Saturday, July 10, 2010

How to Crowd Source Your Lending Club Investment Criteria

A number of personal finance bloggers have posted the criteria that they use to determine which Lending Club loans that they invest in.

Own the Dollar looks for borrowers with “C” credit ratings or lower, longevity in the borrower’s job and borrowers that request smaller loan amounts. He also looks for borrowers with low credit utilization ratios and doesn’t invest more than $50.00 in each loan. Steadfast Finances doesn’t place more than $25.00 in each loan and accepts borrowers that have credit scores of 679 or above and are taking out loans for specific purposes. He also looks for borrowers with job security and a low amount of existing debt. Five Cent Nickel has posted his own lending criteria.

Most Lending Club investors will eventually settle on their own strategy for finding the best borrowers to loan money to, but what if you could find the best loans without digging through the 300+ loan listings which are on Lending Club at any given time? By using the correct selection criteria, you can find the loans that Lending Club lenders are most excited to invest in.

The easiest way to see which loans have expressed the most investment interest from lenders is to compare what percentage of the loan has been funded versus how much time in the lending process the loan has left. If a loan is more than 90% funded and there’s still more than a week to go on the loan listing, there’s probably a reason why investors have been quick to fund the loan. To find these notes, go to the “Browse Notes” section in your Lending Club account, and sort by “% funded” descending and you’ll see a list of which notes have the highest percentage funding. You can than see loans that have a large number of days in the “time left” column to find notes which also are already close to being completely funded.

Finding popular loans isn’t the only criteria that you should use when choosing Lending Club loans to invest in. However, using this sort mechanism can be a good way to find some of the “cream of the crop” loans to review.
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