Why Investors Choose Peer Lending
Disclaimer: The PeerLendingMoney.com website makes no warranties, expressed or implied. Investing in financial products such as personal loans offered via Lending Club involves risk by nature. You need to evaluate your options with your own legal and financial advisors to determine if this type of investment is appropriate for your personal and financial goals.
Let’s start with the top reasons why others have become a Lending Club investor:
- Earn Higher Returns – Since 2007, investors have earned an average net annualized return greater than 9%.
- Creditworthy Borrowers – Only one out of every ten borrowers are accepted to receive a loan. This means you’re minimizing the default risk by investing in the most creditworthy applicants.
- You’re in Control – You have the ability to decide which Lending Club borrower will receive your money. This means you can build your own fully customized lending portfolio.
- Flexible Options – You can reinvest the principal and interest payments; you can withdraw them like an annuity; you can even trade your notes for a profit.
- Risk Management – As with any investment, peer to peer investments entail a certain amount of risk. The biggest risk is that the loan goes into default and is not paid back (charge off). To prevent this, Lending Club has a robust collection process that enables it to achieve a successful collection rate higher than the industry average.
- Investor Privacy – Your personal information and privacy is kept strictly confidential and secure. Lending Club stores all sensitive financial data such as Social Security numbers and bank accounts in a highly secure environment hosted by our partner, BankServ, a PCI-compliant payment solution provider.
- Company Safeguards – Last but not least, Lending Club has a back-up solution in the event its business is no longer viable. A back-up processor will step in to manage the existing loans so payments are made to the investors for the life of the loan.
Now that we’ve explored the benefits for investors, let’s look at how a peer to peer lending service like Lending Club really works.
The Secret Banks Don’t Want You to Know
Peer lending is an investment vehicle that enables the average investor to earn the same kind of high interest that banks have been making off your hard earned money. Peer lending now gives you an option to make better use of your money while helping creditworthy borrowers.
Traditional banks are charging borrowers very high interest rates. At the same time, they are only paying a few percentage points for savings and certificate of deposits (CD). Your money is stuffing their pockets and is falling behind the pace of inflation!
Peer lending creates disintermediation and stuffs your pocket instead. With services such as Lending Club, you get to decide who to fund and how much you want to fund. Best of all, this model provides the average investor with an opportunity to achieve higher returns compared to a savings or CD account.
According to these graphs, your money is definitely worth more than the 1-3% you receive. If you do not have another investment vehicle to achieve higher returns than what the banks are paying you and others are, then you should be asking yourself why aren’t you getting your fair share.
How It Really Works Behind the Scenes
The diagram below illustrates how Lending Club facilitates a loan between a borrower and investor.
Per the illustration, investors do not make loans directly to our borrower members. Instead, investors purchase notes (aka Member Dependent Payment Notes) issued by Lending Club, the proceeds of which are designated by the investors who purchased the Notes to fund a loan to an individual borrower member originated through the Lending Club platform with WebBank.
It should also be noted that the simplified diagram above does not illustrate additional details of the Lending Club platform such as pre-payments, late payments, late fees, and collection fees.
Let’s Talk Performance
Now that we’ve covered the benefits and the basic process of Lending Club, let’s take a look at a few charts. The first is a graph depicting the performance of Lending Club Notes versus other familiar investment vehicles.
Compared to other investment options, a $10,000 investment in Lending Club notes in June 2007 is worth more today than the same investment in any other major asset class. This chart was based on Average Net Annualized Returns from June 2007 (inception) to October 2009. As with any investment vehicle, past performance is no guarantee of future results.
Another graph that provides additional insight is the actual range of investor returns using the Lending Club platform.
Currently, 83.80% of the Lending Club investors are earning returns between 6% and 18%.
These are just a few examples of the real-time statistics Lending Club tracks. Lending Club publicly displays the most current version of this information on their website, including loan performance, default rates, etc.
Getting Started with Peer Lending
By now, you’re starting to see why peer lending services such as Lending Club offer you the potential for attractive investment returns, the ability to diversify your portfolio beyond traditional stocks, bonds and mutual funds, and the opportunity to do well while helping others.
Here’s how to get started:
- Open an account online – The sign up process is fast and easy. You simply provide your name, email address, password, address, etc.
- Fund your account – You can fund your account right away or later using several convenient options such as electronic funds transfer (ACH), free wire transfer, check, or PayPal account.
- Select notes to invest in – You can use either Lending Club’s proprietary LendingMatch tool to help you find notes that match your specific criteria. Alternatively, you can browse the notes and build your own customized search.
- Receive monthly payments – Now, sit back and let those monthly payments roll into your Lending Club account. You can either re-invest those payments or withdraw them out of your Lending Club account. Cash balances in Lending Club are FDIC insured too.
Are you ready to get started?
Become a Lending Club lender and you’ll receive a special $25 bonus in your new account.
