- 1 lending club payment address
- 220.127.116.11.1 How does Lending Alpha design the portfolio strategies?
- 18.104.22.168.2 How well does a portfolio strategy perform during an economic recession?
- 22.214.171.124.3 How long will it take to fully allocate loans my initial portfolio?
- 126.96.36.199.4 What’s the minimum account size recommended for Lending Alpha’s designed portfolios?
- 188.8.131.52.5 How fast are Lending Alpha’s loan selection and trade execution processes?
- 184.108.40.206.6 What’s the largest account that Lending Alpha can manage?
- 220.127.116.11.7 How much money does Lending Alpha currently manage?
- 18.104.22.168.8 What can Lending Alpha access with my account information?
- 22.214.171.124.9 What’s the difference between Lending Alpha and Lending Club’s “Automated Investing” feature?
- 126.96.36.199.10 Does Lending Alpha support Secondary market (FolioFn) trading?
- 188.8.131.52.11 If I have an existing account, should I create a new one for Lending Alpha?
- 184.108.40.206.12 How does Lending Alpha control risk via loan selection?
- 220.127.116.11.13 How could a rising risk-free interest rate affect my portfolio?
- 2 Cash Flow is King in Peer to Peer Lending Investments
- 3 Digging Deeper with Lending Club: The Peer-to-Peer Loans Marketplace
lending club payment address
This section includes Frequently Asked Questions related to Lending Alpha’s services. Click on the questions below to expand the answers.
To complete the activation process, you’ll need a Lending Club Account Number, API Key, and select the strategy for your portfolio.
How does Lending Alpha design the portfolio strategies?
We strategically designed three strategies for your investment risk profile:
- Conservative – Prioritizes on returns stability
- Balanced – Balances between returns and risks
- Aggressive – Prioritizes on returns
Strategies are associated from loans selected from our statistically significant Loan Selection process:
- Approach – Select the “Best of the best” loans for each of our 30+ loan grouped by the combination of (Term, Grade, and Purpose). Our models purposely consider statistically significant findings and focuses on causation factors that directly determine default risk. The goal is to identify loans that yield the same returns, but with lower default rates against its own cohort groupings. Finally, our models are reviewed and adjusted quarterly based on new loan data and external risk information.
- Results – Despite Lending Club’s reputation to only work with credit-worthy borrowers, less than 10% of new loans are actually selected by our models. We’ve found that our selected loans exhibit defaults rates that are 20-50% lower than its own cohorts.
Note: We are considering creating a new strategy that is even more conservative than our Conservative strategy that, in addition, would introduce the use of A graded loans if there is enough demand from our clients.
How well does a portfolio strategy perform during an economic recession?
How long will it take to fully allocate loans my initial portfolio?
Depending on which strategy you choose as well as loan availability and loan selection rates, we target 3-4 weeks to fully allocate your initial portfolio with 400-600 loans. The Conservative strategy typically is easier and faster to fully allocate while the Aggressive strategy may take significantly longer. This timetable should improve as Lending Club’s originations rate expands in size in the future.
We are interested in designing portfolios where annual returns year-in and year-out is very close to our expectations and this can be accomplished through loan diversification. We’ve found that in order to target a +/- 1% variance in annual returns, we need 400-600 loans in a portfolio, depending on the strategy. We found that the higher the default rates, the higher the number of loans required in order achieving this result.
Lending Club recommends at least 100 loans, while independent research has shown that a portfolio with 300 loans is enough. We take advantage of the nature of free diversification and target an even higher number of loans in order to further narrow future volatility. Since we have the luxury of automated trading and the benefit of free diversification, we employ generous diversification for each strategy using the following target number of loans during the initial portfolio construction:
- Conservative – 400 loans
- Balanced – 500 loans
- Aggressive – 600 loans
Continuous reinvestment of payments would continue to diversify your portfolio over time. We don’t expect an ultra-high number of loans to have a negative impact to your portfolio’s overall performance. Instead, we expect it to enhance the consistency of your portfolio’s periodic returns.
What’s the minimum account size recommended for Lending Alpha’s designed portfolios?
- Conservative: $5,000 (300 loans @ $25)
- Balanced: $10,000 (400 loans @ $25)
- Aggressive: $15,000 (500 loans @ $25)
For Balanced and Aggressive strategies, we employ additional loan size scaling for the top loans from our selected pool, which triggers loan size doubling for this group. This allows your portfolio to allocate twice as much per loan to these loans to optimize for highly desired loans (due to high returns or low supply). To benefit from this feature, it is automatically used when accounts with Balanced and Aggressive strategies are over $15,000 and $20,000, respectively.
How fast are Lending Alpha’s loan selection and trade execution processes?
During each cycle for new loans, two time-critical processes occur: Loan selection and order submission. We are able to complete the Loan selection process in under 1 second. Then, we are able to submit the first orders for the selected loans within 2 seconds after that. Relative to the standards today, we are highly competitive in terms of speed. Because most of the execution time is dependent on Lending Club’s server latency, we designed with efficiency and placed our server closest to Lending Club’s trading servers to minimize latency. Furthermore, since our server is horizontally scalable, we are able to maximize computing power when executing orders using multi-threading.
What’s the largest account that Lending Alpha can manage?
Based on today’s liquidity and loan availability, accounts with values under $3,000,000 may be serviced by Lending Alpha effectively. That means that we are able execute the same performance results for a $3,000,000 account as for a $50,000 account. We have experience managing accounts with a variety of sizes and we’re comfortable executing on an account from as little as $5,000 to $3,000,000 as of today. As the Lending Club marketplace grows, we will be able to support even larger accounts.
How much money does Lending Alpha currently manage?
We are new, but we have been running a pilot with selected members for over a year. Without giving an exact number, we service accounts totaling over 7 figures. A sizable amount is from the co-founders’ personal capital because we believe in our products, the future of this asset class, and the investment opportunity in general. We do not foresee a limit in the amount of account value we are able to effectively manage in the near future as we have been designing our technology and business model for to position ourselves for scale.
What can Lending Alpha access with my account information?
Since we do not have full login credential to your account, we have limited access. Here are the details:
- API access limits the client information viewed by Lending Alpha
- Available cash and account balance
- Invested loans and payment performance
- API access limits the client account actions executed by Lending Alpha
- Submit trades
- Create & modify portfolio name
- More at https://www.lendingclub.com/developers/lc-api.action
- No visibility by Lending to sensitive client and account information
- Contact and account type information
- Order history
- Account activity
- Bank account information
- Account Settings (notifications, API Key, email, address)
- Secondary market trading (FolioFn)
What’s the difference between Lending Alpha and Lending Club’s “Automated Investing” feature?
From the surface, Lending Club’s own “Automated Investing” offering sounds like the right solution for automated investing. However, here are a few disadvantages and limitations:
- It does not invest into “popular” loans. If Lending Club detects that there are a lot of investor interest in certain loan grades when new loans are allocated, it will not execute your order for that loan. Since most of the popular loans are of grades D/E/F, “Automated Investing” has trouble investing into these loans. Popular loans may be due to generally low supply or above average credit worthiness. The less popular loans may be riskier for the same interest rate.
- It invests at a high level. “Automated Investing” does not pick loans from borrowers with strong credit profiles whereas Lending Alpha does.
- It does not use loan size scaling to invest more into better loans. Lending Alpha does using sophisticated factors such as cash ratio, account value, and selected loan confidence.
- It does not have a dedicated team to ensure that the investment selection and execution is optimal for current and future market conditions. Lending Alpha monitors your account’s investment activity multiple times a day and leverages our industry expertise to optimize your portfolio.
We are serious about data privacy and service redundancy. Therefore, we designed our technology with security in mind.
- Firewall & Multi-layered security protocols: External access to Lending Alpha master database limited by IP range, administrator credentials, and encryption keys
- Nightly server code and database drive backup
- Virtual server instance cloning and backups for fast emergency reboots
- Server instances in multiple geographic locations (San Francisco, Seattle, and Virginia)
- Fast and reliable internet connectivity: 500/300 Mbps up/down speeds hosted by Amazon AWS with priority bandwidth
We use Internal Rate of Return (IRR) to calculate returns. Our returns expectations include reinvestment of cash flow from principal and interest (monthly payments, pre-payments, late fees). It also includes the 1% Investor Fee charged by Lending Club when processing payments. It does not, however, include the principal collected from the collections process. Finally, it does include the timing of cash flow (fundamental to IRR), which negative impacts of cash flow due to idle cash, rejected loans, payment lag, etc.
Does Lending Alpha support Secondary market (FolioFn) trading?
If I have an existing account, should I create a new one for Lending Alpha?
If you already have an existing account that you invest manually or using Lending Club’s Automated Investing, you may use Lending Alpha to continue servicing your account. You may also create a new account, but that will not be necessary and remember that Lending Club only allows a maximum of three accounts per person.
Should I liquidate using FolioFn? Liquidation via the secondary market takes patience, effort, and pricing sophistication. Therefore, if that is something beyond your capabilities, we recommend that you do not liquidate your portfolio in the secondary market. We currently do not offer secondary market trading automation nor pricing models. Doing so on your own may result in selling your loans at a relative discount to their true value. Finally, there is a possibility that not every loan will be sold successfully over time and full liquidation with this approach may not be realistic.
How will I differentiate between loans serviced through Lending Alpha versus existing loans? Lending Alpha creates a portfolio called “Lending Alpha” in your account. In addition, we could provide customized performance analysis on this portfolio over time, which allows you to separate returns reporting with your existing loans.
How do I switch to Lending Alpha? If you’re using Lending Club’s Automated Investing feature (or a similar third-party service), turn it off. Then, activate your account with us here.
How does Lending Alpha control risk via loan selection?
Frequent Model Updates: Credit risk changes as economic conditions changes. Therefore, we strategically adjust our selection models quarterly to consider new originations and loan performance data, economic changes, and logistics adjustments to ensure optimal performance.
Independent Risk Profiling: As an added advantage, since we filter loans based on our credit risk model, should Lending Club change their risk grading or origination practices, our selected loans will mostly be unaffected due to our fixed selection criteria. This means that if Lending Club decides to put riskier loans into Grade E and F in order to generate more revenue from originations, these loans may not make it into our filters due to our specific selection rules.
Stringent Filtering: Although Lending Club typically rejects about 80% of loan applications on their originations platform, Lending Alpha’s loan selection models typically rejects over 93% of new loans that passes through Lending Club’s application process.
How could a rising risk-free interest rate affect my portfolio?
Your portfolio’s interest rate, once invested, does not change with the U.S.’s risk-free rate whether the Fed increases or decreases rate, over the term of your loans. Our loan selections for your portfolio are designed to be held until maturity and performance should withstand most financial scenarios.
Increasing rate environment: For accounts that reinvest cash proceeds, new loans are expected to have higher interest rate if risk-free rates increases. Because an average account receives about 35% of the portfolio’s value per year in payments, constant reinvestment in new loans over time will adjust the average interest rate of your portfolio. From the borrower’s perspective, their monthly payment will be slightly higher due to higher interest rates, though only marginal in perspective.
Decreasing rate environment: For accounts that are reinvest cash proceeds, new loans are expected to have lower interest rate if risk-free rates increases. Because an average account receives about 35% of the portfolio’s value per year in payments, constant reinvestment in new loans over time will adjust the average interest rate of your portfolio. From the borrower’s perspective, their monthly payment will be slightly lower due to lower interest rates, though only marginal in perspective.
Before we think about our monetization model, we first think about how we can make you money with unmatched value added services. At the moment, we’re working on a competitive service model for the future, but our focus now is to roll out the best and most effective Lending Alpha platform that we could build and get everyone onboard.
Cash Flow is King in Peer to Peer Lending Investments
Peer to peer lending is a unique for many reasons, but one that is often overlooked in my opinion is the cash flow both LendingClub and Prosper accounts provide. As I touched in a recent post about the complaints of peer to peer lending, liquidity is one of the biggest complaints. I offered a counterpoint that the short duration of peer to peer lending investments make them relatively liquid. If you’re wanting to be able to cash out your entire account instantly, peer to peer lending probably isn’t for you – at least for now. I imagine we will see some improvements in liquidity in 2015, but for now – it is slow in, slow out.
Unlike other investments, these peer to peer lending loans pay monthly, which means with a portfolio full of hundreds of loans, you are receiving payments daily. To keep these investments earning the most, funds need to be constantly allocated to new loans as payments come in. But life happens and often unexpected expenses or other investment opportunities arise. Peer to peer lending serves an additional purpose in my portfolio as a second emergency fund and stash. If I need funds, I simply turn off the faucet that is automated investing.
A few weeks ago I decided that I wanted to pursue another rental property. Since I operate a pretty efficient investment plan due to my steady cash flow – I simply don’t have the funds immediately ready for a down payment. Fortunately, I’m also a planner and my goal is purchase another property early 2015. I’ll also scale back my investing in index funds and decrease my 401k contributions for awhile in 2015.
For a relatively small investment in LendingClub (
15k), the funds build up surprisingly fast. But how fast? There are two ways to get an idea of what your cash flow will be on a monthly bases. The first way is to simply login to your LendingClub account and click on the “Portfolios” tab.
The final column is titled “Expected Monthly Payments” and adding them up gives me an expected monthly payment total of $799.96. However, it is inevitable that some of these loans will not make payments and you are likely to receive less. In addition, payments will decrease over time if you keep withdrawing the payments so this really doesn’t give us an accurate picture of cash flow. Fortunately, the smart folks at LendingRobot have a much more sophisticated cash flow forecast. It includes views for daily, weekly and monthly as shown below.
LendingRobot – Monthly Cash-Flow Forecast
LendingRobot – Weekly Cash-Flow Forecast
LendingRobot – Daily Cash-Flow Forecast
As I noted earlier, you’ll see that LendingRobot estimates my monthly cash flow for December to be around $684 which is likely to be far more accurate than LendingClub. You can clearly see the slow decline of my cash flow if I were to continue to withdrawal all payments. I find these charts extremely beneficial when it comes to planning things out. It’s nice to know that I can plan on having more than $600/month for the next 6 months or so.
It is free to signup through LendingRobot and easy to link both LendingClub and Prosper accounts. They even split up the charts by account as well as give you an aggregate for both Prosper and LendingClub if that’s what you’re after. As a side sidenote, they recently announced that automated investing is free for less than $10,000 managed investments so it is definitely worth checking out. You can view all of the content I’ve written about LendingRobot here:
If you’re looking for cash flow, it’s hard to ignore peer to peer lending. Assuming I’m not reinvesting, I have no other investments where I build up cash every single day and it is able to withdrawal whenever I desire. Perhaps it is time you think differently about the relatively good liquidity peer to peer lending gives you with their short duration loans. As long as you can plan things out, this may also be a good strategy for you.
Digging Deeper with Lending Club: The Peer-to-Peer Loans Marketplace
Andrew Barnes’ “Digging Deeper” series is based in Silicon Valley and focuses on startups and key innovators and how they are disrupting digital payments and commerce.
Andrew sat down with Renaud Laplanche, CEO & Founder of Lending Club to talk about the company’s tremendous growth, this thoughts on the payments ecosystem, and plans for 2014.
Barnes: What business model, and whose business model, are you disrupting?
Laplanche: Lending Club is transforming the banking industry to make it more efficient, transparent and consumer friendly. Lending Club replaces traditional bank operations with an online marketplace that operates at a lower cost than the banking system, helping borrowers lower the cost of their credit and investors achieve higher returns. More than $3.8 billion in loans have been originated through our platform since inception, including $2 billion in 2013 alone.
As a payments professional, why should I pay attention to Lending Club?
We now hold about 75% market share of the U.S. peer-to-peer lending industry and we are diversifying our product offerings. Every borrower through the Lending Club platform makes monthly payments, and every investor receives monthly payments. While we’re still a relatively small piece of the U.S. consumer credit market, we’re growing fast. 2013 was Lending Club’s largest year ever.
What are the inefficiencies and the arbitrage in the payments system?
There’s been a lot of innovation in the payments space compared to the lending space, but there’s always room for more. Anywhere there’s a mismatch in pricing, convenience, or speed there’s an opportunity.
I got the idea for Lending Club one morning when I was paying bills and happened to open my bank account statement and credit card statement at the same time. Looking from one to the other I saw that if I carried a balance on my credit card I would pay about 18% interest while that same bank was paying me about 1% on my savings. That’s when I began to understand just how inefficient the traditional banking industry was, and how much opportunity there was to transform it.
What should we expect from Lending Club in 2014?
Our first 2014 announcement is the launch of a small business loan. This is a huge milestone for us. For the past seven years, we’ve been working hard to grow our first product. This week, we launched the first in what will be a series of new products, designed to address a variety of funding and credit needs in our quest to always be more useful to more people, and over time transform the banking industry to make it more transparent, cost efficient and customer friendly. With this new product, small business owners will have access to customer-friendly, transparent and affordable financing options similar to those Lending Club has been providing on the consumer side since 2007.
Any advice you would offer aspiring entrepreneurs in the payments space?
It’s important to pay close attention to the regulatory environment and how it’s evolving. It can have a huge impact on your business if you’re not paying attention. As a former securities lawyer this came more naturally to me than it probably does to many other entrepreneurs.
About Lending Club
Lending Club is an online marketplace for consumer credit. The platform matches borrowers looking for loans with investors looking for yield. Lending Club uses innovative technologies to lower the cost of the traditional banking system.
About Renaud Laplanche
As Founder and CEO, Renaud is responsible for overseeing the overall strategic direction and operation of Lending Club, which he grew from a disruptive idea in 2006 to an industry leader that facilitated over $2 billion in personal loans in 2013. He also serves as Chairman of Lending Club’s Board of Directors. Before founding Lending Club, Renaud was the Founder & CEO of TripleHop Technologies, an enterprise software company acquired by Oracle Corporation in June 2005. Prior to that, Renaud was a Senior Associate at New York law firm Cleary Gottlieb Steen & Hamilton. Renaud has an MBA from HEC and London Business School and a JD from Montpellier University.
Andrew Barnes, Senior Executive Writer, Emerging Markets
Barnes is a self-confessed payments and commerce “geek” working in Silicon Valley and San Francisco. He utilizes c-level relationships in tech, startups, retail, and financial institutions to identify emerging market opportunities and analyze challenging business models. Barnes recently launched “Digging Deeper,” a published series focusing on startups and key innovators that are solving digital payments and mobile commerce problems worldwide. He has held executive business development positions in Asia with Sprint, Global One, and 2Roam Mobile, and is an Advisor to the Electronic Transactions Association (ETA). Barnes has an MBA from Waseda in Tokyo 早稲田大学大学院 and a BA from Penn State. He can be reached on Twitter @AndrewinSV and Linkedin.