Diversifying across multiple LendingClub Notes is important because if one borrower doesn’t pay back their loan, your investment loss may be offset by the other borrowers that do.*
The bigger the risk, the bigger the potential reward. At LendingClub, this means that riskier Notes—such as grades C—have historically delivered a range of returns with higher highs and lower lows compared to grades A and B.* To balance risk and return, investors can create LendingClub portfolios with a mixture of Note grades.
LendingClub Note terms correspond to the length of borrower loans, 36 or 60 months (3 or 5 years). Notes corresponding to loans with 60-month terms have historically delivered higher returns compared to those with 36-month terms.* Keep in mind investing in longer term notes adds both risk and return exposure; you may wish to invest in both terms to diversify.
LendingClub Note investors receive monthly payments of both principal and interest as borrowers repay their loans. This differs from the structure of a typical bond, where an investor gets interest-only payments over the life of the bond and principal is returned at maturity. Assuming borrowers make their payments, cash balances can build up quickly in LendingClub accounts.
To invest the cash building up in your account and potentially earn more returns, turn on Automated Investing. This is a “set it and forget it” approach—meaning we’ll automatically invest any cash in your account according to your grade and term settings. If you don’t turn on automated investing, the cash will stay in your account unless you manually invest or withdraw it.