Passive Income: 23% return with Folio Investing

Here I am outlining my investment experience with the Folio platform and how I am able to achieve a 23% return.

Before you read this blog post, I highly recommend reading my post about LendingClub and getting 13% returns!

I started with LendingClub and am extremely happy with how everything has gone with their platform. I’ve spent a fair amount of time learning about LendingClub and investments in general. And investing 101 is to diversify, plus I love researching different ways to invest and wanted to try something new. That’s how I came across Folio.

Why to try something else?

Logical question, I’m happy with how LendingClub is going and will continue to use their platform for that reason. I’m not going with a whole new approach, rather, “not putting all my eggs in one basket.”

A big reason is simpl: it’s fun!

My main goal is to get high returns with minimal risk.

Ideally, I try to make my decisions based on data and predict the outcomes (probabilities). Looking at the graph above, you can see a common pattern: for a 36 month note there is a massive drop during the first year. This means a large amount of these notes go to default within the first few months, which is the bad news.

The good news is that after the first year your returns are very stable. Meaning, if someone paid all of the payments in the first year there’s a high probability they will keep paying throughout the loan process.

Below is another example with one of my Charged Off Loans to help make it more clear:

In this certain case, the person who received the loan never even made the first payment! They got $35,000 total from investors (including me) but never made the first payment. Worst part is; I can’t do anything about it.

How can I skip the risk of the first year?

This is the big question! How can we just skip those first 12 months and have everything running smoothly with no stress.

Luckily there is a way, by using the trading alternative in LendingClub (why I recommended reading my LendingClub post first). It’s essentially Folio is running their own platform and has integrated with LendingClub and using this option you trade (buy and sell) notes boosts up security options letting you know credit scores and more background information.

This is the interface below:

This is the Folio interface and is very similar to LendingClub’s interface, in the sense that you can search for specific loans that someone else owns or is willing to sell.

It’s just like an open market, some cases people ask for more money than they paid for (e.g. if the credit score is going up, it’s considered a great investment so they may ask for more money).

In some cases it’s hard to understand why certain loans are for sale, for me there are two scenarios:

  • A- The overachiever or those who are trying to make even more money so they sell as much as possible, if someone buys great, if not they keep getting the payments from LendingClub. In general I never invest in those cases.
  • B- The person who had something come up where they needed their money back right away instead of spread out over 2–3 years. So they sell most, if not, all of their portfolio (best investing case).

Now, the part that I love is, you can add all of these different criteria to your search, such as:

  • The loanee was never late for any of their payments
  • The loan has been active for X months
  • The credit score of the person remains the same
  • And then all the standard ones

Shown below is the exact search I constructed to heighten my chances of skipping first year non-payments.

And the first loan I did with this, I received all of my payments!

Also, looking at the image above, you can see all the specific attributes to narrow down your search; interest rates, credit score, etc.

Once you have created a custom filter and removed all of the early stage loans (<1year) you will get something like this:

Taking a look at the first row, we can conclude:

  • 36 month term
  • 24 remaining payments — good, the first year is over
  • Principal+Interest=$16.61 (just for this particular month)
  • Asking Price = $17.00 — Not good, the person is asking for a price higher than the previous point, they’re just looking to make money buy selling the loan. Up to you to decide if the lower risk is worth with the higher price

By improving my filters, I was able to find another that better fit what I was looking for (shown below):

Already this is looking much more appealing (at least from my point of view and my investment strategy).

Analyzing the first row again:

  • Term 36
  • 24 payments to go
  • Principal + Interest = $18.51
  • Asking Price = $18.36 — We have a discount :)

We can conclude we’re getting the following advantages:

  • The first year is over and this person was NEVER late, that already means a lot to me.
  • We will pay even less of what the price is. So we are even getting a discount

My results so far

I’ve started this new strategy a couple of months ago, which may not be enough for a formal conclusion, nevertheless, here are my current results:

I am getting a 23.35% return; way better than my standard 13% with LendingClub.


  • I am only investing in high return notes
  • So far none of those notes have been late

Final notes

Bad points

  • This is less passive than LendingClub. I am constantly looking for more loans to buy (manually)
  • The system does not allow for auto investing
  • You can’t even save your filters. I will say that the functionality and the tooling is very basic making the progress more time consuming
  • Less options, depending on your criteria and how specific you are may take some time to find decent loans to invest in.

Positive points

  • You can find discounts
  • You can skip the first year
  • In general (I believe) that the risk is lower


I will certainly keep testing my theory and investing with the method, and in a few more months I should be able to have more solid data to make valid theories. But this is not a replacement for LendingClub, I will keep using both systems in parallel and trying to get the most out of each platform.