Filtering Loans – Part 5: Moving From Tools to Platforms

Peer-to-Peer-Lending-Tools-Platforms

Part 1 – Introduction: Risk
Part 2 – Avoiding Defaults
Part 3 – Low-Grade Loans

Part 4 – Multiple Filters
Part 5 – Tools to Platforms

Once we have created our filters, we can use them to invest in quality notes and develop a higher than average performing portfolio. Different lenders have used different methods of moving from tools (like NickelSteamroller) to platforms (like Lending Club or Prosper).

Ways to invest with filters:

  • Save them to the Lending Club or Prosper websites
  • Use third-party tools (NSR LC Invest tool)
  • Download the raw notes file and filter through Excel

Do What Works For You

There really is no perfect way to do this. The benefit of investing with the bottom two methods (tools or Excel) is that filtering becomes very precise. You get loans that exactly match the parameters you give them. This is because the platforms, especially Lending Club, do not have such fine-tuned filtering available. However, the benefit of saving your filter directly on the platform is that the list of available loans are up to date. Also, you are not juggling two different websites each time you go online to reinvest your available cash.

For this reason, I personally save my filters directly to the Lending Club and Prosper sites and invest directly through them. I feel this gives me the freshest list of loans available while also simplifying my lending process.

Moving from NickelSteamroller to Lending Club

This is the approach we will focus on today (using Lending Club), though I will highlight the NSR Invest Tool near the end of this post. To do this, we first need to log into our Lending Club account. From here, go to the Browse Notes screen.

Go to Browse Notes

The section we will focus on today is the Filter Notes section on the left.

Set up filters

Now we will recreate the two 12% historical ROI filters we created in part four. These were:

Lending Club Filters from May 21

Setting Up Filter #1

Filter 1 on Lending Club

(click for full filter)

Within the Filter Notes field, add the seven parameters from filter #1. Unfortunately, the Lending Club’s employment filter only goes to 5, so you will have to look at each loan individually, making sure a loan has 6+ years of employment before you invest in it. Also, selecting all the states except California can be tricky. If you use a PC, first click in the states box. Then hit Ctrl-A to select every state. Finally, hold down just the Ctrl button and click on All and California to deselect those options. Eventually, your resulting filter should look something like the graphic on the right (click to see the full filter).

Alright! Click the Update Results button at the bottom, and watch the platform filter the available loans for only the ones that match your parameters.  Hit Save to keep this filter for future use, giving it whatever name you wish (named ‘Filtering Example 1’ above).

Filter 1 Results

(click to zoom)

Filter #1 currently gives me three C-grade loans and one D. Of course, it will be different for you since time will have passed since this post was published.

Saving Filter #2

Filter 2 on Lending Club

(click to view full filter)

Now go back to the Filter Notes section and change the parameters to fit the five we chose from filter #2. Of course, this means you can remove some parameters altogether, clicking the X next to Employment Length and Location State. The resulting filter should look like the graphic on the right (click to see the full filter).

When you’re finished, click the Save, giving this filter a name. Now click Update Results to filter the available loans.

Filter 2 Results

(click to zoom)

Currently, filter #2 gives me four loans: two Cs, one D, and one F.

Now, anytime you log into Lending Club and have excess cash available, you can open these filters and use them to invest in more loans! If we examine each of our results (four loans each), we can see they all match the filters we set up in part four. Now you choose which you want to invest in. For instance, this C-grade loan looks really promising:

C loan in detail

(click to zoom)

This person has:

  • 10+ years of employment
  • $6000+ month income
  • 695 credit score
  • 31 total credit lines
  • 25 years of history (earliest line is 1988)
  • No late marks

Personally, I would feel good about investing money with this individual. The fact is, sometimes our filters return more loans than we can invest in, so we have to choose between them. Generally, you should lean towards the available borrowers that have longer employment and higher incomes, and so on. Once you have invested in a few hundred loans, this becomes a pretty easy task. Lenders can learn how to quickly invest in the best ones.

NickelSteamroller Invest Tool

You may also choose to invest off a tool like the NSR Invest Tool. To do this you would simply go there and set up the parameters (you can also import them with a free account). I typed in filter #2 from above and clicked filter. Below you can see the resulting same four loans as above.

NSR Lending Club Invest tool

From here you can invest through Lending Club’s website using a link that says Buy. You can also click Loan Details to get a closer look at the loan.

Lending Club Problems

One issue lenders are facing today is how hard it can be to find the loans we are looking for. Over at the LendAcademy blog, Peter just wrote a post that discusses exactly this. There are so many people looking to invest in p2p loans (especially low-grade loans), that our filters often turn up few results. To combat this, there are two major approaches to take:

Method 1 – Log on at 6am, 10am, 2pm, and 6pm PST (pacific standard time). This is when Lending Club updates their platform with new loans.

Method 2 – Loosen your filters. The other way to find more loans is to loosen the standards of your filters. Remember, the filter you use will determine how quickly your cash will find good notes. Filters that return only 2000 historical loans may take longer to invest with, and at times may not have any matching loans at all. On the other hand, if you invest with a filter that has a large number of historical notes (like how our two filters return over 7000), the process can be quicker.

Filtering on Prosper

Before we close this filter series, let’s overview how similar the process is for Prosper.com. Personally, I have earned an even greater return on Prosper (see my portfolio), mostly because they offer even higher interest rates than Lending Club; Prosper’s HR-grade loans have rates above 30%.

Prosper-StatsTo create a filter on Prosper you would use the same process we outlined here. Using a site like Rocco’s Prosper-Stats.com you would find a filter that has your target ROI, but also aligns with your level of risk.

Prosper Invest Screen

Once you create your filters, you would go to Prosper’s Invest section and click on their Advance Search area. From here you can select wonderfully fine tuned filters for their available loans, even using their Automated Quick Invest to invest with these notes automatically.

Conclusion

Congratulations! You have learned how basic risk and statistics work, how to discover great peer to peer lending loans, and how to use these filters on the platforms themselves. It is worth mentioning that our loan data will continue to mature over time. You should analyze your filters throughout the year to make sure they are still accurate.

[image credit: @sage_solar "Girl in the Red Coat" CC-BY 2.0]

Comments

  1. says

    Hey Simon, you could also adjust your filters by learning/teaching some stuff about credit since not every 720 credit score is the same. At least that’s what I am hoping to show people. I havent released it yet but I have my own scorecard that I use based on my experience as a Credit Analyst.

    Are you finding loans easier to fund on Prosper than on LC? I am….so far. Keep up the great work

    • says

      Hi Stu. Interested in your blog, looks like good stuff. I would be really interested to see your expertise as a credit analyst in regard to your positioning of filters… I’ve simply been using historical loan history.

      As for finding loans, my requirements are really strict, so I’ve been having a tough time on either :)

  2. Kevin Lilly says

    I live in a state that only allows me to purchase Lending Club notes on FOLIOfn. Do you have information regarding this. Specifically do you have any strategies to use interestradar for filtering notes on the FOILIOfn trading platform?

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