It has been almost four weeks since LendingClub has closed its retail investor platform and the money is already starting to pile up. Many people have reached out to me asking what I am doing with this unused money, so I thought I would provide some suggestions.
Important note: Nothing I write here should be taken as investment advice. This article contains my own opinions only and may not be suitable for your situation. You should always consult a financial professional before taking any action regarding investments.
Here are twelve platforms for individual investors, which I have invested in for the most part, that offer a return similar to what we expected from LendingClub. I divided them into two groups: options for unlicensed investors and options for licensed investors only.
Options for non-accredited investors
- Prosper (prosper.com)
Prosper is the only offering that will provide the exact same type of investment as LendingClub: unsecured consumer loans. I met with Prosper yesterday to get an update on their retail investor offerings and was pleasantly surprised. The volume of retail investors increased by over 90% from April to December and this month, that trend continues. They strive to keep unused cash to a minimum and that is certainly true in my case as I am fully invested to this day. They are working on improvements to the investor experience with an updated interface and new investment tracking tools. They are also committed to offering ratings across the entire credit spectrum based on investor demand. Prosper raised interest rates at the start of the pandemic and loan performance for the 2020 vintage has been better than expected, even better than the typical vintage so far. To get more performance details, you can read Prosper’s monthly performance updates on their Blog. I will significantly increase my allocation to Prosper as cash builds up in my LendingClub accounts.
- Fund raising (fundrise.com)
Think of Fundrise as a low cost REIT (Real Estate Investment Trust) designed for unaccredited investors. They offer three plans depending on your risk appetite: additional income, balanced investing, and long-term growth with a minimum investment of $ 1,000. The portfolios invest in single-family homes, multi-family homes, apartment building renovations and commercial buildings. There is a mixture of debt and equity agreements. I opened an account there in 2015 and have an average of 7.3% since inception which includes a 4.5% return in 2020 with an income portfolio.
- Ground floor (ground floor.us)
Still in real estate but with a different approach. Transactions on Groundfloor are all real estate debts with a typical time horizon of 12 to 18 months. Investors invest in split loans, similar to those offered by LendingClub, with a minimum of $ 10 per loan. The average loan size last year was $ 202,000 with an average of 710 investors per loan. In their 2020 review, they shared that Groundfloor investors received an average rate of return of 10.42%. They had 10 defaults out of 444 loans and 190 loans in some sort of turnaround, so a double-digit return might be difficult to sustain going forward. But LendingClub investors will feel comfortable with the concept and control that comes with building your own portfolio.
- Kick further (kickfurther.com)
I just had the CEO of Kickfurther on the Podcast earlier this month so you can dive into the business by listening to this episode. The idea behind this platform is that financing the sale of physical products is difficult, especially for small businesses. Individuals can sign up for Kickfurther and purchase inventory on consignment and are reimbursed when the products retail. These buyers (they are not called investors) can typically earn 1% to 1.5% per month with a typical tenure of less than six months. I have been a buyer on the platform for many years and am quite optimistic about the concept.
- BlockFi (blockfi.com)
While not for everyone, if you’re a cryptocurrency enthusiast, you should check out BlockFi. Started by a former Orchard executive, Zac Prince, BlockFi allows holders of popular cryptocurrencies to earn interest on their assets. The BlockFi Interest Account earns up to 8.6% per year with no fees or minimum balances. They pay interest on Bitcoin (6% APY), Ethereum (5.25%), Litecoin (5%), Pax Gold (5%) and Gemini dollar (8.6%). I recently moved a good chunk of my crypto into BlockFi.
- Steward (gosteward.com)
Steward is a unique platform that enables qualified people to lend to sustainable farms. They call it CrowdFarming, where lenders can buy a loan stake tied to a specific farm. At the time of this writing, four projects were funded with interest rates ranging from 5% to 9% and terms ranging from 18 to 84 months. The minimum for most projects is only $ 100. I recently started loaning, participating in three projects in the past two months.
- NSR Invest (nsrinvest.com)
Although I no longer have anything to do with the day-to-day management of our sister company, NSR Invest, they still manage my IRA Prosper and have been doing so for many years. It turns out to be my best performing peer to peer lending account in the past five years. NSR Invest is helping its LendingClub clients switch to Prosper and is also working on adding new opportunities. Opportunities will likely be announced shortly in real estate, factoring and other alternative fixed income investments. In addition, they are building model portfolios based on publicly traded securities that will increase the alternative space of fixed income securities.
- Masterpieces (masterworks.io)
It’s a platform that I only recently discovered and that involves investing in art. You can create a diverse portfolio of works of art curated by the Masterworks research team. The Masterworks platform allows investors to start with $ 1,000 and buy fractions of works of art for just $ 20. The fees don’t come cheap, however. You pay 1.5% of management fees per year and then 20% of future profits. You have to apply to become an investor, but even with this hurdle tens of thousands of investors are already looking to invest in the next Picasso.
Accredited investor options
- Yield Street (yieldstreet.com)
Yieldstreet has become one of the most popular alternative investment platforms for accredited investors. They offer a range of investments covering asset classes that are difficult to access for individuals. Verticals such as litigation finance, marine, art, commercial lending, and real estate are all available within the platform. Most investments are backed by guarantees. You can invest in individual trades when they reach the platform with a minimum typically of $ 10,000 per trade or you can invest in the Yieldstreet Prism fund with a minimum of $ 1,000. The fund aims for a return of 8% and invests in several asset classes. I have been investing here for several years because I like the diversification it provides.
- Peer Street (peerstreet.com)
PeerStreet is a marketplace for investing in real estate debt, which offers loans generally ranging from nine months to 24 months. They have a minimum of $ 1,000 per trade and have an automated investing option that allows you to set certain criteria and let the platform do the work. New loans are added daily with detailed loan criteria available for analysis. Recently, PeerStreet announced Pocket, a new way to make money from your unused money. They still have a waiting list, but when it opens it will allow investors to earn 2% on their unused cash. This is something I would love to see more platforms add as most offer 0% or nominal return on uninvested cash.
- States of actions (sharestates.com)
Sharestates is another real estate platform that offers slightly higher returns than PeerStreet, with larger loans. The minimum investment is $ 5,000 and the average loan amount is $ 894,000. Their average returns to investors so far stand at 10.1% and even in the difficult year last year, they returned 9.16% to investors. While having 5.35% of their portfolio in foreclosure, investors have suffered a total capital loss of only 0.09% to date. One thing unique about Sharestates is that they offer a buyback program where investors can sell their note back to Sharestates for a small loss.
- Cadence (withcadence.io)
Cadence offers a diverse mix of investments across a range of asset classes. These are generally high yielding short term investments often offering double digit returns. Offers range from 9% to north of 15%. What I love about Cadence is that they offer unique opportunities that you don’t see anywhere else. I have invested in motorcycle loans, crypto loans, e-commerce loans, health care receivables, small business loans in Mexico, consumer loans in Colombia, mobile app financing and the financing of accounts receivable. The minimum investment is generally $ 500.
I know this list is by no means complete as there are many other investment opportunities for those looking for high yield fixed income investments. But it should provide investors with some ideas when looking to withdraw your money from LendingClub. Of course, I would expect LendingClub to offer its own alternatives as well, but in the meantime, these are alternatives that any investor can consider.
Peter Renton is the President and Co-Founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and is the author and creator of the Fintech One-on-One podcast, the first and longest-running fintech interview series. Peter has been interviewed by The Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, The Financial Times, and dozens of other publications.