Subscribe
Logo
Logo
  • Topics Icon Topics
    • AI Icon AI
    • Banking Icon Banking
    • Blockchain/DeFi Icon Blockchain/DeFi
    • Embedded Finance Icon Embedded Finance
    • Fraud/Identity Icon Fraud/Identity
    • Investing Icon Investing
    • Lending Icon Lending
    • Payments Icon Payments
    • Regulation Icon Regulation
    • Startups Icon Startups
  • Podcasts Icon Podcasts
  • Products Icon Products
    • Webinars Icon Webinars
    • White Papers Icon White Papers
  • TechWire Icon TechWire
  • Search
  • Subscribe
Reading
Why I Avoid A-Grade Loans on Lending Club and Prosper
ShareTweet
Home
News Roundup
Why I Avoid A-Grade Loans on Lending Club and Prosper

Why I Avoid A-Grade Loans on Lending Club and Prosper

Peter Renton·
News Roundup
·Aug. 22, 2011·1 min read

I hear this sentiment all the time. People start off conservatively in p2p lending, investing mainly in A-Grade loans and then decide to branch out once they get comfortable. I know, because I was one of those people.

When you first start out the A-grade loans look very tempting. Low default rates (but not zero) should mean a consistent return on your money.  Sure they only pay 5-8% but that doesn’t seem so bad, particularly these days. New investors often feel that p2p lending is a risky endeavor in itself so they may as well mitigate that risk somewhat by choosing the most creditworthy borrowers.

What are Your P2P Lending Investment Goals?

It all comes down to your goals for your investment. For me I want double-digit investment returns from peer to peer lending. With that in mind all A-grade investments on Lending Club and AA-grade investments on Prosper pay less than this. So if I invest in these loans then I am hurting my chances of hitting my goal of 10% or more.

Now, I admit not everyone is going to have such lofty goals. Some people may be quite happy with a 5-6% return, especially given the current interest rate environment. If that is your goal then I encourage you to include the A-grade loans in your portfolio.

At Lending Club the interest rates for A-grade loans range from a low of 5.42% for A1-rated loans up to 8.49% for A5-rated loans. Even B1-rated loans are below 10% (at 9.99%). Keep in mind that Lending Club takes out an investor fee of 1% and you can see why it is impossible to earn double-digit returns here.

Prosper is a little different. Their top rating on loans is AA and these AA-rated loans pay in the single digits (although a five year AA-rated loan from a new borrower is currently 10.99% for investors). Single A-rated loans on Prosper can pay as much as 13.9%. So here it is really the AA-rated loans that are not worth considering if you are trying to earn a double digit return.

I am interested to hear from others. Did you start out investing in A-grade loans? If so, do you still invest in them? Please leave your thoughts in the comments below.

  • Peter Renton
    Peter Renton

    Peter Renton cofounded Fintech Nexus as the world’s largest digital media company focused on fintech before it was acquired by Command. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

    View all posts
Tags
investingLending ClubProsper
Related

Stash announces new B2B offering called StashWorks

LendingClub exceeds expectations in strong Q1 earnings

Liza Landsman, CEO of Stash on creating financial opportunity

LendingClub delivers better than expected earnings in Q4 2023

Popular Posts

Today:

  • FUTURE NEXUS IMAGE TEMPLATES!! (2)OCC Hints at Trouble for Charters Jun. 18, 2026
  • Fonoa (2)Funded: Fonoa raises $110M to build the operating system for autonomous tax May. 29, 2026
  • Ethan ChanAllium CEO Ethan Chan on making blockchain data usable Sep. 3, 2026
  • Nic BairdThe $10,000 inference trap: A former pro sailor’s fix for AI’s money problem Oct. 1, 2026

This month:

  • FUTURE NEXUS IMAGE TEMPLATES!! (2)OCC Hints at Trouble for Charters Jun. 18, 2026
  • Dr. Devi Parikh“Too heavy of a hammer”: How Yutori is beating AI giants at building the web’s future Sep. 10, 2026
  • Ram PalaniappanIn 2026, Your Wages Should Not Be On a Two-Week Delay Aug. 20, 2026
  • Ryan WigginsMercury’s Ryan Wiggins on Building Customer Trust: Lessons from a Decade at Facebook and WhatsApp Jul. 2, 2026
  • Santiago SuarezInside Addi’s mission to build a fairer financial system in Colombia Feb. 19, 2026
  • Dr. Jean NehmeHardware as a durable moat & the former surgeon’s bet on “soft robotic cells” Aug. 27, 2026
  • Ethan ChanAllium CEO Ethan Chan on making blockchain data usable Sep. 3, 2026
  • TitoEscaping the demo: The founders building the foundation for medtech physical AI Jul. 23, 2026
  • FNMerge CEO on building the pipes behind AI, and starting with zero code May. 21, 2026
  • 197Renton’s Take on Loan Model Risks Nov. 4, 2025

More News
  • About
  • Contact
  • Disclaimer
  • Privacy Policy
  • Terms
Subscribe
Copyright © 2026 Fintech Nexus
  • Topics
    • AI
    • Banking
    • Blockchain/DeFi
    • Embedded Finance
    • Fraud/Identity
    • Investing
    • Lending
    • Payments
    • Regulation
    • Startups
  • Podcasts
  • Products
    • Webinars
    • White Papers
  • TechWire
  • Contact Us
Start typing to see results or hit ESC to close
lis digital banking USA Lending Club UK
See all results