Peer-to-Peer Lending With Pertuity Direct

Since we’ve been on the topic of peer-to-peer lending this week, I wanted to talk a bit about Pertuity Direct and find out if you guys have had any experience with them. While Pertuity Direct specializes in social lending much like Lending Club does, they use a somewhat different model…

The Pertuity Direct approach

Instead of investing directly in notes corresponding to individual loans, lenders invest in borrowers through the so-called “National Retail Fund.” This is essentially a privately-offered, closed-end mutual fund that invests in the loans of Pertuity Direct issues to their borrowers.

While this sounds like a somewhat roundabout way to do things, there are some distinct advantages. Most notably, you don’t have to select loans in which to invest, meaning that the process is considerably more efficient for investors. This also results in a high level of diversification as your money is automatically spread across a large number of loans.

The downside of this approach is that, as an investor, you don’t have any control over your interest rate or risk level. You’re simply buying into the full pool of loans that Pertuity Direct has approved.

Borrower requirements

The only stated borrower requirement is a minimum FICO score of 660, though I would imagine that they’re also on the lookout for recent delinquencies, etc. The average credit score of their borrowers is 744, and 75% of approved loans go to people with a 700+ credit score.

If you’re not sure where you stand, you can take a free peek at your credit score courtesy of or MyFICO.

Investor information

According to the prospectus, the minimum investment is $250, meaning that there is a relatively low barrier to entry. Something to keep in mind, however, is that there is no secondary market for fund shares. This means that your investment will relatively illiquid, though they do offer periodic buybacks.

Something that I’ve had a hard time getting my head around is the expected return. Of course, this depends on a variety of factors, some of which (such as the expected default rate) are difficult to pin down. What I can say is that borrowers were recently paying an average of 13.5% on their loans, so there seems to be a lot of potential there.

Anything to add?

If you’ve had any experience with Pertuity Direct, please let us know your thoughts. For the time being, I think I’ll be sticking with Lending Club, though I’m always open to trying new things.

4 Responses to “Peer-to-Peer Lending With Pertuity Direct”

  1. Anonymous

    As I do not have a small fortune in cash and “certain” assets, I don’t qualify for LendingClub. From what I hear, if Prosper ever rises from the ashes (doubtful), their plan is to follow LendingClub’s lead on financial requirements. I mean, it’s not like I want to invest ALL of my money in this. I just want a variety of investment options aside from the usual (which seems to be the friend of few right now anyway). I signed up for Prosper literally the day before the quiet period started. Maybe I’ll get grandfathered in? HA!

    I don’t like that Pertuity does not seem to give much lender info on their site. I’ve learned more about their requirements from this review and other blogs and reviews than I did from their website. They are great at marketing to borrowers though. Fun, animated graphics and everything. WOO!

    I like the ‘mutual fund’ type idea. As an investor with limited funds to invest (at least, from LendingClub’s standpoint), this can be a good start if I want to choose the P2P lending route as a type of investing.

    I would like to know more about the Pertuity Bucks thing they do. Lenders get some of these for free at sign up and they can give them to borrowers after reading their stories and such (I guess this makes it more p2p without the risk of investing directly in single loans). The ‘bucks’ given to a borrower are then applied to their loan principal. In other words, lenders can use these bucks to pay off part of the principal balance for a borrow they see fit. Seems kinda cool, but I’m not sure if/how lenders can earn more of these ‘bucks’ to give to borrowers. I wouldn’t want to BUY these bucks unless it was associated with some non-profit or something and I could count it as charitable contributions for tax purposes. After all, these are loans, not grants. I like the p2p lending idea because it can be people helping people, but lets not forget I’m in it for the money in the end.

    I like that they have strict restrictions for borrowers as far as who they choose to lend to (660 FICO or higher). That’ lowers the risk overall.

    I’m always pretty wordy with these things. If anyone has found more information on this, I know I’D love to hear it.

  2. Nickel

    Manshu: No, you’re not diversified in an asset-type sense, but you are diversified across different lenders. If everything goes kaput, then you’re screwed. But spreading your money around protects you from investing in a single loan and having it fail.

  3. Anonymous

    Loaning out money and owning a pool of loans without knowing where the money is going sounds a bit too risky to me. Just because the loan is spread across a number of borrowers doesn’t mean you are diversified. Recent history teaches us that.

  4. Anonymous

    This is interesting. I’ll have to investigate it more. I currently live in a state that does not allow investing in LendingClub, so this is a good alternative in the meantime.

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