth a second look by investors.
Social Lending Video Course
Also this month Peter Renton of SocialLending.net has relaunched his peer to peer lending training video course. The course goes over the social lending sphere in depth, talks about how to maximize returns and gives some of Peter’s best investment strategies to help you succeed. The course is well worth the cost, and worth a look if you’re interested in maximizing your returns with P2P Lending.
More Details + Video Overview Of Peer to Peer Lending Wealth System
Returns Now At 11.93%
A week or two ago I started looking at my Lending Club account for 2011 tax purposes. Trying to figure out your taxes when it comes to Lending club can be extremely confusing as the reporting processes can vary depending on how much you’re investing in each loan, how your interest income will be reported, etc. If you’re as confused as i was when I started looking at it, check out my post on Lending Club and taxes.
A couple of months ago I had my first charged off loan. It was disappointing to see my perfect record of no charged off loans go down the tubes, but it wasn’t completely unexpected. With as long as I’ve been investing with Lending Club I would have expected at least 1 or 2 charged off loans a while ago. Here’s a look at my account to date:
Net Annualized Return of 11.93%: Up from 11.61% in early April, 11.44% in February, all the way back to 10.53% in July of last year. It continues showing progress.
Number of defaults.. one, with 2 new late: A few months ago now I had my first charged off loan, a Grade B loan. It’s interesting that the loans I’ve had either go late or get charged off have mostly been the higher grade loans. I’ve now got two more late loans, one of them a grade A loan, and the other a Grade D loan. The grade A loan is thankfully almost all paid off already, so even if it gets charged off my losses would be minimal. The grade D loan that’s late is about 1/2 paid off by now, and is already on a payment schedule to hopefully get them back on track. We’ll see.
Twenty seven loans have been paid off early: Ten were A grade loans, eight were grade B loans, six were C grade, two grade E and one F. Looks like grade A and B loans are more likely to get paid back early, reducing returns. Another reason why I’ve started investing in more higher grade loans.
My account balance increasing, re-investing returns: I currently have $2,777.11 in my account, with $170.87 of that ready to invest. I’ll get around to re-investing that money soon.
I’m still diversified by investing across a large number of loans: I’ve had 169 loans, with no more than $25 in each loan. In other words, I’m diversified across a large number of loans, lessening my risk from any one loan going into default or getting charged off.
NOTE: Did you know that 100% of investors who have invested in 800 notes or more had positive returns. Not too shabby, not everyone in the stock market can say that!
What’s Your Actual ROI?
When you’re looking at the numbers on the Lending Club and Prosper sites, it has been pointed out time and again that their numbers are overly rosy view of what your actual return on investment will be. The ways that they calculate the ROI isn’t really standardized, and they don’t take into account how old your loans are, possible future default rates, or other things that may become a factor. The numbers they show are just something you have to take or leave.
A site that I discovered a while ago that gives what I think is a better picture of the actual ROI you can expect is Nickel Steamroller’s Lending Club portfolio analyzer. Basically the analysis tool with give you an estimated ROI after you download all your notes from your Lending Club account and upload the .csv file. It will go through you notes and give sell recommendations, show duplicate notes and highlight notes that are below Lending Club’s average return (so you can sell them on the secondary platform). It will even give you a fun little map showing where your loans are (see mine above).
In looking at my returns on the analyzer, my actual return according to the site will be closer to 10.74%. It also gives me quite a few sell recommendations, particularly on some of my older lower interest loans that I did when first starting out. Those particular loans tend to be grade A or B, and have interest below 8%.
Evolving Lending Club Strategy
Here’s the basic strategy I’ve been using with Lending Club since I started investing. The strategy has changed a little bit over time to include more low grade loans and a few loans with higher balances.
Less than $10,000: I believe I’ll still be sticking with mostly loans below $10,000. Lower amounts mean higher likelihood of payback of the loan.
Zero delinquencies: Again, I may fudge slightly on this one, but I still want it to be very few or zero delinquencies.
Debt to income ratio below 20-25%: I like to invest in loans where the borrowers have a lower DTI ratio, and preferably have higher incomes. I’ll try to keep this as is.
Good employment history: I like loans with a decent employment history of at least 2 years, and a decent income.
So that’s what I’m doing with my Lending Club portfolio right now, and how I’m investing.
Not ready to invest, but looking to consolidate debt or pay off a high interest credit card? You might want to consider borrowing from Lending Club. Check out my post on borrowing from Lending Club.
Are you currently investing in Lending Club? How are your returns looking? Tell us in the comments!
Editor’s Note: Lending Club no longer offers peer-to-peer lending on it’s platform.
Peer Lending Server is a completely automated investment solution for peer-to-peer (P2P) loan investing. It works with only one of the P2P lending sites, Lending Club, and runs on Windows, Mac or Linux. At least part of what makes Peer Lending Server unique is the focus on loan underwriting. This process can be done in a fraction of the second as soon as new loans are listed.
How Peer Lending Server Works
You can download and install the Peer Lending Server Virtual Box that is designed for your operating system. You start by installing Peer Lending Server, and only then do you add your Lending Club API information and program options. From there, you can create filters that you want to use to help you in selecting loans to invest in.
The system will filter current notes, allowing you to download and browse the latest notes on Lending Club that will match your filters. With the click of a button, you can automatically invest in any and all listed loans that match your filter criteria. Any notes that you are already invested in through Peer Lending Server will of course be excluded. You can then schedule the service to automatically start filtering loans at times that you select.
The platform enables you to choose the amount that you want to invest each note, as well as the maximum notes per order. You can also choose to maintain a minimum cash level in your account.
You can also set a maximum percent of available notes to be allowed per filter, and the service will enable you to rank filter notes by a given field. This will give a higher priority to notes that meet the criteria of the highest ranking filters.
Peer Lending Server makes use of external data, which includes additional data points to determine the creditworthiness of any loan. They use statistical models that include macroeconomic data to help increase return on investment, while significantly reducing risk.
Through the use of artificial intelligence, you are able to underwrite loans quickly. Artificial intelligence deciphers complex relationships, improves efficiency and avoids errors.
The service is set to run on Pacific Standard Time, and changing your time zone is not supported or recommended. Peer Lending Server is also designed to run as a service that is always “on” , and for that reason it should be installed on a computer that will always be left on, and where sleep mode is disabled. This means you will be more likely to install it on a home-based desktop computer, rather than a laptop, since the latter is shut down frequently.
One of the major advantages of using Peer Lending Server is that since it runs through your home computer (for the reason given in the paragraph above), your password and API can be maintained privately. There is no need to share your credentials with third parties, or to wait on shared resources. The application runs on your own computer, allowing you to be “first in line” when looking for loans and notes to invest in.
Peer Lending Server offers a large number of tools and features that could improve your success as an investor on Lending Club.
Automated investing. Peer Lending Server is a complete “turn-key” investment application for Lending Club, and is Lending Club API compliant. It offers low detection, execution of saved Lending Club filters, the ability to schedule service times, and a detailed log of each transaction. It also provides configurable maximum loans per order, as well as configurable investment dollar amounts and a configurable option to disable order submission. It can enable you to maintain a minimum cash level of your choice, and to configure based on a maximum percent of notes per order allowed.
Machine learning. The system provides a sophisticated gradient hosted model for mature loan classification, as well as rapid loan prediction. Analytics provide your projected return on investment, and no technical knowledge is required.
Filters. You can use preset filters, and custom filters to match your investment strategy. Filters include artificial intelligence fields for return on investment projections. There is also extensive help included with each field – again you don’t need to be a technical genius in order to operate the system.
Peer Lending Server analytics. This includes the ability to test custom filters, instant and projected return on investment, extended return metrics, and loan status including paid, default, and late statistics. It also comes with bar charts and pie charts, as well as common field categories from multiple perspectives and views.
Ease of use. Peer Lending Server is setup to operate on a “set and forget” basis. It takes just a few steps to configure, filter and run automated investing, and you can be up and running in a matter of minutes.
Speed. Peer Lending Server describes itself as “blazingly fast”, using search and modeling technology that takes place in a small fraction of the second. This gives you the ability to make educated investment decisions while capturing the most popular investment opportunities.
Peer Lending Server Forum. The forum is actually hosted by LendAcademy.com, and has hundreds of discussions relating to both the technical aspects of Peer Lending Server as well as investment strategies to best take advantage of the system.
The platform also has a blog, however there are only about a half-dozen articles, so this feature will have very limited utility.
Peer Lending Server is Free to Use. We saved the best for last. You can’t beat the price of Peer Lending Server, because it’s absolutely free to use.
Should You Try Peer Lending Server
Peer Lending Server is one of several P2P automated investment services – robo advisors for P2P platforms. The service is completely free, so you have nothing to lose by at least trying the service. If you are an active investor on Lending Club, then you almost certainly will need to use some sort of automated investment service, and Peer Lending Server offers the full package.
Perhaps the major downside of Peer Lending Server is that it can be used only in conjunction with Lending Club and not with any other P2P platforms. But apart from that limitation, it is a full-service platform, that offers a higher level of security and quicker access to new loans, due to the fact that it is downloaded to your home computer. This gives you the advantage of immediate access to new loans, as well as eliminating the necessity to share your credentials with third parties.
Is it the best P2P automated investment service? That’s probably more a matter of preference than anything else. Each investor has to find the service that works best for him or her, and which that will be will depend upon the preferred tools and features offered by each. But given that Peer Lending Server is free, you owe it to yourself to at least give it a test run.
PeerCube is a peer-to-peer (P2P) filtering tool. PeerCube has been capturing and analyzing data on P2P lending sites since 2011, which actually makes it one of the better established P2P investing apps available (most have been around only a year or two, and some for just a few months!). Since it began operations, PeerCube has […]
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