LendingRobot

Summary

LendingRobot is a roboadvisor offering automated investments across multiple P2P lending platforms, including LendingClub and Prosper

  • Website: https://lendingrobot.com
  • Investment Types: Consumer (P2P) Loans and Investment Funds
  • Security Types: Debt
  • Sectors: P2P Loans
  • Minimum Investment: 25
  • Open to all investors

Pros

  • No minimums (for their "Classic" product)
  • "Classic" product open to all investors
  • Fantastic blog content
  • Consolidated and very readable reporting and automated investing across platforms
  • User-friendly yet powerful tools for adjusting investment risk profile

Cons

  • Need to invest in many, many notes (100+) to achieve diversification
  • P2P loans are unsecured
  • High minimums (and must be accredited) for newer (non-"Classic") products

LendingRobot logo

Overview

Although LendingClub and Prosper both offer automated investing options, LendingRobot spotted an opportunity to provide (what they would assert is) a better set of loan selection tools and risk models, as well as the ability to monitor and manage investment across P2P loan platforms.

Recently, LendingRobot announced they are merging with their biggest competitor in the space, NSR Invest.

Types of investments LendingRobot offers

With LendingRobot’s “Classic” product, you’re using their platform to in turn invest in loans (notes) on LendingClub and Prosper (as well as FundingCircle, though FundingCircle is only open to accredited investors and has much higher minimums than LendingClub or Prosper). Essentially, their value proposition is that using LendingRobot can help you outperform investing directly, and do so enough to more than make up for the 0.45% annual fee they charge for the service.

What do you get when investing with LendingRobot?

When you invest in notes on LendingClub or Prosper, you’re buying a a fractional interest in a consumer loan. The underlying notes on LendingClub and Prosper are graded by risk level.

LendingRobot fee structure

For the Classic product, LendingRobot charges 0.45% as an AUM fee (billed monthly). They do not charge any fees for the first $5,000 invested. Their newer products (open only to accredited investors) have different and varying fees.

Potential returns and cashflow

LendingRobot asserts that they can help investors outperform returns from investing directly in LendingClub or Prosper, though fundamentally the return drivers are the same, which is the particular diversification and risk profile of the loans you’ve invested in.

Borrower payments are collected montly and deposited regularly into your account on each platform, where they can optionally be automatically re-invested.

Regulatory framework and due diligence expectations

The regulatory framework for P2P lenders is quite distinct from the rest of the investment crowdfunding ecosystem. The borrower side of the equation is regulated via the Consumer Financial Protection Bureau and the Federal Trade Commission, while the lender/investor side is regulated by the SEC. As part of the process in place, each loan is registered and filed with the SEC to comply with securities regulations.

Once a borrower applies for a loan, the platform grades the loan quality and files a detailed disclosure with the SEC. The loan is then made available to prospective investors; once enough investors express interest, the loan is funded.

While both LendingClub and Prosper do perform credit checks, much of the application is information supplied by the borrower and not independently verified.

(Here’s much more on the gory details of the rather-complicated regulatory landscape around P2P lending from Harvard Business Law Review.)