For the first half of this year the number of available loans at Lending Club hovered between 700 and 1,000 loans. Occasionally the number went over 1,000 but it averaged somewhere around 800 loans available to investors at any one time.
But in the month of June this changed. By June 21st there was over 2,000 loans available on the platform, a previously unheard of number. In late July at one stage there was over 2,500 loans available – about triple the historical average. I just took this screenshot above this morning and we are at 1,842 loans right now, below the heady numbers from last month but still more than double the average for this year.
The LC Advisor Funds Investing Huge Amounts in the First Week
Why the big increase in available loans? Simply stated, it is driven by investor demand. For the last several months we have seen this trend where in the first few days of the month at Lending Club very large volumes of loans are issued. In the first week of August that number was the largest ever – over $30 million.
Now, this isn’t driven by regular investors like you and I – the vast majority of this $30 million was from the LC Advisor Funds. These funds tend to collect money throughout the month and then put it to work in the first week of the month. Because they are investing tens of millions of dollars Lending Club needs to have many more loans available for investors in this first week.
This is the reason in the past couple of months you have seen a dramatic increase in number of loans on the platform late in the month. I expect this week we will get to well over 2,000 loans again as Lending Club gears up for the busy first week of next month.
Refining Your Investment Strategy
With many more loans available it stands to reason that investors have more choices. If you are just reinvesting your cash or if you have a fixed deposit going in every month you have probably found there are more loans to choose from. What do you do?
What Lending Club would no doubt like you to do is to transfer more money in to take advantage of the increased loan inventory but if that is not possible you can refine your choices. One thing I have done is increase my investments in 36-month loans. I have been investing about 70% of my money in 60-month loans this year – because in the D-G grades that I like to invest in there is a much higher percentage of 60-month loans than average.
So for the last couple of months I have been investing almost exclusively in 36-month loans to bring more balance to my portfolio. When the number of available loans is close to 2,000 I can usually find enough loans that meet my investing criteria just in 36-month loans. Of course, you have other options. You could take advantage of the Approved filter that Lending Club blogged about earlier this month. Or you can spend some time at Nickel Steamroller or Lendstats (it is working now for Lending Club investors) to refine your investing filters.
The other good point about this is if you put your money to work in the last week of the month the chances are that many of the loans you are funding will issue when LC Advisors fully funds the balance of the loan. This means you can put your money to work more quickly.
What do you think? Have you adapted your Lending Club investment strategy? As always I am interested to hear your comments.
Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he 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.