Wondering if you should join Lending Loop?
Here is our unbiased Review of Lending Loop listng down, pros, cons, fees and everything else you need to know about the Peer-to-Peer Lending platform in Canada .
If you are interested in the whole concept of making money online, you can check out some of my other posts including 10 Easy Ways to Earn Money Online without Investment, How to Earn Money from YouTube, how to earn money from Facebook and how to start a blog and make money.
What is Peer-To-Peer Lending?
Peer-to-Peer lending is an alternative to traditional banking. There are platforms where borrowers and lenders interact with one another like Lending Club or Lending Loop that allow borrowers to request loans for various needs.
The lenders see these loan requests and are able to choose who they want to give their money to.
Furthermore the platform gives them all sorts of information about the borrowers so that lenders can make educated decisions.
Some might settle for lower returns and only lend to the safest borrowers whereas others reach for yield but accept a higher degree of risk.
What is Lending Loop and how does it work?
Lending loop is a great option to earn passive income through peer-to-peer lending. There are different companies available in Canada for peer-to-peer lending but Lending loop is one of the best options for peer-to-peer lending.
Lending Loop is a Canadian company based off Toronto, Ontario. It is a fully regulated company and they have been in business since 2014.
They have lent almost 70 million dollars to different businesses in Canada.
Lending Loop has a provision for small businesses. The businesses can borrow from $ 100,000 to $500,000 as a loan based on their requirements.
The minimum criteria to qualify for the loan is as follows:
– The business has to have been operational for at least one year.
-The annual revenue must be $100,000
-The personal credit score of the owner of the business must be above 600 points
If you want to invest into any business using Lending Loop you have to sign up and open an account.
There are two ways to lend the money: first is you can lend the money manually. You can select the businesses of your choice and lend them money.
For that you are required to fill a questionnaire that helps determine your investment preference, financial strength and risk tolerance.
Your net worth plays an important role here as that leads to your classification as a non-eligible investor, eligible investor and accredited investor.
There is no specific criteria for a non-eligible investor, anyone can qualify for it. As a non-eligible investor you can invest up to $10,000 in a year.
You have to have an annual net income that exceeds $75,000 to classify as an eligible investor.
After which you can invest up to $100,000 every year.
As an Accredited Investor you can invest more than $100,000 per year.
It should be noted that you cannot start lending unless you deposit a minimum of $200 on the platform.
After this process, you can start browsing through the various applicants who are looking for a loan.
The second option is to go for Auto lending. In that case too you will have to fill a questionnaire determining your preferences.
Your profile will then be classified into a Balanced, Conservative, Aggressive and Custom Portfolio based on your answers.
If it’s a balanced portfolio you can earn up to 7.9% interest per year whereas if it’s a conservative portfolio you will earn around 6.7% per year in interest.
If you have a balanced portfolio then your money will be invested on the business based on their ratings from all ranges.
For businesses with the safest ratings the interest that you receive on your money will be the lowest. And businesses that have high risk ratings will fetch you the highest interest rate.
You may also stand a chance of being defaulted. But Lending Loop does screen the businesses well before the lending process so the chances of a default are slim.
In a conservative portfolio the high risk businesses will be avoided and loans with ratings ranging from A+ to B will be selected.
The aggressive plan as the name suggests is based on a high risk-high reward principle. It selects loans that are rated from the C+ to E category and have some of the highest risks.
The custom plan on the other hand gives you free reign and lets you decide on your investment according to your comfort and preference.
Lending Loop Statistics
All the Lending Loop data can be easily accessed by its members by simple viewing the statistics page.
It shows the kinds of businesses that are borrowing money, their location and industry sector.
It gives a clear picture on the total number of loans issued every year and also their status and default rates.
Lending Loop Fees
You are not required to pay any fee to sign up, it is absolutely free. But here are the fees that may apply to those who want to borrow from the site.
1. Borrowers will be required to pay an interest rate that can range from 5.90% to 26.50% depending on their lending loop in-house credit rating.
2. Apart from the interest rate borrowers also have to pay origination fees that can range from 3.0% to 6.5% which is also based on the in-house credit rating.
Here are the fees that may apply to lenders:
1. Lenders have to pay a servicing or management fee of 1.50% every year which is charged based on repayments.
2. Lenders might also have to pay a collection fee on the amount recovered after a loan is defaulted and Lending Loop takes it to collections.
Pros of Lending Loop
-Lending Loop is fairly easy to navigate and setting up your profile is also hassle free
– The platform also makes your investing decisions easier for you through the auto lend platform.
– You get a chance to invest into small businesses and give them a boost.
-Lending Loop gives you an unparalleled opportunity of earning money through some of the highest interest rates.
-It is a legitimate and fully regulated money lending platform, all the transactions are transparent.
-It works as a platform that helps you diversify your investment portfolio
-You can refer the platform to your family and friends and both the parties will get $25 if your referrals invest at least $1,500
– In case of any disputes you are eligible for the resolution of the same via the trusted Ombudsman for Banking Services and Investments
Cons of Lending Loop
-If borrowers are unable to keep making payments and default, lenders lose money and aren’t covered by the positive guarantee schemes such as the FDIC in the United States
– Your money will be locked in for as long as it takes for loan repayment.
– You might not be able to resell owing to the lack of a secondary market
– There is usually limited to no protection if the platform itself goes bankrupt
Lending Loop Alternative websites
If you want to utilize Peer-to-Peer lending for personal loans you can log on to LoanConnect, Borrowell and Mogo.
Since Lending Loop only provides loans for businesses you can use these platforms as alternatives as they specialize in personal loans
Groplend and Lending Club are also worth checking out. These are fairly popular platforms and are trustworthy.
You can also consider Lendfield as an option but it should be noted that it work on the crowdlending model.