What are Prime Consumer Notes?

    Prime Consumer Notes are fixed-income investments that generate monthly cash flow in the form of payments of principal and interest. Generally, investors choose to invest in hundreds or thousands of Notes to diversify and benefit from more consistent performance. Notes are graded A1 through G5 and carry an interest rate commensurate with their risks, so you can build a portfolio that fits your investment objectives. 
    Consumer Notes allow investors, individuals and institutions, to capture the spread on consumer debt. Lending Club offers loans to creditworthy borrowers looking to fund their business or pay off their high-interest credit cards. Many of these borrowers are simply looking for an alternative when their bank couldn't -- or wouldn't -- extend credit. Their loss, your gain!

Diversification of Peer to Peer Investments

Diversification is a way of managing investment risk where you spread your dollars across many different investments to reduce the exposure to and the risk of a single investment. Investing in a combination of assets that are not correlated can lead to a return with lower volatility and less unique risk.

Example:
Say you have $5,000 to start investing in Lending Club Notes. You can either invest:
$5,000 in 1 borrower or
$25 in 200 different borrowers.

If you invest in one borrower and that borrower becomes delinquent, you may potentially lose 100% of your total investment amount.

If you invested in 200 different borrowers and that same borrower became delinquent, your potential loss would be limited to 0.5% of your total investment amount.



Two ways you can diversify with Lending Club

• Select Notes
• Browse Notes, and pick the borrowers you want to invest in one by one, for maximum control. You will find credit and loan information in each listing and you can even ask a borrower questions for additional diligence.
• Use the portfolio tool
• You can use our portfolio tool to help you develop a diversified portfolio in seconds. The greater the number of different borrowers you invest in, the greater your diversification.