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Seeking Investment Income? See How LendingClub Notes Can Help

Investor Essentials Guide

What are your investment objectives? If “generate income” is high on your list, you might be surprised to learn that LendingClub Notes could be an advantageous addition to your overall investment strategy.

In their search for yield, some investors have shifted their allocations away from traditional fixed income tools like Treasurys or broad bond funds to higher-yielding instruments like high-yield bonds, or alternative income tools like dividend stock funds or real estate investment trusts (REITs).

If you’re among the many investors searching for alternative income tools, read on—high-yield bonds, dividend stock funds and REITs aren’t your only choices.

Here’s how the unique characteristics of LendingClub Notes could help you meet your income goals.

First Off, What Is a LendingClub Note?

LendingClub Notes correspond to fractions of personal loans that LendingClub facilitates to borrowers. Notes can be purchased in $25 increments so investors can easily build portfolios with many Notes corresponding to many different loans and borrowers. An investor can buy up to 100 Notes starting with as little as $2,500. Notes mature in 3 or 5 years, according to their term.

Strategy 1: How LendingClub Notes Can Help Generate Income

Loans facilitated by LendingClub amortize monthly, which means borrowers are required to repay a portion of interest and principal in each monthly payment.

This monthly payout structure differs from that of a bond, which typically makes interest-only payments during the life of the bond and repays principal only at maturity. Our Notes are designed to deliver cash flow monthly and allow investors to avoid lumpy payments.

What This Means for Investors

Because of this distinctive monthly payout structure, LendingClub investors have historically received a monthly cash flow of 2-5%.1

Here’s how the key characteristics of LendingClub Notes compare to other common income-generating investments:
Essential Strategies Chart

As with other fixed income investments it’s important to remember that an investor’s cash flow depends on borrowers repaying their loans. With LendingClub, if a borrower doesn’t repay their loan an investor can lose their principal invested and the remaining interest expected on their Note. (Purchasing multiple Notes that correspond to different borrowers or loans can reduce an investor’s exposure to the risk of a single borrower or loan.) Furthermore, an investor’s ability to generate a consistent income stream through LendingClub Notes depends on a number of other factors, including prepayment rates, continued reinvestment into additional Notes, and the grade and term mix of the Notes purchased. For example, if a borrower prepays their loan in full, an investor won’t receive future income payments on their corresponding Note.
There are many investments that can offer income streams, and LendingClub may not be right for each investor. All alternative income tools – including high-yield bonds, dividend stock funds, REITs and LendingClub Notes – have distinct characteristics. Investors should consider all potential benefits and potential drawbacks when considering alternatives to traditional bond allocations.

Want to learn more about how LendingClub Notes can fit into your overall investment strategy? Check out Five Strategies for LendingClub Notes. We illustrate how investors can use Notes to generate income, build wealth for the long term, diversify a portfolio, put cash to work and grow retirement savings.

This information is not intended to be investment advice. LendingClub Notes are not guaranteed or insured, and investors may lose some or all of the principal invested. Notes are offered by prospectus filed with the SEC and investors should review the risks and uncertainties described in the prospectus prior to investing. Investors should consult a financial advisor with questions or if they need additional information. Actual results may vary.

1Data as of June 30, 2017. LendingClub retail investors have historically received 2%–5% monthly cash flow. Retail investor accounts are defined as those accounts with at least $2,500 in outstanding principal balance in any given month. Monthly cash flow for any given account is calculated by dividing an account’s proceeds for any given month (scheduled principal & interest and additional payments, reduced by any charged-off Notes and fees) by the outstanding principal amount in such month. The monthly cash flow values reported above are based on the 12-month trailing average of the 10th and 90th percentile monthly cash flow values for all retail investors in the 12-month period ending June 30, 2017. Individual results may vary based on grade and term composition of an investor’s investment strategy. Historical performance is not a guarantee of future results. This information is not intended to be investment advice. LendingClub Notes are not guaranteed or insured, and investors may lose some or all of the principal invested. Notes are offered by prospectus filed with the SEC and investors should review the risks and uncertainties described in the prospectus prior to investing. Actual results may vary.

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