As the largest peer-to-peer lending network, Lending Club is a solid choice for anyone seeking a personal loan
1. Introduction to Lending Club
Let's say you need a loan fast.
Do you bug your friends and family members for donations to your cause or do you jump through hoops and fight your way through red tape to get a loan from your bank or credit union?
Most of us aren't comfortable taking either route.
But if you're going broke just trying to pay down your high-interest credit cards or auto loan, you may not see any other options.
Think about this: the average American household has a whopping $15,675 of credit card debt, according to data compiled by Statistic Brain.
And since 57% of Americans carry a credit card balance every month, many of us are stuck paying crazy high interest fees on our unpaid charges.
Wouldn't it be great if you could just post information online about why you need a loan and wait for generous lenders to pour in with offers to help fund your dreams?
Time for the good news.
As the largest peer-to-peer lending network and biggest online lending company, that's exactly the concept behind Lending Club's success.
Lending Club has facilitated over $24 billion in loans as of December 2016.
From personal and business loans to auto refinancing and loans for medical procedures not covered by your insurance plan, Lending Club has transformed the lending market thanks to their simple, low-cost, and convenient process for both borrowers and investors of the modern, digital age.
Lending Club moved the whole loan process online and created a peer-to-peer lending network where investors back the loans of qualified borrowers and earn interest and returns as the loans are paid off every month.
Welcome to the world of easy lending and investing for those of us who live on our smartphones.
Stick with us today and we'll find out if Lending Club makes sense for your financial future.
2. So What is Lending Club Anyway?
Back in the old days, you used to have to apply for a loan at a traditional financial institution like a bank or credit union if you needed cash.
The whole process used to take stacks of paperwork to prove your creditworthiness, at least a day of waiting around to speak to a representative to plead your case, and then at least another month of waiting on pins and needles to hear if your loan was approved.
In its most basic terms, Lending Club is an online peer-to-peer lending company, which means it connects borrowers looking for a loan with investors willing to fund them.
All this is done via the secure Lending Club online platform.
Lending Club eliminates all the hassle of finding and getting approved for a loan by moving every lending transaction online so you never have to go through the rigamarole of an in-person meeting.
P2P lending became popular during the financial crisis because so many banks stopped lending money to otherwise creditworthy borrowers.
Lending Club was a pioneering leader ready to step in and help Americans pay down their debt.
How did it become the largest online P2P lending network?
2.1. The (super short) History of Lending Club
When former securities lawyer Renaud Laplanche was in the process of launching a new venture, he did what most of us would when starting an expensive endeavor: he relied on his credit cards to pay for everything.
After admitting the financial struggles of his early years to his friends, several of them told Laplanche that they would have lent him the money to get his business off the ground without the steep terms the banks and credit card companies gave him.
"That got me thinking," Laplanche told Forbes back in 2010, "Banks are middlemen."
Laplanche later sold his company (for $10 million, ps) and invested all his attention to starting up Lending Club.
Launched in May 2007 as one of Facebook's first applications, Lending Club connected with college-aged users who needed money and had very little credit history to back them up for a loan.
After receiving additional funding from venture capitalists, Lending Club became a full-fledged online peer-to-peer lending network.
To disrupt and rival the major brick-and-mortar lenders currently dominating the market by using the power of the internet to cut time and costs for borrowers.
It was this spirit that led Google Capital to invest $125 million for a stake in Lending Club.
We'd be hard-pressed to find another company that has a better alignment with how we are using technology to innovate
We're trying to be the good guys of finance and banking, and Google has a reputation of being the good guys of technology.
Lending Club raised $1 billion for their IPO in 2014, which was the largest technology IPO in the U.S. at that time.
Now they employ 1,000 people at their San Francisco headquarters and they show no signs of slowing down.
As a public company, Lending Club must report data about their lending process and fees, which ensures greater transparency for their borrowers and investors.
Lending Club became the first P2P lender to register its loans with the Securities and Exchange Commission (SEC) as tradable financial assets, which is exactly why their model is so unique.
2.2. What is the Lending Club Concept?
Borrowers can apply for a personal, business, or medical loan, or refinance their existing auto loan, using Lending Club.
The average interest rate for loans from major financial institutions currently hovers around 15% (or 23% if you have less than stellar credit).
Lending Club interest rates start at just 5.32% for well-qualified borrowers, which is quite a difference.
Investors view the details of your loan request on a virtual marketplace.
While they can't see personal identifying details, they can see facts such as how much you need, why you need the loan, and how risky your loan is to fund (based on your credit and financial history).
Investors and financial institutions simply browse these loan listings and choose which ones they want to invest in.
Borrowers typically have access to their loan money in one week and enjoy lower interest rates while lenders make money from the interest being paid back on the loans they chose to contribute to.
It's a true win-win for everyone.
2.3. Who are the Lenders in Lending Club?
Traditional banks rely on their customers' deposits to fund the loans of their other customers.
The Lending Club community of lenders backs the loans given to their peers and they see a profit for doing so.
"There are now well over 100,000 active investors in [over] 39 states enjoying the benefits of high-yield and broad diversification that were previously only available to banks and large institutional investors," Laplanche commented to Crowdfund Insider.
As long as you meet their investor eligibility criteria, Lending Club will allow anyone to become an investor/lender.
Here's how investing works:
Each loan is divided into many separate pieces called Notes.
Investors can purchase Notes in $25 increments.
Each Note gives the investor a portion of the loan repayments of principal and interest, according to Lending Club.
This means investors can fund pieces of several loans to diversify their portfolios.
This also minimizes investment risk if a borrower should default and stop paying back their loan.
Investors don't have to assume the risk of funding an entire loan when they can contribute as little as $25.
You can literally invest in four different loans—all ranging in risk—with just 100 bucks.
Lending Club Notes have historically earned annual returns between the 5% and 7% range.
That's not bad considering experts say you'll be lucky to see 4%–5% returns in the "era of diminished stock market expectations," Heather Long writes for CNN Money.
Lending Club investors receive between 2–5% of their total investment back in cash as borrowers make their monthly loan payments.
They can cash out or keep reinvesting their money for new loans.
Lending Club claims that 99% of investors who invest in 100+ Notes of relatively equal size see positive returns.
Solid returns, low volatility, and a steady monthly cash flow—what more could an investor ask for?
So really, how does this actually work and is it too good to be true?
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3. How Does Lending Club work?
As Matthew Zeitlin explains for The Daily Beast, "A typical bank takes in deposits and then lends out money, and keeps the difference between the interest rate paid to its depositors and the rate paid to its borrowers."
Lending Club is different; they connect lenders to borrowers in what's known as a peer-to-peer network. Let's go over what this means.
3.1. Peer-to-Peer Lending—What is it?
See, all loans facilitated by Lending Club are issued by smaller banks and financial institutions. Lending Club is partial to using WebBank, which is based in Salt Lake City, Utah.
Using an FDIC-insured bank is good news for borrowers as they earn the same consumer protection given to customers of the big banks.
Each loan is broken down into Notes, or pieces of the loan.
Investors can then buy a Note, or a piece of that loan, starting at $25.
Several investors fund the same loan to share the financial burden (and subsequent returns).
Lending Club's interest rates are typically lower than those you'd find at your bank or credit union because they don't have any brick-and-mortar offices (cutting down on expenses) and they reject around 80–90% of their applicants (so they minimize their loan defaults).
Bypassing the banks and going with a P2P loan is beneficial when you:
- Need a loan sooner rather than later
- Have been denied by a traditional lender
- Have impeccabIe credit
Let's talk about why your credit history matters.
3.2. What Does the Loan Grade Mean?
Based on your loan amount, credit history, and other factors such as your debt-to-income ratio, Lending Club assigns your loan a letter grade from A (least risky) to G (most risky).
Within each letter grade are five numbered sub-grades (A1, A2, A3, etc.).
So for example, A1 is the least risky type of loan whereas G5 is the most risky.
These grades correspond to how Lending Club sets their borrower interest rates:
Low-risk loans enjoy lower interest rates, origination fees, and APR.
The riskier Lending Club deems your loan, the higher these rates will all be, as you can see in this chart:
Investors will not be able to view the personal details of your loan and will instead be shown your Loan Grade as a way to standardize the process.
This also helps investors choose the level of risk they're most comfortable with.
3.3. How You Can Invest
To start investing with Lending Club, follow these steps:
Open an account on www.LendingClub.com
Answer a few basic questions and create an account online within minutes.
Transfer funds to yourLending Clubaccount
You'll use this money to invest in the wide range of loans available.
Build a diversified portfolio
You can filter out specific loan parameters for automatic investing or choose to invest in loans manually.
Diversity your portfolio by investing in loans graded all the way from A to G. Invest as little as $25 per loan.
Loans will not list the borrower's full name, address, or social security number.
Loan listings provide details for investors to make smart decisions, including specifics about:
- The Loan: such as the loan amount, purpose, loan length, loan grade, interest rate, and monthly payment
- The Borrower: their occupation, gross monthly income, employer history, homeowner status, and partial zip code and state
- Their Credit History: credit score range, delinquencies, debt-to-income ratio
Investors can ask the borrower questions online, such as how many people they're inviting to the wedding they need a loan for, so you're more comfortable taking on the loan.
4. Let the money roll in
Every month you'll receive payments of principal and interest as borrowers start to repay their loans.
You can either withdraw these funds or continue to reinvest in new loans.
Returns have historically ranged in the 5%–7% zone for average-risk loans.
4. What are the Services Offered by Lending Club?
Lending Club specializes in providing loan quotes within minutes without affecting your credit score.
Once your loan has been approved, investors will fund your loan and you'll receive the money you need.
Loans are offered in four categories:
4.1. Personal Loans
Even though Lending Club offers personal loans for home improvement projects, weddings, and much-needed vacations, 62.36% of Lending Club borrowers use their loans to refinance existing loans or pay off their credit cards.
Lending Club offers personal loans up to $40,000.
If you're struggling to pay down your debt or high-interest credit cards, Lending Club may be able to offer you an interest rate that's much lower than what you may already be paying.
It's not uncommon to see credit card balances with interest rates well over 15%.
According to a survey by Lending Club, borrowers who used a personal loan from Lending Club to consolidate their debt or pay off a high-interest credit card admitted that the interest rate on their loan was an average of 25% lower than what they were paying on their outstanding debt or
A lower interest rate means you'll be saving money every month while you work to raise your score, which takes a hit when you're close to maxing out your lines of credit.
In fact, 74% of Lending Club customers experienced an average FICO score increase of 19 points three months after obtaining their loan.
Apply online within minutes and receive your money in as little as a few business days.
You'll never need to visit a bank or branch to start or finish the process—the whole application can be completed online at your convenience.
Plus, Lending Club offers fixed monthly rates so your payments will never change or increase for the life of your loan.
4.2. Auto Refinancing
Was your credit score down in the dumps when you purchased your car?
Do you think you could qualify for a better rate now that you've established better credit history or lowered your debt-to-income ratio?
An auto-refinancing loan from Lending Club may be right up your alley.
It's a surefire way to lower your monthly payments or reduce the total amount of interest you'll be paying for your car.
Simply tell Lending Club about you and your vehicle and you'll receive multiple refinancing options to choose from.
After you choose the loan you like best, Lending Club will approve your application and pay off your current lender.
You'll have a lower interest rate and smaller monthly payments.
Rates vary from 2.24%–19.99% APR for existing auto loans.
Auto refinance loans are not charged any application or loan origination fees.
Plus, you can pre-pay your full loan amount without any fees or penalties and save yourself a ton in interest.
To qualify for a Lending Club auto-refinance loan, your car must be:
- A personal-use automobile and not an RV, motorcycle, commercial, or salvaged vehicle
- Less than 10 years old
- Have less than 100,000 miles
Your current car loan must have:
- An outstanding balance between $5,000–$50,000
- Been initiated at least three months ago
- At least 24 months of remaining payments
4.3. Business Loans
Are you finally ready to make your business dreams a reality?
Looking for someone to invest in your startup?
Whether you need the cash to purchase inventory or equipment or plan a whole new remodel, you'll have a repayment term that's between one and five years so your monthly payments are smaller than those of other lending companies.
Apply for a business loan at Lending Club in as little as a few minutes and get all of your capital—up to $300,000—up front in as soon as one week.
You'll have fixed monthly payments and never face a penalty for prepaying.
If you've ever tried to apply for a business loan at a traditional lender like a big bank, you know they generally require:
- Collateral for loans or lines under $100K
- A business plan or projection
- Visits to your business
- Costly appraisals or title insurance
Lending Club doesn't ask for any of this and allows you to complete the whole loan application online without ever visiting a branch or speaking with a loan officer.
To find out if you're eligible for a business loan, keep in mind that Lending Club likes to see that you've:
- Been in business for at least 24 months
- Acquired at least $75,000 in annual sales
- Avoided recent bankruptcies or tax liens
- Owned at least a 20% stake of the business and have at least fair or better personal credit
Lending Club will even let you open a business line of credit without hitting you over the head with membership fees.
You can use it whenever you want and give your business the flexibility to manage your cash flow as you grow.
Compared to traditional lenders, Lending Club's monthly payments are between $227–$1,000 per $10,000 borrowed.
They also have a total annualized rate between 7.77%–35.11%.
Some lending companies require daily payments that can be as high as $500–$4,000, with total annualized rates starting at 35%.
Whoever said you need to spend money to make money clearly didn't have a Lending Club loan.
4.4. Patient Solutions
There's nothing more frustrating than when your healthcare provider doesn't cover a procedure you really need, especially with today's ever-increasing insurance premiums.
Let Lending Club support your personal journey and help finance procedures relating to:
- Hair restoration
- Weight loss surgery
- Restorative, cosmetic, or orthodontic dental care
It can be difficult and embarrassing to speak with a loan officer in person about financing these types of necessary expenses.
However, by completing the loan process online with Lending Club, you'll never have to worry about explaining your reasons for these procedures.
Lending Club offers two loan options for patient solutions:
1. Extended Plans offer coverage for dental, fertility, hair restoration, and weight loss surgery.
You'll receive a:
- Loan amount between $2,000 and $50,000
- Interest rate from 3.99%–19.99% per year, depending on the size of the loan and your credit history
- Wide variety of loan terms: 24-, 36-, 48-, 60-, 72-, or 84-months
2. True No-Interest Plans offer coverage for dental and hair restoration procedures. You'll receive a:
- Loan amount between $499 and $32,000
- 0% APR for terms of 6-, 12-, 18-, or 24-months
- After the no-interest term expires, you'll be subject to a variable rate of 23.48% APR on the remaining balance. Pay off your balance before this period ends and you won't pay ANY interest on your procedure.
Even though most patient solutions applications receive a decision in seconds, you should hear from Lending Club no later than the next business day.
Once approved, your first payment won't be due for three to seven weeks so you can schedule your procedure stress-free.
Now that you know all the services Lending Club offers, how do you join their club?
5. Here's How to Use Lending Club's Services
You don't want to miss out on the competitive interest rates for the loan you desperately need.
Here's how to get started:
5.1. First, Complete the Application Process
Applying for a loan online with Lending Club will take less time than microwaving your pizza snacks.
Simply follow these steps:
Fill out an application on www.LendingClub.com
Answer a few basic questions about how much you need a loan for, what the money will be used for (i.e., credit card refinancing, home improvement, etc.), and what your credit score is like.
Then you'll be asked for details like your name, address, and yearly income.
A soft pull will not affect your credit score.
Checking your credit allows Lending Club to determine your interest rates quickly based on the credit rating they assign you.
Choose the loan you like best
If you're approved, Lending Club will show you multiple loan offers with different terms, interest rates, and monthly payment amounts.
Browse these and choose the one that fits your lifestyle best.
Wait for review and approval
Lending Club will review your application to make sure you're a qualified borrower.
They'll verify your banking information and credit history by accessing online databases with your info.
You can check your Account Summary online anytime to see the status of your loan.
Get backed by investors
The details of your loan will be posted on the Lending Club platform for investors and institutions to check out.
They'll see your loan grade, the reason for your loan, and the monthly returns they'll stand to gain before they decide to invest.
Receive your cash and start paying back your loan
Once enough investors back your loan, the money will be automatically deposited in your bank account within four business days.
You'll start to assume fixed monthly payments to pay off your loan.
Bonus: There's no penalty for paying off your loan whenever you want.
Lending Club makes it super easy to pay back your loan as the funds are withdrawn automatically from your bank account starting the following month.
As you can see, the whole process is fast and super convenient.
Most borrowers receive funds in as soon as one week.
Before you start fantasizing about what you would do with all that cash in your account, let's go over Lending Club's eligibility requirements.
5.2. Meet the Eligibility Requirements
Lending Club uses complex algorithms to determine borrower eligibility and behavior.
They continue to use the data they collect to improve the loan process for borrowers and lenders.
For example, when Lending Club analyzed their data, they realized that a select number of their borrowers with amazing credit deserved lower loan rates.
They gave them unheard-of interest rates at 4.99%!
Lending Club also added joint loan applications so couples could navigate the loan process and pay off their debt together.
Though Lending Club does not publish their eligibility requirements, they admit to rejecting 90% of their applicants.
This may seem extreme, but it lowers the risk for investors if Lending Club assures them of high-quality borrowers ahead of time.
This decreases the amount of loans in default, which would otherwise tank investor portfolios and collapse the whole P2P system.
Lending Club uses the following criteria to determine borrower creditworthiness:
- Credit score
- Credit history
- Desired loan amount
- Borrower's debt-to-income ratio
As of December 31, 2016, the average Lending Club borrower has a:
- 699 FICO credit score
- 18.29% debt-to-income ratio (excluding mortgage)
- 16.5 years of credit history
- $76,860 personal income (top 10% of US population)
- An average loan size of $14,739
Lending Club rejects applicants with credit scores under 600.
However, if you're above this threshold you should apply for a loan and see what happens.
Lending Club's other determining factors may overlook a lower credit score if your income is high and you're asking for a small loan.
6. What are Lending Club's Lending Terms?
Here are the Lending Club lending terms for personal loans:
- Loan amount: $1,000–$40,000
- Loan duration: Three or five years (or 36- and 60-month terms)
- Interest rates: 5.32%–30.99%
- Annual percentage rate (APR) range: 5.99%–35.89%
Check out the lending terms for business loans:
- Loan amount: $5,000–$300,000
- Loan duration: One to five years
- Interest rates range from 5.9%–25.9%
- Total annualized rate: 7.77%–35.11%
The Lending Club patient solutions terms are:
- Extended Plan Loan amount: $2,000–$5,000
- Extended Plan Loan duration: 24, 36, 48, 60, 72, or 84 months
- True No-Interest Plan Loan amount: $499–$32,000
- True No-Interest Plan duration: 6, 12, 18, or 24 months promotional no-interest period
7. What are the Fees and Penalties?
Lending Club charges personal loan borrowers an origination fee between 1%–6% depending on their loan grade.
A and B loan grades have the smallest origination fees while loans C through G pay the 6% rate.
A one-time origination fee of 0.99%–6.99% is taken out of the loan proceeds for business loans.
You'll never face a prepayment fee with any loan, which means you can pay off your loan sooner and cut down on the total interest you have to pay.
As far as penalties are concerned, don't be surprised to see:
- $7 processing fee if you want to pay your monthly payment with a personal check instead of letting Lending Club deduct the payment from your bank account
- $15 or 5% of your monthly payment (whichever is greater) for a late payment
- $15 for an unsuccessful payment (like if you don't have the funds to make your payment)
Investors will be charged a service fee, which goes towards maintaining the online accounts, collecting payments from borrowers, and distributing these payments to the loan's corresponding investors.
The fee will be equal to one percent (1%) of the amount of any borrower payments received within 15 days of the payment due date.
If borrowers miss a payment, investors do not have to pay a service fee.
Investors are also on the hook for a collection fee if their loan becomes delinquent.
After Lending Club goes through the collection process, the collection fee is deducted from any amount recovered. It may be:
- Up to 35% of the amount recovered if a collection action must be taken with respect to a loan and no litigation is involved, or
- 30% of hourly attorneys' fees, plus costs, if litigation is involved.
A collection fee is not charged if Lending Club is unable to collect payments.
8. How User-Friendly is Lending Club's Services?
Lending Club's services are intuitive and straightforward so you can complete the whole application process right from your computer or favorite mobile device anywhere you're connected to the internet.
Investors can set their portfolios on autopilot and have Lending Club invest in loans that meet certain criteria.
Or they can opt for Lending Club's easy-to-use manual investing tool to filter for specific loans they want to invest in.
Choose your loan terms, loan grades, and interest rate, or choose from a wide selection of filters to customize your portfolio exactly to your standards:
Lending Club makes it stupid simple to borrow and invest all from their online platform.
9. How is the Customer Service?
Lending Club has an A+ rating from the Better Business Bureau and hundreds of positive reviews thanks to their outstanding Customer Service.
To receive an A+ from the BBB—which is their highest honor—a company has to advertise honestly, embody integrity, and make good faith efforts to resolve complaints in a timely manner and to the satisfaction of their customers.
Check out these reviews from Lending Club clients:
10. Is Lending Club Safe and Legit to Use?
Lending Club is a fully-compliant American lender registered with the SEC.
This means it must publish detailed information about the rates associated with their loans.
This provides greater transparency for clients.
You even can browse their publicly available spreadsheets about prospective borrowers (though this information will be anonymous).
Since Lending Club completes all their transactions online, they assure their clients that they never sell, rent, or distribute the information and data they collect to third-party websites for marketing purposes.
Unlike applying for loans with other companies, this means you won't have to dodge calls and flyers in the mail from random companies that purchased your information.
Receiving the highest grade awarded by the BBB (A+), Lending Club is totally safe and legit to use.
They've even been featured in respected online publications such as CBS News, CNN Money, and TechCrunch.
11. What are Lending Club's Strengths?
Lending Club fills a need in the American lending marketplace for borrowers who don't want to deal with the hassle of (or have been denied by) the big banks and lending institutions.
Here are Lending Club's top three strengths:
11.1. You need a minimum 600 credit score to borrow
Since Lending Club has such strict borrower criteria—including a minimum 600 credit score—investors know the pool of well-qualified borrowers is less likely to default on their loans.
The banks and major financial institutions have to budget for a percentage of their loans going into collections.
They then have to charge their other clients higher interest rates to cover the costs of these loans in default.
Investors can feel confident knowing Lending Club borrowers know how to maintain their financial accounts as reflected in their good credit scores.
This also ensures lower interest rates for borrowers.
11.2. You can be an investor
Investors make up the backbone of the Lending Club concept and directly fund the P2P network.
Lending Club allows investors to pick and choose the best loans to contribute to with as little as $25.
After you pay off your Lending Club loan, you can apply to become an investor and help others while you make a profit.
11.3. Debt consolidation loans help most folks
Most customers take advantage of the low rates offered by Lending Club to consolidate their debt and provide financial relief to their stressed-out wallets.
Since Lending Club doesn't have to maintain the overhead expenses of operating branches across the country, they have lower administrative and marketing costs compared to traditional banks.
Their streamlined online process also cuts down on paperwork and time.
This means they can offer lower rates than what you'd typically encounter with bank loans.
With a debt consolidation loan, you'll be able to combine all your monthly debt payments into one single, fixed, low-interest payment and get rid of your credit card debt once and for all.
12. What are Lending Club's Weaknesses?
Despite all the positives associated with Lending Club, there are a few downsides, such as:
12.1. You may not meet their strict borrower criteria
In an effort to cut down on the number of loans that default, Lending Club likes to keep their borrower pool flush with high-credit scores.
They don't approve loans for people with FICO credit scores below 600.
Typically, the average Lending Club borrower has:
- A credit score well above average (think: 700 range)
- 15+ years of credit history
- A debt-to-income ratio under 20%
- An average yearly salary above $70,000
- No current delinquencies, bankruptcies, or tax liens
You should apply for a loan with Lending Club even if you don't meet all their eligibility criteria on the nose—the application process is totally free and the Lending Club algorithms may like what they see in your loan request and send funding your way.
12.2. Some will experience high interest rates
Lending Club publishes the average interest rates for their previous quarter, which are currently:
- 12.61% for 36-month loans
- 17.28% for 60-month loans
- 14.21% for all loan terms
While these interest rates are low compared to interest rates from the major banks, certain borrowers could see interest rates as high as 35.89% APR for a 36-month loan.
Generally, higher interest rates correspond with riskier loans.
This means your credit score, debt-to-income ratio, or other financial factors used to determine your loan grade weren't deemed as safe to the Lending Club algorithms as those from other borrowers.
If your credit information suggests you're a lower credit risk, you'll receive an offer with lower interest rates.
To qualify for the lowest rates, you'll need:
- A high credit score
- A low percentage of total outstanding debt compared with your income
- A long history of credit with significant successful credit lines
To avoid high interest fees, follow these tips:
- Don't apply for the maximum loan amount Lending Club will offer; only apply for as much as you need and you'll be seen as less financially risky.
- Go with the 36-month (3-year) loan and skip the 60-month (5-year) option. You'll save two years worth of higher interest rate payments this way.
12.3. Their services are not available nationwide
Lending Club cannot accept loan applications from residents of Iowa, West Virginia, Guam, or Puerto Rico.
12.4. Verification process may take long
Even though the application process only takes a few minutes to complete online, Lending Club still needs to verify your information and evaluate your creditworthiness before you receive your loan money.
Lending Club will base their approval on a number of factors, including:
- Your credit score
- The information you provide on your loan application
- The financial data received from all three credit bureaus
- Information that predicts the likelihood that you'll make on-time monthly payments for the life of your loan
Lending Club says the entire application, approval, and funding process typically takes about seven days.
Once your loan is approved and backed by investors, your money is electronically deposited into your bank account.
It may take a few more days to have access to your funds depending on your specific bank.
13. Does Lending Club Run Your Credit Score or Affect It?
Lending Club will offer you loans based on a "soft" credit inquiry.
These checks of your credit history do not affect your credit score.
However, before your loan is completely processed, Lending Club may run a "hard" credit inquiry, which has the potential to lower your credit score by up to five points.
Lending Club needs to run the hard check to vet your personal financial information before releasing the funds of your loan to your bank account.
14. Frequently Asked Questions about Lending Club
Before you reach out to a Lending Club professional, check out the top four FAQ:
- 14.1. How do I pay back Lending Club?
Lending Club not only makes your loan application process easier, it also takes all the thinking out of scheduling and making your monthly loan payment.
Every month Lending Club will send you a friendly reminder about your upcoming payment.
This will give you time to make sure you have enough money in your account before your due date.
When your payment is due, Lending Club will automatically deduct it from your bank account.
While you may be tempted to take back control and pay by check, Lending Club will hit you with a $7 processing fee to do so.
Automatic deductions give investors more confidence that their loans will be paid back and they take the human error out of the late-payment equation.
Remember: If you need a little more time to make a payment, contact Lending Club's customer service at 1-888-596-3157, or email email@example.com.
Lending Club gives you a 15-day grace period before your monthly payment is considered late.
After that, you'll get charged a late payment fee of $15 or 5% of your monthly payment (whichever is greater).
- 14.2. What is the maximum I can borrow?
You can borrow up to $40,000 for a personal loan with Lending Club.
If you take out a business loan with Lending Club, you can borrow up to $300,000.
Patient solutions loans allow up to a borrowed amount of $50,000 for Extended Plans and up to $32,000 for True No-Interest Plans.
- 14.3. How long does it take for an application to be reviewed?
You can check your interest rate and the loan amount you qualify for online at Lending Club in just a few minutes.
Simply fill out a quick application and browse the loan offers you receive.
Lending Club may need to ask for additional information or verify financial documents before completing your application.
They'll add these items to your To-Do List which you can check throughout the process.
It should take about or less than a week for you to apply, wait for approval, and receive your loan money.
- 14.4. How does Lending Club make money?
Even though Lending Club doesn't operate any brick-and-mortar branches, they still need to charge their clients small fees to maintain their online infrastructure, pay for ongoing security protocols, and deliver outstanding customer service.
To make enough money to keep the lights on (and their shareholders happy), Lending Club charges borrowers an origination fee for their loans and they charge investors a service fee for maintaining their accounts.
The size of the origination fee depends on your loan's credit grade; it ranges from 1.1%–6.0% of the loan amount.
The service fee for investors is 1% on all amounts the borrower pays.
15. Final Notes
There's a reason Lending Club borrowers and investors are so happy: borrowers are offered interest rates much lower than those from a traditional brick-and-mortar bank and investors have the potential to earn higher returns than those playing the unpredictable stock market.
That's the beauty of a peer-to-peer lending network like Lending Club.
If you have the creditworthiness for a loan approval, you can pay off your high-interest credit card debt, inject new capital into your business, refinance that outrageous car loan, or finally fund the medical procedure you've been dreaming about.
When you can fill out an application online within a few minutes, why live with the high-interest monkey on your back instead of finally living debt free?