Lending Club vs Prosper – Round 2

by AB@AspiringBlogger.com

Welcome to Round 2! If you missed Round 1, you can catch up here.

Now that we’ve covered the basics of peer-to-peer lending, some differences between our competitors, and why you may or may not be interested in investing your money this way, I need to make a decision on where I’m going to invest my money. The winner… (drum roll please)… LendingClub.com!!!! To me, it just has the best mix of features (ability to filter loans much better than Prosper), volume (almost 5x as much in monthly originations and growing at a much higher rate), and quality (we talked in round 1 about the black hole of data from before the middle of 2009 with Prosper). So, now that I’ve picked a place to invest my $2500, it’s time to get started!

Getting Started with LendingClub

Signing up is pretty easy and requires just the usual information (name, address, etc). To fund your account they do require your Social Security Number for security purposes (and maybe for tax reasons?), so just be prepared for that. You have a couple of options for funding your account – you can either do a bank transfer, which takes up to four days to complete. Your other option is to wire the money, which happens in one business day and is free for amounts over $1000. I chose to just do a simple transfer as I’m not in a huge rush.

Big Problem

Once I’d confirmed my transfer I ran into a BIG problem.

Yes – you’re reading that right, as I’m from Texas I can’t actually invest in the regular LendingClub notes, I can only invest via the secondary market! This is a big whoops on my part – especially as I’ve already initiated the transfer….

My Options

Now I need to figure out where I can go from here. I’ve done some research into LendingClub’s secondary market and I haven’t heard great things. Basically you can only invest in notes that people are selling for various reasons and can’t do anywhere near the level of filtering that you can with the primary originations. Here are my initial thoughts:

  •  Once my money is transferred, I can just transfer it back to my bank and forget this whole thing. I don’t like this option, as I really want to find some sort of investment that can jumpstart my financial independence and provide me with some (semi) passive income.
  • After a lot of searching (they don’t make it easy) I found a list of the states where you can use all parts of LendingClub. My parents just happen to live in one of those states, so I might talk to them about using their information and investing on their behalf. I think this would work out well, but be more of a hassle.

I looked at Prosper and they have the same limitations, so that’s not an option either, so it looks like it’s a Texas thing, not a LendingClub thing. I’ve got a few days while the money transfers into my new account to figure things out, so stay tuned while I figure out what I’m going to do! Let me know if you have any experience with this or any thoughts.


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