In response to my latest update on our Lending Club portfolio, I was asked why we’re winding down our holdings. My response was that it’s too much of a time sink. A reader named Simon then said:
“I imagine Lending Club will have a feature someday to auto-invest for you. At that point, lending with them will become dramatically more passive.”
This is an excellent point. And, in fact, such an option does exist (though it didn’t back when we started out with Lending Club. It’s called a Lending Club PRIME Account and it promises to “maximize your returns with minimal effort.”
While details on the public side of their website are rather sparse, you can get a bit more info once you’ve logged in. In short, PRIME is a premium offering that seeks to take the hassle out of investing with Lending Club.
To use it, you essentially set a target allocation across all credit grades (A-G; summing to 100%) and then let their “Investor Services” team take over from there. You also have a choice as to whether you want 36 month, 60 month, or both types of loans.
If you currently have a Lending Club account, you can upgrade to PRIME, at which point they’ll take over the investing decisions for you.
Now for the fine print:
- There’s a $25k minimum balance requirement.
- There’s a 0.8% front-end fee that applies to cash in the account at the time of upgrade.
- The same 0.8% fee applies to any new cash added to the account (but not for amounts reinvested).
- Beyond the above, your account is subject to the same fees as a regular Lending Club account.
- You can only participate if you’re in an eligible state (list below).
For a new account with a $25k initial deposit, that 0.8% fee adds up to one-time fee of $200. But if you already have a portfolio with them, I don’t think this fee applies to amounts already invested. Rather, it just applies to your residual cash — or at least that’s how I read it.
So, if you’re thinking about investing through Lending Club, are interested in putting in at least $25k, and are okay with a “hands off” approach, then this seems like a reasonable option.
Consider how long it would take to deploy $25k if you wanted to keep your notes small (the minimum is $25/note). In that case, $200 doesn’t sound so bad, does it?
According to their website, individuals in the following states are eligible for direct investing via Lending Club: CA, CO, CT, DE, FL, GA, HI, ID, IL, KY, LA, ME, MN, MO, MS, MT, NH, NV, NY, RI, SC, SD, UT, VA, WA, WI, WV, or WY.