Lending Club Investment Review [How I Get 9% Return]

I’m sharing one of my favorite cash flow
investments, how to get started and how much you can expect to make. By the end of this video, you’ll have everything
you need to get started on Lending Club including the risks, returns and how I beat the site
average on my loans. I’m also going to reveal two strategies
for different types of investors from high-return to a conservative cash flow strategy. We’re talking Lending Club and p2p investing
today on Let’s Talk Money. Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let’s talk money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. This is going to be a controversial video
because I know a lot of you are still skeptical of investing in peer-to-peer loans on Lending
Club . I wanted to share my experience though and why I think it could be one of the best
cash flow investments you can make. I’ll be sharing my Lending Club returns,
why I think every investor should have some p2p in their portfolio as well as the risks
to the investment. I’m not going to sugar-coat any of it. I’ve been investing on the site for years
and have talked to investors that have been investing since 2007. I’ve seen the worst as well as the best
and I’m going to share it with you in this review. Finally, I’ll outline two investing strategies
on Lending Club for different types of investors. I’ll show you exactly how to set up your
account for two different types of investors; from high-risk to conservative with stable
cash flows. Peer-to-Peer investing is really no different
than what banks and investors have been doing for ages. Websites like Lending Club take loan applications
from individuals, they check the applications’ credit and investors get a chance to invest
in pieces of the loans. Before p2p loan sites like Lending Club, banks
would make a loan and then sell packages of their loans to brokers. Banks don’t keep their loans, they want
the cash to make more loans. So brokers and institutional managers at insurance
companies would buy these loans for their investors. Of course, everyone in this process took a
cut of the returns so investor returns were usually pretty low. On Lending Club, borrowers can apply for a
personal loan up to $40,000 but have to meet employment and credit requirements just like
a traditional loan from a bank. Investors can invest as little as $25 on a
loan and invest in only the loans that meet their criteria. Borrowers make fixed monthly payments on the
loans. Those payments including interest and repayment
are passed directly through to investors minus a 1% fee for management. Since there’s no bank middle-man or broker
taking a piece, investors get a higher return investing directly in the loans. Since 2006, nearly $42 billion in loans have
been made on Lending Club in every state. Most of the loans are used to refinance or
pay off existing debt, something called debt consolidation. Here we see a table of loan statistics and
the investor returns. Loans are separated into a risk category according
to borrower credit factors with A-rated loans being the safest. Now I wanted to filter this only to loans
originated over the last few years to show the most recent data. In this charged off column, you see the amount
of loans that have defaulted or not been paid back. In that safest A-rated category, that’s
just 1.3% of loans made, while it’s as high as 10% in these D-rated loans and about 6.6%
across all loans. Of course, the loans made in these riskier
categories come with higher rates so the idea is that investors are compensated with a higher
return. This last column, the adjusted net annualized
return, shows the investor return even after accounting for the loans that default. Here you see that investors in those safest
A-rated loans have earned a 4.5% return and that gradually increases through the C-rated
loans to almost 5.6% return. What’s interesting here is that investors
aren’t necessarily getting enough return for the extra risk in these highest risk categories. When I show you those two Lending Club strategies,
we’ll be using loans from the A- through D-rated categories to build portfolios. In fact, I’ll be revealing some loan filters
that will increase your returns over the website average here. I’ve been able to book a 9.2% return on
my p2p loans by using the same loan filter I’ll be sharing. Now that return is great, especially on a
cash flow investment that puts money in my account every single month but that’s not
the reason I think every investor should have money in this asset. These are fixed-income investments just like
bonds. All the naysayers out there are going to say
that loan defaults will increase during a recession and I’ll concede they will a little
but you’re still going to get between three to five percent return. Compare that against what could be a 50% plus
loss in stocks and you start to see why I’m recommending p2p loans to all investors. When the bottom drops out of the market, you
can use that cash flow from your p2p loans to buy into stocks at those bargain prices. That’s not to say there aren’t risks to
Lending Club investing. I’ll detail them here, some of which we’ll
be minimizing in those two example portfolios I’ll reveal. The first risk is back to that potential for
higher defaults in a recession . These are unsecured loans to individuals so they aren’t
secured by a house or a car. In a deep recession, more people will stop
making payments. Now Lending Club has a system in place for
working with borrowers to keep up their payments and I think people don’t give the site credit
for quality of its borrowers. To qualify for these A- through C-rated loans,
you need a pristine credit score. Borrowers across the loans have an average
score of 700 FICO and average $78,000 a year, nearly $20,000 more than the average annual
household income. So these are solid borrowers, again mostly
borrowing money to pay off other debt so it’s not like they’re just taking as much money
as they can get. The second risk I want to talk about is that
your money is locked up in a loan until it’s paid off, that’s either 36-months or 60-months
. You can sell your loan investments through a site called folioFN but there’s usually
a discount from the price and I don’t usually recommend selling your notes. But is this really that much of a risk? Most of us are long-term investors with investing
goals that reach out decades. One of the investing mistakes I see is people
panic sell out of their stocks because it’s so easy to do. It might actually be a good thing that you’re
locked into loan investments to see how they pay out. Now I want to show you exactly how to invest
on Lending Club, how I invest my money and two strategies for different types of investors. I’m going to detail it all here and will
leave a link in the video description below to get started. Let’s look at these two strategies now but
stick around because next I’ll walk you through exactly how I invest, how I pick loans
on the site. I’m also going to show you how to take advantage
of the automated investing tool on Lending Club to make your investments completely passive. First I’ll share the safe, conservative
investing strategy. Now borrowers in these first three loan categories,
A through C, have credit scores well above 700 FICO and make more than $80,000 annually. Combine this with this loan filter we’ll
talk about, this is going to be a loan portfolio with very few defaults and a safe return. For this portfolio, I recommend loans from
the first three categories and I’ll show you how to filter for these loans and invest
on the site in our walk through screenshare after these two strategies. I would also filter for borrowers that own
their home and with verified income. This means Lending Club has checked their
employment and income and those home owner borrowers tend to be safer. We’re also going to filter for borrowers
with no accounts delinquent and no charge-offs in the last 12 months on their credit report. We’ll also filter the loans for a debt-to-income
ratio of 20% or less. These are some important loan filters that
narrow your list of loans to only the safest borrowers. I’ve back-tested these criteria and think
you can expect a return of around six percent or higher which is exceptional with this kind
of safety. It’s higher than you get with most corporate
bonds and even above the return on high-yield bonds. Next is our higher-risk, higher-return strategy. Now I wouldn’t recommend chasing high returns
for most investors but if you can stomach the higher defaults then you can make a great
return on these loans. We shift this portfolio to loans from categories
B through D so we take advantage of those higher rates in the riskier categories. We’re going to stick with some of the filters
we used in the other strategy including income verified, no delinquencies and no charge-offs. We’ll also be limiting the filter to loans
where the total amount borrowed is $15,000 or less. I like this last loan filter because it makes
for less risky borrowers. Those smaller loans mean lower payments for
the borrowers and they’re less likely to fall behind. It also screens out the scammers because anyone
not planning on paying back their loan is going to borrow as much as possible up to
that $40,000 loan limit. Limiting your loans with these filters will
keep your defaults lower but you’re still going to have some, especially in that D-rated
category. It’s just a reality for p2p lending. The idea though is that your good loans far
outnumber the bad ones and you make that higher adjusted return. Back-testing this strategy, I think you can
expect returns in the nine to ten percent range and possibly higher. Now I want to share exactly how I invest on
Lending Club including the loan filter I use and how to turn on that automatic investing
tool so you never have to worry about your investments. Include my loan filter video
I know this has been a long video and in an investment you’re probably not very familiar
with. Just like any investment, I recommend doing
your own research to make sure Lending Club loans are right for you. As we get closer to the next stock market
crash, I think these investments are more important than ever to protect your money and give you the opportunity when stock prices
are a bargain. I’m leaving a link to get started on Lending
Club when you’re ready. I’d love to hear your feedback on p2p investing
and am always happy to answer any questions. We’re here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making more money and making your money work for
you. If you’ve got a question about money, just
scroll down and ask it in the comments and we’ll answer it in a video.

Paul Whisler


  1. Find out more about this cash-flow investment on Lending Club and p2p investing https://mystockmarketbasics.com/lendingclubinvesting

  2. The difference is the bank can use fractional reserve lending practice. Make money off money that they create. We can not.

  3. Great video Joseph! Thank you for all the info! I would be very interested to see if there is a similar platform for those of us living in Europe.

  4. Is this peer to peer lending possible worldwide ? I'm from morocco and some investing websites always say morocco not included……

  5. I like the idea of being the lender because when I was doing my consumer math homework, I was in love with the concept of getting "interest" in addition to the principal amount. In paper it's lucrative; however, I think I need to have a lump-sum of at least $2,000 investable cash that is not apart of my emergency savings, Roth IRA, Individual investing accounts, etc. But, I'll save some money until I have at least 2,000 so I can take a test drive.
    I was always wondering how investors build wealth outside of the traditional securities/assets.

  6. Love to see a similar breakdown of prosper. Still P2P like lending tree but doesn’t require the $1000 dollar minimum to start.

  7. Thanks for the info. I've been investing in Lending Club for just over a year. I have a Net annualized return of 6.89%. I will use your strategy and see if I can increase that. Thanks again.

  8. I've been wondering how to use that filter for automated investing for a year. Thank you! Always great content and tie

  9. Been hitting about 4.5% I had no idea you could even setup filters like this. Very helpful I just need to play with it a little more as I never get any results at the moment. I would imagine most of these get filled as soon as they come in.

  10. LendingClub is not as great as it seems. It wasn't worth the time I spent looking for good notes. I did it for a few years. I never lost money, but my adjusted net annualized return was 2.80%. I was pretty conservative with the filtering. 54 out of 557 notes were 'charged off'. Maybe it would have been better if I lived in a state that allows for notes to be bought on their primary market.

  11. I am in New Zealand and use "Harmoney " peer 2 peer lending platform,it has been going 4 years here.I am making 11.7 % . Wish we had property P2P like you do In America.

  12. Great video. I’ve been wondering about this for a bit. Marc Lichtenfeld of Oxford Club has also recommended this. It’s a little intimidating to get started but hopefully I can step through it using your video. Thank you!!

  13. You say "return of 10%of the portfolio for the period.." Do you mean the whole period of 36 or 60 months…?

  14. … And does Landing club works with people who live outside USA (investors)? … I live in Norway.

  15. I went for it today. Seems like there are no available options now with your set of filters, but it may just mean that lower risk options are just harder to come by. BTW, how secure is the company itself? Any concerns with it's stability and what that might mean for your assets being administered by them?

  16. Thanks for giving out this info again, I used your settings from the previous video a few months ago and it's going well. Right now I'm funding 87 loans for average return of 11%. That beats the heck out of the .01% in my savings account. After 7 months I have yet to even have a late payment. These filter settings are crucial to getting the safest loans. If after a year things are still going well I may double or triple the amount I have in the account for investing.
    Maybe I missed it but I didn't hear you mention setting up an IRA to fund the loans to avoid all the tax stuff until way later.
    Thanks Joe.

  17. I make more than 15% on lending club. I don't use automatic investing. Manual only. So I pick the very best loans only. And I invest gradually, rather than all at once, so I can pick just the best loan. You don't want to go in with a big load of cash. Just $1,000, then add in gradually over time. And he is wrong about loan amount. There is no correlation between loan amount and default rate. And I only do E rated loans because the rate is higher even if you correct for the default rate.

  18. Hmm, how often do C and D risk loans come up with those filters? I only ever see A and B.

  19. Thanks for the tip, definitely will open an account with Lending club, I have a Prosper account is Lending Club better?

  20. What’s the maximum amount can you invest?

    I looked up the amount you could invest in and you can only invest about 25$ for each.

    If i want to invest a grand instead of putting in just 25$, would that be possible?

  21. So, not sure if you’re running into the same thing I am but after a few weeks now having employed the filters you suggested and leaving it on auto there’s been no matches. Wondering if you have thoughts on which filters you might change to get in the game but still keep risk at a minimum. Thanks

  22. you mentioned the money is locked until the loan is paid back, does that include the interest as well?

  23. Your channel is so professional and well rounded compared to mickey mouse 'get rich with real estate' 'get rich with drop shipping' channel..nice to see a channel that doesn't have misleading clickbait bragging video titles

  24. Thank you for the informative video. I currently have ~ 35k invested on the platform with automatic reinvesting. Account has been active for 1.5 years. I received NAR 7.41. I have never adjusted the settings manually. I haven’t made any changes since I opens the account, just occasionally glance over the account. I do see what seems like a large amount of payoffs and I happened to notice D= 21% and E= 6%.
    My question is: as I’m inexperienced should I just leave it alone and not mess with the current settings or make the changes you suggested? I have started to make a biweekly auto invest as well.
    Again thank you for the informative video.

  25. Great info, do have a video on how save money fast and not to risky to get down payment on a home ?

  26. Hello I have input your criteria, but I only have one loan that fits it, any thoughts? Thank you! I am literally just starting out.

  27. P2P lending is a mediocre investment at best. 3-5% return is generally what most people are getting based on their reviews I've seen as well as my own experience after loan defaults. Why invest in a riskier asset when currently CD are offering ~ 3% for 3-5 years which are similar to lending club loan terms. Liquidating a CD is easier than many small notes on a secondary exchange and default rates will climb when the economy declines into recession. After making an initial investment two years ago I'm slowly pulling money back out every month. BTW all my defaults were AB rated.

  28. Unfortunately I started off making poor choices in loans. I'm in the process of moving my investments to more conservative loans. I have been following this setup for the past 5 months and none of them have charged off. Unfortunately the ones from my 'shiney object syndrome' are being charged off and dropping my NAR. So I'm slowly getting better.

  29. I would love to create a peer to peer platform here in Cameroon but I don't know how to go about this. Please can you help?

  30. Great info, very detailed, thanks !! Now can you share with us on the other investing apps as well ??

  31. Thank you for making these videos, I will try these tactics when i open an account. With research of course but this is a great video to help me understand and get started.

  32. I have been with Lending Club since Nov 2017 and my ROI has just dipped to 9.86%. I am satisfied with this platform and will continue to invest. I started off with $1000 and just reinvested the returns and my account value is already over $1500.

  33. Question. I like the conservative filter. How often does it find B and C loans? It got me 4 As so far, and now a pause. Wondering if the algorithm is now waiting for lower loans in order to balance grade percentages according to my autoinvest settings.

    Edit: may have spoken too soon. Autoinvesting just got me a B note.

  34. what about the risk of Lending Club folding, it seems to be struggling financially

  35. Lending Club has recently made some changes – phasing out new Category E and raising interest rates on some of its Category D loans. Has this prompted any changes in your filters?

  36. So what are the updates? I"ve been following your filters and not getting anywhere near 9%.

  37. Been watching your videos for a while. Just came to this from the newest passive income strategies video. Excited to see where this small change takes me over time!

    Thanks for always providing immense value to your audience.

  38. Hello Joseph. What's your opinion on Lending Club up to this day? Would you still recommend investing with Lending Club? Are you going to post an update video on Lending Club soon? Thank you for the great content.

  39. Hey I was curious to know as a lending club investor would it be possible to have multiple investment account for example like 3 in total?

  40. Joseph, thank you for the videos. I have a quick question. I can’t come up with the $5500 to open an IRA with lending club. I only have about $2000 available. Do you recommend me go ahead and set up a taxable account and do weekly paycheck investments go into the new account. Just don’t want to miss out just because I don’t have enough money to open an Ira. Thanks for your input.

  41. How much money do they pay you per month? I want to start making passive income and I think this is the way to start first

  42. These filters are very strict. So strict- in fact- that by the end you can see it says "There are currently no notes matching your criteria."

    How many notes per day/week are you getting invested from such a strict filter? And if you were going to make your filter a little more lenient, which filter(s) would you omit?

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