Lending Club Note Trading Platform – FOLIOfn

by · 7 comments

With an investment of only $3,400… my peer lending notes at Lending Club are currently earning returns of 8.8% which, at the time of writing, equates to $25 of income every month.

One of the most important ways to keep your net annualized return (NAR) as high as possible it so watch your notes (loans) carefully and sell them on the note trading platform when they reach a level of risk you’re no longer comfortable with.  Don’t worry… using the note trading platform is much simpler than it sounds and today I’ll show you how I do it.

Note trading platform basics

The note trading platform is nothing more than an electronic marketplace for the buying and selling of notes that represent consumer loans issued through Lending Club.

Sellers list notes in hopes of selling for a price of their choosing. Buyers browse available notes, review borrower payment history and credit score, and buy the notes of their choosing at the asking price. Buy orders received before 11am PST on a business day will settle same day, otherwise the transactions will settle the next business day.

Accrued interest

Buyers receive interest payments whether they buy the note on the first day, last day, or any day in between the time the previous payment was made, so be sure to factor in accrued interest to your valuation of a perspective note. You can find the accrued interest since last payment on the Browse Notes page.

Fees

Fees for using the FOLIOfn platform equal 1% of the purchase price, charged to the seller of the note. There is no fee for buyers trades.

Tips for selling notes on the trading platform

You will have to determine your own criteria for trading existing notes, and everyone will do things a bit differently according to their own risk tolerance.

Here are a few strategies I use including a screencast of me selling a note and speaking more on the topic.

  1. I sell late notes. Any notes that have become late or are even in the grace period are watched very carefully and usually sold right away.  I do this because I am not comfortable lending money to people who do not think it important to pay their debts on time.
  2. I watch credit scores. Watching credit score drops can help you head off a late payment before it reaches late status.  Chances are, if a borrowers credit score drops significantly over a short period of time, they may be in financial trouble.  I will sometimes sell the note before it has a chance to go late.
  3. I price notes accordingly. This is a bit of a gray area and will take a bit of practice, but do not charge more for a troubled note than you would be willing to pay, and at the same time be sure you’re not giving it away at a price that is too low.  As you sell more notes you’ll get a better feel for pricing them correctly.

Enjoy this screencast of me discussing note trading and selling a note on the secondary market, and invest with Lending Club if interested.

Invest with Lending Club

If these returns interest you and you would like to invest in peer lending, you can sign up to invest with Lending Club and get started.

If you have any questions or comments don’t hesitate to leave them below.



Betterment is one of my two favorite ways to earn interest on my savings! They have an awesome program for the Average Joe to save and invest simply and effectively. There are no minimum balance requirements and no transaction fees. Read my Betterment Review or open an account to get started earning now.

1 Joel Martinez

It makes sense to mention that some people are restricted to the trading platform for acquiring notes (for example, people who live in NJ like myself ;-) ). In those cases, people may be willing to buy high quality notes with a good payment history for a slight markup (to cover the selling fee and a small return for the seller).

2 Matt Jabs

Excellent point Joel… sounds like a good topic for another article. :)

3 Alan

Just watched your video on Lending Club. Looks like a slow and steady way to bring in some “Passive Income”. I was surprised at the amount of the loans can be so small. Really a pretty cool way to invest some extra money, also being so hands on with trading the loans.

Thanks Matt.

4 Steve D.

Nice article for beginners and people looking to invest with Lending Club. I started off with a $650 investment. At first, I was just trying to figure out the way it works. A couple of my notes became late and I couldn’t even give them away. Since then, I’ve become much more aware of the warning signs. With some simple calculations and research on the subject, my NAR has skyrocketed to 14.93% even though most of my notes aren’t even near that interest rate. Whenever I see a credit score dropping, I sell the note immediately and will only buy new notes with no bad histories. I look forward to investing some more money and getting into the larger notes.

5 Matt Jabs

Nice work Steve, thanks for sharing your experience.

6 Lene

What is your strategy when buying notes int Trading Platform?

7 Matt Jabs

I haven’t purchased notes on the trading platform yet, I only sell there. I purchase notes using the Lending Club interface.

Previous post:

Next post: