For online platforms there is considerable cost to be able to accept retail dollars. This is one of the reasons that Lending Club and Prosper were the only two platforms that allowed for retail investor participation for many years. Since many firms are just a few years old it’s much easier to target accredited individual and institutional investors due to the capital those investors have to deploy. However, there are now online lending platforms spanning almost every lending vertical that are open to retail investors. Below we share all of the opportunities retail investors should be aware of.
Lending Club – Consumer Lending
Lending Club allows retail investors access to consumer loans and has the most loan volume out of any other platform on this list. Investors can purchase fractions of loans starting at $25 and so can build a diversified portfolio with a relatively small investment. Borrowers are given loan grades from A-G and investors can decide which grades they would like to invest in. Lending Club advertises historical returns between 5%-7% with 99% of investors with over 100 loans achieving positive returns. In addition to the primary market, investors can buy and sell loans on Lending Club’s secondary market FOLIOfn which provides liquidity to investors.
Lending Club’s state and financial suitability conditions can be found on their website.
Prosper – Consumer Lending
Prosper’s platform is similar to Lending Club’s. Investors can purchase consumer loans ranging from grades AA-HR. One difference is that Prosper shut down their secondary market recently which means investors must hold notes to their maturity once purchased. Estimated returns vary from 3.83% to 13.04%