What is the procedure for Investors to use the Lending Club?

Once the investor has decided to make an investment at the Lending Club these are the simple steps that they need to follow to complete the loan access procedure:

  • In order to open then the account the investor must possess a minimum of $1000 to start with the procedure and then the investor needs to select one of these options for the account type:
    – Trust Account
    – Joint Account
    – Custodial Account
    – Corporate Account
    – IRA
  • When the account has been opened the investor will be asked to invest at least $25 for each of the notes.
  • Let us explain this better using an instance, if an investor Mr. A has an account of exact $1000 then Mr. A will be able to invest around 40 notes each of which will be at $25 each. This will allow the investors to decrease the risk of being defaulted. 
  • Then the investor will be asked to select their strategy from the two options of investment made available to them
  • Investment which is automated: This is the option in which The Lending Club itself chooses the investment for the investor according to the risk that is bearable and the amount which can feasibly be returned.
  • The investor can either take the “Platform Mix” option of The Lending Club which is essentially an option that combines loans from every grade or the investor can even come up with their personalized “Custom Mix”.
  • Investment which is manual: This is the investment option which is done after conducting research on the grade of the borrower, the reason for borrowing the loan, the rate of interest acceptable and the credentials of the borrower then the investor will be allowed to decide on complete knowledge based details for smart investments.

Important Cues for the Investors to Remember

  • The grade hat The Lending Club assigns ranges from A to E, that includes further sub grades as well within every grade which ranges from 1 to 5.
  • In these grades A1 is the type of loan that has the least amount of risk involved while E5 has the most amount of risk involved and then the subsequent loans range in between.
  • These grades are set to allow investors to construct their personal investment profile which stands par with the amount of risk that they can handle.
  • The account for the funds and the returns to be given has to be done through a bank account that is linked and has the limit to transfer a minimum of $1000.
  • After this the investors will instantly be given deposits on a monthly basis on both the principal amount and the decided interest rate on to the linked account as soon as the borrower’s submit their loan repayments.

How can Investors decrease the risk of their investment?

The investor must know that there is always a risk involved with every investment made and borrowers a lot of times become the defaulters.

However some tips and tricks if adopted by the investor can indeed help minimize the disastrous aftermath of wrong investments

  • Make a variety of notes
  • Never put all your eggs in one basket meaning never make all your investments on 1 or 2 loans it’s always prudent to invest some money into a number of notes.
  • Remember that Lending Club says that almost 99% of profiles with above 100 notes have enjoyed positive paybacks
  • Remember to select borrowers who have a well-maintained profile with better grades
  • Always keep in view the reason for which the borrower is applying for the loan
  • It is wise to go for borrowers with refinancing rather than new debts
  • Filter out all your borrowers by setting criteria for their credentials hence you will be shown borrowers with improved credit scores, stable earnings and those borrowers who have a lesser debt ratio than the others.

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