Starting Out with Lending Club

I’m not going to lie: I didn’t exactly do a lot of research on this. I read a few blogs and watched a few YouTube videos with probably a total of 3 hours of research before I decided to invest $5,000 in Lending Club.

Anyhow, I started with a 36 month strategy and allowed the system to take care of the rest. We’ll see how this goes…I’m definitely a little worried, but at the same time, I figured I can afford to take a $5,000 hit in the event this experiment doesn’t work out as favorably as the website claims.

Here is the strategy where I’m expected to earn about 5% return on my investments:

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How Does it Work?

You start by creating an account on the Lending Club website. It’s a pretty simple and straight-forward process.

Afterwards, you need to fund the account by linking a checking or savings account. It’s very similar to when you first open a checking or savings and they need to do a penny test. The account won’t be funded for at least a week. And how much you want to invest is up to you. The minimum investment is $25, which is the amount of a note. The Lending Club recommends at least $5,000 to keep your portfolio diversified.

Finally, it’ll ask you about your investment strategy. You can choose between a 36-month (allocation is show in the picture above) or 60-month strategy. Or, you can create your own strategy by reading about each person’s loan and personally deciding which loans to invest in. You’re also responsible for determining your own risk level in this case. To keep things simple, it’s probably best to go with the 36-month or 60-month strategy unless you really have the time dedicate and do research.

Once the Lending Club is funded, the system will automatically start to invest for you. You will just receive emails along the way to confirm the notes. You can change the settings to receiving a weekly or monthly summary as opposed to real-time. You’ll have full access to information related to everything the system has invested in on your behalf.

Now, it’s pretty much sit and wait. Lending Club will call you in a few days down the line to see if you have any questions or concerns. I didn’t have much as I understand how loans work and what happens when someone defaults. So, you may want to get details on their collection process and what happens when someone does default.

Bottom Line: This is another form of investment; however, I would not suggest funding your entire retirement. The reality is that defaults do happen and you may lose value as with stocks. Therefore, treat this as another type of diversification and a way to invest if you have some extra money.

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