How to Get Started Investing at Lending Club

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A few weeks ago, we explored the question – what to do with a lump sum of cash.

After going through the research process, I decided that I wanted to diversify how I invested the money and where I invested the money.

I actually ended up putting some money in four of the five possible places I explored in that post.

  • Local credit union – 12% of the total.  Return of 3.01%.
  • Accounts with a sign up bonus – 24%.  Return of 4-5%
  • Lending Club – 12%. Anticipating at least 6-7%.
  • Bank Direct – 52%.  1 AAdvantage mile per dollar per month.
Why not bonds?  The reason is because I felt like bonds had the biggest learning curve for me, and I was comfortable with the other four options.

Even though I’ve previously invested in Lending Club, this was my first time to take a larger chunk of cash and invest it in Lending Club.

I felt comfortable investing in Lending Club for three reasons:

  1. It’s an investing environment I understand. People have been paying interest on loans for a long, long time.
  2. There’s a measurable relationship between risk and reward.
  3. The track record of those investing in Lending Club.  Peter Anderson at Bible Money Matters had returns around 12%.  Five Cent Nickel is earning returns around 7%.

Why Lending Club?

I knew that I could create a very conservative portfolio and end up with over 3%, which is the best no-risk rate I was able to track down.  It was my goal to diversify where I invested the money and how I invested the money at different places.  Diversification is the key.  Even if my Lending Club fund preformed poorly, they would have a relatively small impact on the overall return on the total lump sum.

What Strategy Did I Use?

There are people who have created some very technical and time consuming strategies for investing at Lending Club (see this post).  However, in my case, I simply wanted a conservative portfolio that would earn at least 5%. I focused mostly on the top A and B rated loans.  I didn’t want to take the time to look closely at each one. (Perhaps I’ll pay for that in the future.)  However, when you’re investing in hundreds of notes, it would become a full-time job to screen each loan individually.  As such, I developed a quick scanning method as I did my investing.

Craig’s Lazy Man How to Get Started Investing at Lending Club Strategy

Step #1:  I started by using the “Build a Portfolio” option.  When you use this feature, Lending Club generates a list of notes that fit into a portfolio mix of loans based on lender letter grade.  Conservative portfolios will mostly be composed of A and B graded loans.  I did do a few C, and D loans, but a very, very small percentage.

How to start investing at Lending Club

Step #2: I customized my search results by only selecting loans for 36 months.  It’s less profitable to do this, but I didn’t want to tie up the funds for five years.

Lending Club

Step #3: Reviewed the loan purposes.  Every borrower indicates what their loan is for.  For example, “Debt Consolidation”, “Paying Off Credit Cards”, “Small Business”, etc.  I focused on lending to those who were looking for loans for credit card or other debt consolidation.  I specifically avoided funding requests for small business, vacation, or repair loans.

invest Lending Club

Tip:  If I weren’t investing in a lot of notes, I’d probably take more time to review each note looking at the inquires, open credit line, and income.  Here’s a good list of possible filters to use.

Step #4: For the sake of diversification, I tried to limit my investment to $25 per person.  I figured the more loans I had, the better.  At times, the suggested portfolio would have amounts greater than $25, and occasionally I wouldn’t change the loan amount.

Step #5: Wait a few days and take the uninvested funds (loans that didn’t get fully funded) and reinvest them by starting back at step #1. If a loan you’ve picked is not fully funded, then the money goes back into your cash pool.  It can take weeks to get all your money invested, depending on how much you actually invest.

I’ve attached some images so you can see how this works.


While I really like the idea of Lending Club, you should know that this is not an expert test approach.  Instead, I wanted to introduce Lending Club to those of you who might not know about it in case it might fit well with your investing needs.  I’d suggest you start small and take some time to learn about Lending Club if you’re interested in investing with them.

In about six months or so, I hope to update you on the investing progress, but I think that Lending Club has shown that it’s here to stay, and it does provide another investment opportunity for those looking to diversify their investments.

If you wish to open a Lending Club account, you can click here.  This is an affiliate link, and I will get a commission if you use my link to sign up for Lending Club.

If you wish to borrow money from Lending Club, you can get information here.


  1. says

    Craig, Thanks for linking to my post. Your approach is actually similar to what I used when I first started investing in Lending Club. Using the portfolio builder is a valid approach and one that many investors take and I used it for my first 12-18 months of investing with Lending Club.

    You didn’t mention how much your total investment was but it looks like it is $175. If that is the case, then you have seven notes which really isn’t a diversified portfolio. If one of your loans defaults right away you will have lost 14% of your investment which will cause a negative return on your money. So, in this case you are wise to invest in the low risk notes because you want to avoid a default if at all possible.

    And for the record, investing in Lending Club doesn’t have to be time consuming. I invest over $1,000 a week and spend just 5-10 minutes doing so. Once you have a system in place it can be very quick to invest.

    • says


      My total investment is much bigger than $175. I just used some of my uninvested funds as an example of how the process works.

      I totally trust that you can do it in 5-10 minutes a week, but that is also probably after spending hours discovering a system and fine tuning it. Since my expectations were very low – aiming for 5-6% (I just wanted to get something more than a bank account) I decided that I’d adopt a very low risk and low time investment strategy. If I started doing more in the future and wanted to increase my gains my first step would be to do a lot more reading and analyzing.

      I am going to subscribe to your blog and continue to educate myself about Lending Club.

      Thanks for the helpful comment.

      • says

        Craig, I think it is about any investment in the real world which will require you spending time developing the system. If you want to invest in stocks, it will also take you time to learn how to do it profitably. I spent hours (and lost a lot of money) finding what works for me in the stock market the best (I tried swing trading, options trading, dividend investing and all sorts of strategies just to realize that dividend investing and basic options trading works the best for me. Lending Club isn’t any different (if you want to invest without issues of defaulting notes). Once you find out, then it is a piece of cake, but to find it it may take years of learning and developing and polishing your strategy. If you want investment vehicle which doesn’t require anything of that, then CDs or savings account would be the best, but not stocks or P2P lending, IMHO.

        • says

          I think you’re correct. I think there is a scale where you can potentially earn more when you’re willing to invest more time in understanding the process.
          Do you think that if a person invested in “A” rated borrowers and diversified with over 200 notes they are likely to lose money? I guess time will tell :).

          • says


            I think you still can lose money even with A graded loans. I have seen a few of them going default. Thus you must watch your notes carefully. Fortunately due to my “watch system” I was able to avoid all late or defaulted notes at all. If you want go to my blog, I posted a print screen of my account in there showing zero defaults and zero charged off notes. But this takes time. I am an investing geek and I like watching it on daily basis, but some people hate it. Although I look at my investments on daily basis, I usually spend few minutes doing it since now I know what I am looking for to avoid defaults. I’ve been with Lending Club for three years and it works very well for me.

    • says

      It’s just one of the accounts my bank offers. There’s a checking account that has a bill pay requirement, with 10 debit card usages per month that offers 3.01%.

  2. says

    Thanks for the link Craig. My Lending Club account is still performing above 12%, and I’ll be the first to admit my strategy is far from scientific or as well thought out as Peter. Still, after about 3 years or so, I’ve got returns at 12.19% currently, even with a couple of chargeoffs, and several late loans. I think peer to peer lending truly can be a decent way to make good returns on your money. for me, I’m invested in close to 150 $25 loans, usually lower dollar loans, no recent delinquencies, lower debt to income ratio and good employment histories. It’s worked so far, and I plan on putting more money in once we finish saving for a new house next year.

  3. says

    I scan my notes manually as well as watch them manually, but try to automate as much as possible by downloading notes into a spreadsheet which then does the job for me. My rate of return is now 13.12% and rising (since my strategy is capable of warning me in time against possibly troubled notes I can sell them on time and this allows me taking on riskier notes with higher interest). I am quite satisfied with the results. But definitely Lending Club investing is not a passive investment and needs attention. If you cannot pay that attention then it is not a vehicle for you.

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