With the rise of fintech, peer-to-peer (P2P) lending platforms like Lending Club have become popular investing apps. Lending Club is one of the largest P2P lending platforms in the US, allowing investors to invest in consumer loans. Using the Lending Club investing app, retail investors can browse loan listings, select loans to invest in based on criteria like loan grade and yield, and build a portfolio of fractional loan interests. Key features of the Lending Club app include easy account opening, automated investing tools, and low investment minimums. While P2P lending offers high yields, it also comes with risks like borrower defaults. Tips for investors using the Lending Club app include diversifying across many loans, investing in higher grade loans, and using the automated tools judiciously.
How the Lending Club investing app works
The Lending Club investing app allows users to invest in consumer loans issued through Lending Club’s platform. After opening an account, investors can browse available loan listings which include details like loan amount, loan grade, interest rate, term, and purpose. Each loan is assigned a grade from A-G indicating the estimated risk and return. Investors select loans to invest in and the amount they wish to fund, with a minimum of $25 per loan. The app aggregates investments from multiple investors to fund whole loans. As borrowers make monthly payments, investors receive principal and interest based on the percentage of the loan they funded. Features like Automated Investing allows investors to customize criteria and automatically invest in loans matching those criteria.
Benefits of using the Lending Club app
The Lending Club app provides several advantages for investors compared to traditional lending options. The app offers the ability to invest in consumer loans with yields of 5-7%, higher than savings accounts or CDs. The minimum investment of $25 per loan provides easy diversification. Automated investing tools help streamline the investment process. And using an app provides 24/7 access and easy tracking of investments. Overall, the Lending Club app opens up consumer lending as an asset class for smaller retail investors.
Risk factors of P2P lending via Lending Club
While P2P lending offers high returns, it does come with risks. The two main risks are borrower defaults and platform risk. Since borrowers are often non-prime, default rates of 5% or higher are common. And unlike bank deposits, P2P investments are not FDIC insured. Platform risk arises if the platform itself goes under, leaving investors with limited recourse to recover investments. Given these risks, investors should aim to diversify and invest smaller amounts per loan.
Tips for investing via Lending Club app
Here are some tips for investors using the Lending Club app: 1) Diversify across many loans to reduce default risk 2) Invest primarily in higher grade loans (A-C) which have lower default rates 3) Take advantage of automated tools to streamline investing 4) Start small to get comfortable 5) Review historical data on returns and defaults 6) Don’t invest money you may need access to in the near term 7) Understand the risks involved before investing large amounts
The Lending Club app provides an easy way for retail investors to invest in consumer loans. Key advantages include high yields, diversification, and automated investing tools. However, P2P lending also comes with default risk and platform risk. Following basic tips on diversification and avoiding lower grade loans can help mitigate these risks.