One company is aiming to make peer-to-peer lending much easier.
LendingClub is an online marketplace for loans that directly connects borrowers with investors. When an investor wants to invest in LendingClub loans, the client will open an account and build a portfolio of diversified loans by putting as little as $50 in each loan, creating hundreds of investments for the client to manage.
With its new service, LendingRobot automatically lists, prices and reprices loans made on the platform, and reinvests income into the loans with the highest potential return available at any given time on LendingClub.
Compare that to what you would have to do before: Go to the LendingClub website, see what could be 50,000 different notes and from there, check one by one the investments you want to sell. And you would have to price all of those loans yourself.
"If there's one problem, it's the lack of liquidity," said co-founder and CEO Emmanuel Marot in an interview. "If you want your money back, you have to wait a while to get it back."
The idea is to make peer-to-peer lending more practical for the average person, not just for deep-pocketed investors. Clients don't necessarily care about how marketplace lending works, nor are they necessarily interested in managing hundreds of loans.
"Five or six years ago people who were investing in marketplace lending were people who were enthusiasts," Marot said. "Nowadays, we see our clients coming, and they don't want to learn any of this stuff."
LendingRobot supports automated investing on both LendingClub and smaller rival Prosper. However, the automated buying and selling of loans on the secondary market is only available for LendingClub.
Founded in 2013, LendingRobot has seen year-over-year growth of about 1,000 clients each year, and the market is doubling in size every nine months, Marot said. To date, it has raised $3.7 million in funding.
Unlike competitors such as PeerTrader, LendingRobot is currently the only automated peer-to-peer investment service that supports investing on the secondary market.