Investing and Liquidation

For newly created accounts, it can take several days (up to weeks for very large balances) to fully invest your initial cash balance depending on the availability of loans matching your investment strategy.

For security purposes, Liquid P2P does not have access to your bank account. However, we can initiate a transfer request through Lending Club on your behalf.

To deposit funds, go to the Transfer Requests tab in the Manage section. This is where you can submit new requests, monitor and edit active requests, and view your transfer history.

You can select a one-time deposit or set up a recurring deposit. Recurring deposits can be scheduled weekly, bi-weekly, monthly, or on the 1st and 16th of each month specifically.

To avoid the negative effect cash drag can have on your return, we use “Full Reinvesting” as the default setting for user accounts. This means that as payments accrue, we continuously reinvest your available cash to keep your money working for you.

Liquid P2P constantly monitors note availability on both the primary and secondary markets to ensure your available cash is invested as quickly as possible in notes that meet our standards and match your saved strategy settings.

You can pause full reinvesting at any time in the Manage section under the Automated Settings tab.

Liquid P2P gives you the option to set a Constant Account Value (CAV). Simply enter a specific amount and our automated system will reinvest accordingly to maintain that account value.

You can select to receive payment of excess dividends on a weekly or monthly basis.

To set a Constant Account Value, go to the Automated Settings tab in the Manage section.

For example:
Constant Account Value setting: $100,000
End-of-month account value: $101,236
Monthly dividend payment: $100,000

Yes. You can pause investing at any time from the Manage section under the Automated Settings tab.

The default automated setting for all accounts is Full Reinvesting, and you also have the option to set a Constant Account Value or pause investing.

When investing is paused, payments that accrue in your account will not be reinvested and your available cash will remain idle.

Diversification is the key to managing risk in P2P lending. Spreading your investment across many different loans limits the impact of any single default on your overall return.

Lending Club leaves diversification up to the individual investor but suggests holding at least 100 notes to achieve a positive return. Other industry experts recommend a 200-note threshold to achieve full diversification.

Liquid P2P raises that bar by automating diversification up to a 400-note threshold and only purchases notes in $25 increments (the smallest denomination available.)

This means investments of $10,000 and greater will be diversified across at least 400 different notes, limiting your loss to just 0.25% of your account value when a single loan defaults.

Example for various investment amounts:

  • $2,500 100 notes

  • $5,000 200 notes

  • $10,000 400 notes

Liquid P2P uses machine-learning algorithms to cherry-pick only the best quality loans that match your investment strategy. Back-tested using historical data and predictive analysis, our proprietary algorithms are written and trained to outperform the market.*

Algorithm-powered investing gives you the potential for higher returns while also protecting you from the possibility of investing in below-quality loans if and when Lending Club changes their loan grade standards.

*Liquid P2P makes no warranties or representations concerning back testing, machine learning, and predictive analytics. User acknowledges past performance is no guarantee of future results. See our Terms of Service for more.

Liquid Match is our patent-pending model that harnesses the power of the group to fuel our loan selection and liquidation processes. As we continuously invest your available funds, we automatically match Liquid P2P buyers and sellers first in an effort to both boost returns and accelerate liquidity.

Here's how it works:

1. Identify buyers and sellers.
A buyer is any active user with available cash, and a seller is any user with an active Liquid Match withdrawal request.
2. Check notes for a Liquid Match.
To qualify as a match, a seller's note must meet all Liquid Match Standards, allign with buyer's investment strategy, AND maintain buyer's diversification.
3. Trade matching notes on secondary market.
For any matching note, we calculate a fair price, list note on the Folio secondary market, and then purchase note on behalf of the buyer.
4. Invest remaining cash.
After all Liquid Match possibilities are identified, we then invest any remaining available cash on behalf of buyer. First, we check the secondary market at large for notes offered a fair price or below that also meet Liquid Match Standards. Finally, we go to the primary market and purchase newly-issued $25 notes.
Check out our Liquid Match infographic to learn more.

The Folio Note Trading Platform is a secondary marketplace where you can buy and sell previously issued Lending Club notes. Investors register for Folio through their Lending Club account. Because we utilize both the primary and secondary markets to automate investing and liquidation on your behalf, we require Folio registration and API access as part of our sign-up process.

With note-trading between users at the core of our Liquid Match model, we want to ensure both sides of a transaction are treated fairly, and we accomplish this with our fair pricing strategy.

When automating the trade of a note between users, simply pricing the note at par (equal to the outstanding balance) will result in the buyer getting a lower yield than the seller. This is partly due to the negative impact of Lending Club’s 1% investor fee. (Learn more about the effect Lending Club's fee structure has on YTM)

Our strategy is to price the note so that the buyer gets the same Yield to Maturity (the return on a note if held to maturity and received all payments according to payment schedule) as she could have gotten if she purchased a similar note on the primary market. We refer to this process as “making the buyer whole,” and the price as “fair price”.

Calculating a fair price is two-step process:

1. Determine the YTM of a newly-issued note on the primary market with the same term*, sub-grade and interest rate as the note in transaction. This accounts for any interest rate change since the note in transaction was issued.

*Notes with 37-60 remaining payments are considered having a 5-year term, and with 1-36 remaining payments are considered having a 3-year term.

Solve for YTM in the following equation using Newton’s method:

Loan Amount = (payment-fee)/(1+YTM/12)+(payment-fee)/((1+YTM/12)2 ) + ... + (payment-fee)/((1+YTM/12)term )

2. Plug the YTM obtained from step 1 into the following bond pricing formula to calculate the fair price any month (t).

P(t) = (payment-fee)/(1+YTM/12)+(payment-fee)/((1+YTM/12)2 ) + ... + (payment-fee)/((1+YTM/12)t ) 

On top of making the buyer whole, we also use machine learning to select notes that are less likely to default so that buyers can invest in high quality notes with a seasoned payment history and shorter time to maturity. On the other side of the transaction, sellers are able to accelerate the liquidation of their notes. It’s a win-win.

Liquid Match Standards are the criteria we use to define the quality of loans traded between users.

We continuously monitor the loans you’re invested in, including those originally invested in outside of Liquid P2P. If any loan fails to meet one of our standards, it will be temporarily ineligible for Liquid Match liquidation.

You can monitor the real-time eligibility of your invested principal from your user dashboard.

Principal invested in loans that do not currently meet Liquid Match Standards is listed as “Non-Eligible Principal” and then broken out into the following sub-categories.

(Holding Period is the time it takes for the note to regain eligibility.)

Loan Score
DESCRIPTION:
Loan was originally invested in outside of Liquid P2P and would not be scored as a “buy” by our loan selection algorithms.
HOLDING PERIOD:
Indefinite
FICO Drop
DESCRIPTION:
Borrower's FICO score has dropped 40 or more points from when loan originally issued. (Liquid P2P's standard)
HOLDING PERIOD:
Immediately eligible once FICO meets our standard.
Late Payment
DESCRIPTION:
Loan payment is 16-120 days past due.
HOLDING PERIOD:
Eligible again once current for 6 consecutive months.
Grace Period
DESCRIPTION:
Loan payment is past due but within the 15-day grace period.
HOLDING PERIOD:
Immediately eligible once current.
Change Request
DESCRIPTION:
Borrower requested a payment date change after first two payment cycles.
HOLDING PERIOD:
Eligible once there has been no change request for 6 consecutive months.

You can initiate a new withdrawal request from your Manage page under the Withdrawal Requests tab. You can only have one pending or active withdrawal request at a time.

We give you three withdrawal options to choose from and customize to meet your needs, each with a different liquidation method, time frame, and cost.

For all active withdrawal requests, we initiate transfers to your bank account on a weekly basis. You can easily monitor the progress of your withdrawal and change or cancel the request from your dashboard. Automated reinvesting will resume as soon as your requested amount is met.

Standard Withdrawal
METHOD: Pause reinvesting to allow incoming payments to accrue.
TIMELINE: Because no liquidation is involved, this is the slowest method. Timeline will vary. You can monitor progress and cancel or change to another method at any time.
FEES: None
Liquid Match Withdrawal
METHOD: Pause reinvesting and automate liquidation using our Liquid Match model.
TIMELINE: Accelerated
COST: 1% Folio fee + 1 % Liquid Match fee
Liquid Match +Plus Withdrawal
METHOD: User sets custom end date for Liquid Match which can be edited at any time. After end date, eligible notes are adjusted to a fair price and liquidated through Liquid Reserve Pool at a 1.5% discount to reach requested withdrawal amount.
TIMELINE: Custom
FEES: 1% Folio fee + 2% Liquid Match +Plus fee

You can monitor the progress of a pending or active withdrawal request, as well as change the withdrawal type and/or amount or cancel the request at any time from your dashboard summary page or in the Manage setion under the Withdrawal Requests tab.

We created the Liquid Reserve Pool to be another win-win solution for our users. It gives sellers a way to fully liquidate within a specific time period, while matching a pool of buyers with a quality loans at a discounted price.

To fund the reserve, we periodically invite users to contribute by investing in $1,000-blocks increments. These reserve blocks are “stacked” in a first-in, first-out order and used as a liquidity pool to fund Liquid Match +Plus withdrawal requests.

In a Liquid Match +Plus withdrawal, the user is able to control the timeline for full liquidation by setting an end date for Liquid Match. After that date, eligible notes are automatically liquidated through the reserve pool to meet the remaining balance on the active withdrawal.

As an incentive to contribute, eligible notes liquidated through the reserve are adjusted to a fair price and then sold to buyers at 1.5% discount.

A 2% Liquid Match +Plus Fee will apply to any note sold through the reserve. This fee will be included as a sperate line item on your monthly bill and charged to your credit card on file with Liquid P2P.

We periodically invite selected users to contribute to our Liquid Reserve Pool in $1K blocks. Once committed, these funds are held in a reserve and used to liquidate fellow investors with active Liquid Match +Plus withdrawals.

You can request an invitation anytime from the Summary page of your user dashboard.

Depending on reserve demand, we will periodically send out invitations to users on the request list. This invitation will include specific information on available reserve blocks, as well as details about the order in which we will accept and allocate contributions for that round.

We give users with active contributions to the Liquid Reserve Pool a simple way to monitor purchased reserve blocks. From your dashboard Summary page, you'll have an at-a-glance view of the current reserve total, your individual contribution amount, and a graphic showing a real-time queue of where your blocks fall in the order to be invested.

-