Last week, Lending Club announced that their form of automation formerly known as Lending Club Prime is now simply called “Automated Investing.” I’ll start by stating that I have never used Lending Club Prime or their version of Automated Investing. However, I think it is important to write about the major differences are between Lending Club’s Automated service and the third party tools that I have used. I encourage you to share your thoughts in the comments if I have missed or overlooked anything.
This post is not intended to bash on Lending Club’s Automated Investing. In fact, my opinion is that it is a great service for those who don’t care to take the time to investigate third party tools - not to mention figuring out what an API key is. If you have a Lending Club account, you can’t avoid their Automated Investing advertising scattered all over their website. It’s also integrated into Lending Club’s website, which makes implementing automation extremely easy.
As of writing, the current minimum amount for automated investing is $2,500, which in my opinion is on the low end of how much you should have invested in either platform to even be diversified. ($2,500 is only 100 $25 notes) Their service is also free, which is a plus as some of the third party tools charge fees.
Lending Club states that their service runs up to four times per day when loans are listed. They will deploy your cash as outlined in the criteria you are able to set. The biggest difference is that the frequency of orders is based on the cash balance of your account, availability of loan inventory, and demand from other investors. There is no guarantee how fast your money will be deployed. This could mean that you have idle cash, which is no better than having a zombie bank account (thanks RateSetter). What else does this mean? That my strict filtering (some of which is outlined here) is unlikely to be successful with Lending Club’s Automated Investing.
It makes sense that Lending Club puts in these provisions as it is in their best interest to keep all investors happy, but given the opportunity - I’ll skip to the front of the line. I actually have an inkling that Lending Club eventually might limit the third party tools in the future which makes me think about the future of third party order execution. I have some thoughts of how these tools will continue to add value to keep them relevant if this were to happen.
The third party tools (BlueVestment, LendingRobot, Nickel Steamroller) do all have a learning curve to get started. It is a separate account linked to your Lending Club account. You also need to email Lending Club in order to get access to an API key which is then used when you set up automation on any of the tools. Finally, you need to also provide your Lending Club credentials to these third party tools - something that makes some investors nervous.
Some of these tools charge a management fee or may charge a management fee in the future which is definitely something to consider. I personally try to minimize account management fees when it comes to investing (I invest with Vanguard) so I avoid them if possible.
Once those steps are completed, you can simply set your criteria and let the third party tool do the rest. You’re not penalized because you have a low account balance or investor demand is high. You will get your fighting chance at every note listed, only limited by your criteria and the computing power of the tool.
In the case of BlueVestment, you also get access to automate based on the two investing models from p2p-picks which is different from any other offering available to retail investors.
I’d love to hear some thoughts from investors in the comments below! Do you use Lending Club’s Automated Investing? Whatever you decide, just make sure you automate.
Enjoy your various post. I’ve only been into P2P lending for less than 6 months but spent a few hundred hours initially learning everything I could. Knew I had to automate to use $25 increments. Originally I only read that Prosper had automated investing so I was going with them. Then learned of Lending Club PRIME and with them having more loans it seemed like a better option. Their dials and throttling was a big worry tho. Then my world opened up as read about P2P-Picks and Bluevestment. That is when I jumped in with both feet. My spouse is now looking at LendingRobot and some of their automated features and built in criteria. May be a good comparison to P2PP+BV.
Hi Scott, thanks for stopping by. As an alternative if you are just using filter criteria you can also check out Nickel Steamroller for automation. Just use their contact form on their site to request access. You can’t go wrong with any of the tools I mention on the blog in my opinion. I also use P2P-Picks paired with BlueVestment which is a significant percentage of my Lending Club account.
On a side note, I did just open a Prosper account and will be detailing my automation on the blog using Nickel Steamroller.
Hey Ryan, she is not going to be using normal filter criteria at this point. Instead we will be testing out the unique LendingRobot features. Some were mentioned here in your article: Q & A with LendingRobot (“Loan Popularity, Loan Payment to Income Ratio, and sub-grade”). Likely we will try out Loan Popularity for some/all of the D and E subgrades. Loan Popularity will be quite interesting! http://peersociallending.com/interviews/lendingrobot-third-party-automated-investing-tool/