The following review of Lending Club is part of our series of articles focused on how to make money to create additional income streams or passive income cash flow. In this article we will address the pros and cons of Lending Club and provide some insight on how you can capitalize on this technology that is revolutionizing the way banking is done.
Lending Club Review
Lending Club is the leader in peer-to-peer lending offering one of the biggest credit marketplaces on the internet. Peer to peer lending means that borrowers and lenders work together, with the help of a streamlined process, which facilitates through an intermediary—the Lending Club website. On the site, borrowers can apply for both personal and business loans. These loans are sought for a variety of reasons and a variety of amounts. Because everything is done online, Lending Club is able to cut out many traditional costs, which the company then passes on to its users.
What are peer-to-peer loans?
Peer-to-peer loans or peer-to-peer lending (P2P lending) is when one person lends directly to another person, typically using an online matching service like Lending club. Most of the time, investments are pooled. That means that if a person is seeking an investment of $5,000, the loan typically won’t come from a single lender. Instead, it may come from multiple people. For example, when a borrower seeks a $5,000 loan, the capital may be provided by five people who each loan $1,000 or ten people who each loan $500.
Why do people turn to P2P platforms like Lending Club?
People seek loans from Lending Club because it is often easier to get a loan than through a bank. For small amounts, people rarely turn to banks – but they do turn to Lending Club.
People decide to loan their money on Lending Club because the returns are higher than found through typical investment vehicles currently offered by banks.
More About Lending Club
Lending Club is one of the biggest and most notable P2P lending platforms out there and they have received multiple awards for their amazing innovation that has completely revolutionized the lending marketplace and traditional banking.
Become a Lending Club Investor
Right now you might be thinking, “I’m not an investor!” That’s okay! People who lend their money on Lending Club aren’t professional stock brokers are lenders—in fact, most of them are not. They are just people like you who are looking for a monthly cash flow using their existing assets.
Becoming a Lending Club investor is a lot easier than it sounds. All you have to do is follow these steps:
- Open an account at lendingclub.com
- Transfer funds to your Lending Club account so that you can invest in your peers
- Make investments of $25 or more.
How Lending Club Works
- Prospective borrowers submit loans and pass through Lending Club’s screening process.
- If the borrower is approved, the loan is assigned a “grade”. Grades are classified between A and G depending on the borrower’s credit quality and assigned risk.
- Investor select and invest in “notes”. A note represent a fraction of a loan. By investing in a portion of the overall note, investors can limit their exposure and therefore reduce risk.
- As borrowers make loan payments, a portion of the funds are deposited into the investor’s account. The funds can then be withdrawn or reinvested.
How do you get paid from Lending Club?
Once the borrowers start to repay their loans, Lending Club will send you your portion of the monthly payments made by the borrower.
How much money will I make on Lending Club?
Since you are investing money, your returns will depend on the overall investment amount. As of the time this review of Lending Club was being written, historical returns range from 5.12% – 7.78%. Therefore, if you invest $10,000, then you will have returns of roughly $51.20 – $77.80 per thousand dollars, or $512 – $778 annually based on grades A-C.
How can I lose money on Lending Club?
Each loan is assessed by risk. The lower the risk, the lower the return is going to be—but the more likely it will actually be repaid. With high risk borrowers, the return will be high—but only if the borrower actually winds up paying off the loan. If he/she cannot make the payment, he/she can default on a loan the same way people default on bank loans.
What do experienced lenders make on Lending Club?
It’s pretty safe to expect that if you make smart investments, you can earn around 5-10% on Lending Club. That may seem low, but when you compare that to a bank’s average savings account interest rate of 0.06%, then it seems like a great way to make your money work for you!
After one year, this is what your money could look like:
|Amount||5% on Lending Club||10% on Lending Club||0.06% Bank Interest|
Letting your money sit in the bank won’t give you enough return to buy a single cup of coffee! Yet, with Lending Club, you can earn some extra cash that just might go a long way.
Why is an insurance company writing about Lending Club?
A lot of times people decide not to get life insurance due to the fact that they feel they don’t have enough money to pay the monthly premiums. However, most people have no idea how affordable term life insurance can be – and being a smart investor on Lending Club can help you cover your premium. When you invest on Lending Club, you get returns that will help you make further smart investments – such as getting a life insurance policy to protect your loved ones.
Another reason we are writing on Lending Club is because it is a good option to create cash flow. Some of our more sophisticated clients buy life insurance as an asset and then use the cash value as collateral to purchase other income producing assets. Lending Club is a platform that allows an investor to use capital to gain an income producing asset.