Get Passive Income With Lending Club

This is a guest post by LuLu from How I Save Money.net. Please check out her blog and consider subscribing to her RSS Feed.

Passive Income is income that you don’t have to mess with once you get it set up in the first place. I have been getting some passive income by using the services of Lending Club to make loans to individuals who need money.

It is easy to use Lending Club to loan money and I will detail the set up a simple description of the steps below.

• Create Account
• Link Outside Bank
• Fund Lending Account
• Pick Loans
• Receive Passive Income

Create Account
The first step in becoming a lender is obviously to set up your account. You can go to Lending Club and enter your information and set up your account. You will need to enter income, address, social security information and a few other items that Lending Club can use to verify your identity, just like if you were trying to borrow money.

Link Outside Bank
Once you have your account set up correctly you will need to link your outside bank account to Lending Club so that you can fund your account and have a receptacle for your money to be placed in once your passive income starts rolling in. You can only link one account to Lending Club so be sure it is an account that you can easily access.

Fund Lending Account
You need to put in a minimum of $25 into your Lending Club account because that is the minimum that you can use to fund a loan. You can obviously put in more money than that but as all good investors know you should never put in more money than you can afford to lose. Do not go into Lending Club with the idea that all your money WILL be returned because you always run the risk that someone will default on his or her loan and then you will most likely not get your money back.

Pick Loans
Once your account is ready to begin loaning money you need to pick your loans. In your Lending Club account you can browse through the different loans that people are asking for. Borrowers are graded from A (high credit rating, 8.40% interest) to G (low credit rating, 19.47% interest rate). People with an A rating are less likely to default on their loans…but it has happened so be careful with them. As a result of the low risk there is a low payout on A grade loans.

The reverse of this is also true, with a G grade loan having a higher risk of default, so it has a higher interest rate as a payout. This means if you fund someone with a G grade loan then you would receive 19% interest back on the money that you loaned…IF the person repays every month.

Receive Passive Income
Once your loans are funded all you have to do is sit back and get the money in your account every month. Lending Club draws the payment from the borrower’s accounts every month and direct deposits your share into your account. You can log in to your Lending Club account and withdraw the available funds at any time and send them to your bank because the money does not earn interest while in Lending Club.

I set up my ING account as my bank and every week I transfer the available money back to ING so it can earn interest. You can opt to reinvest your funds once you have at least $25 in your account again so that you can make even more loans.

This post is written by Lulu from How I Save Money (http://www.howisavemoney.net). How I Save Money.net chronicles the journey of a twenty something year old girl who is slowly working her way out of debt after being financially irresponsible with credit cards at a young age. I have used Lending Club with great success to loan out small amounts of money and I have also been on the receiving end as a borrower so I have seen both sides of the system.

Tagged as: LendingClub, peer to peer lending