Why so much money?
Well, it was just sitting in a savings account earning less than 2%, and I need to diversify my investments a little, but I’m not ready to go back into the stock market yet. I realize there is risk involved with holding a personal loan portfolio, but I’ve met the Lending Club team, and I feel confident in their tactics and processes to minimize that risk.
I’m looking now for investments that generate cash, and Lending Club fits that bill.
Setting up my Lending Club PRIME account
I didn’t want to choose dozens of loans on my own, and since Lending Club was waiving the normal .8% PRIME loading fee, I decided to enroll in their PRIME program.
The PRIME program allows Lending Club to invest on my behalf, which is exactly what I’m looking for. I want a hands off, low risk approach to this pretty significant chunk of money.
They were also offering a bonus on deposits, so I took advantage of that : )
Filling out the forms
I talked with Chris, a client analyst, and he sent me over the form (Prime Investment Account Order Form) that allows Lending Club to invest on my behalf. I figured there must be something to sign to allow them to pick loans for me.
The form has you specify what interest rate you want to show for (and thus how much risk you want in your loan portfolio). The options were: 11%, 13%, 15%.
I went with the lowest risk option, shooting for a 11% return.
Funding Notes
Once I had faxed the form back, the Lending Club team started investing on my behalf in notes in my risk range, in $250 increments.
The process took about 3-4 weeks to fully complete. I imagine with smaller amounts it would be quicker. Larger amount would probably take a little longer.
3 Months Later…
3 Months into the PRIME program and things are looking very good. It’s very hands off, as new payments come in, and I have cash sitting in my account, it gets auto-reinvested about once a week.
I get an e-mail every time that happens, but I don’t have to do anything myself for that to happen. I think that’s probably the best feature of PRIME accounts, once you’re setup, your investments just run on auto-pilot according to your interest rate selection.
Any Defaults?
So far, not yet. But it’s only been 3 months, and I expect with the sheer number of notes that I have invested in (446 as of today) that I will have a number of defaults. I do have one loan that is in the 15-day late category, but hopefully that will get back to current soon.
Diversifying My Investments
As I look into more investments beyond just a savings account, I’m going to get pretty creative. Lending Club is pretty strait-forward, but it is not conventional by any means. I figure as long as I end up with a 5-6% return, I will be happy. There is just no way to have your money work for you sitting even in a so-called high yield online savings account. The rates are just too low right now.
I still plan on staying away from stock investment for the time being. At some point I may look into some dividend stocks for the cash-flow, but for right now I’m sitting on the sidelines. I was pretty much the worst stock investor ever, so I’m very, very hesitant to ever commit a large amount of money to something that I don’t know and understand inside and out.
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- Making Your Money Work for You – A Beginner’s Guide
