How to Buy Notes and Make Money in Lending Club

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For Starters

If you're reading this I'm assuming two things:

  • You're familiar with some of the basic concepts of micro finance and micro lending.
  • You have an established account with Lending Club.

If you're unsure about either of these concepts, and/or would like to know more about micro finance and peer to peer lending (p2p), I would recommend that you start here. Now that that's out of the way, let's talk investing.

Buying Notes

So once you have some money (usually takes 4 business days to transfer from the bank to Lending Club) in your account its time to start investing! I'm going to discuss each aspect of trading from the Folioƒn trading platform that you can access simply by clicking on the Trade Notes hyperlink on the Account Summary Page. If you are in a state where Lending Club allows you to invest in notes as soon as they are approved, most of the same concepts apply, but there are a few differences that you will quickly notice. I like using the Folioƒn trading platform for a few reasons:

  • Someone has already spent the time and work to look at the loan and thought it to be a worthwhile investment by buying notes
  • The loan often has had a least a little time to mature, which allows you to see if the borrower has been making payments regularly and on time.
  • While people sell their notes for a variety of reasons, often you can score a discount on notes simply because they want to get rid of it!

 Once you are in the Folioƒn trading screen, there will be a long list of notes for sale as well as search options and other info. To find some notes to start investing in you'll have to select the boxes of the interest rates your willing to invest in. The higher the rate, the more profit potential from the loan, as well as a higher risk of the lender defaulting. Once you decide which percentile range you want to invest in, click on the Never Late check box and make sure all the other boxes around it are un-selected. In my experience, notes that are late (16-30 days or more) have a tendency to sink quickly towards defaulting. If you want loan amounts that have fewer payments left (generally more stable), change the Remaining Payments box to the desired amount. (Loans with 60 total payments have a higher interest rate than the same loan would with 36 total payments) After you have all your search parameters set up, click Search and begin browsing the notes. Each column has varied and important information about the loan, but here is the order I look at them:

  • Markup/Discount (I sort the notes by clicking on this column with the discounted ones first so as to avoid any scalpers as well as find good deals on notes)*
  • Asking Price
  • Interest Rate
  • Status

When you see a note that matches some of your criteria in terms of interest rate and price, right click on the note's status (which should say Current) and open the link in a new box. This will bring up detailed information about the loan such as what it was for, how much, and whether the payments have been made on time. You can then click on the Original Listing link in the right-hand corner which will bring up another window showing you all of the borrowers relevant financial information. (I'll discuss the importance of some of these figures in another hub). Once you have decided on a healthy looking note, you can return to the main trading window and click on the checkbox next to the appropriate note(s) and click Buy Notes. You just invested in your first note! It will take a few business days for the transaction to complete, and you should receive an email confirmation. Once the process is through you should be able to access the details of your note in your main Lending Club account screen by clicking on Notes in the bar across the top of the page. 

* When deciding on notes you should be aware that many people try to scalp notes by selling very small amounts at outrageously high prices to unsuspecting investors.

Do you have a better idea of how to buy and sell Notes?

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  • Not sure, need to try it out.
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