Lending Club is the world's largest lending marketplace for personal loans. It was launched in 2007 by Renaud Laplanche, who got the idea of starting a lending marketplace when he noticed the huge spread between the interest rate his credit card was charging on unpaid balances and the returns on his savings account.
Lending Club started as a Facebook application, which generated the buzz and investors Laplanche needed to take the concept to the next level. As of March 2016, Lending Club has funded over $16 billion in loans and helped over a million borrowers achieve their goals. On average, borrowers who refinance their debt through Lending Club lower their interest rates by 35%.
How Does Lending Club Work?
As with other peer-to-peer lending platforms, Lending Club cuts out the middle man, banks, by giving investors the chance to lend money directly to borrowers for a higher return. The actual loans are initially made by WebBank, a Utah-chartered industrial bank, but Lending Club uses the capital of individual investors to purchases the loans. Investors then receive the payments of borrowers plus interest. However, there is risk involved. If borrowers don't pay their loans, investors could lose their money. Lending Club makes money from charging borrowers and investors fees for its services.
What Are Lending Club's Interest Rates?
Lending Club assigns borrowers a score based on a 25-grade system, which will determine what interest rate they qualify for. Rates range from 5.99% to 35.96%. The average interest rate is 14.09%.
What are Lending Club's Fees
Lending Club does not charge an application fee; however, an origination fee will be taken from the proceeds of your loan before they are deposited into your bank account. The percentage of this fee ranges from 1.11% to 5% of the total loan amount and depends on the grade of your loan — which is, in turn, based on your credit rating. It is good to keep this in mind when deciding what amount to request, because you will need to factor in the origination fee to be sure the amount you actually receive will cover whatever it is you need to pay for.
Payments on your loan are withdrawn automatically from your bank account starting the following month. Alternatively, you can pay by check but an additional $7 processing fee is tacked on to each payment if you choose this route. You are free to repay the full loan amount at any time or make larger payments without risk of penalties or fees, but you must notify customer support in order to do so. If there is an issue with your payment, such as an error with your bank account or a bounced check, Lending Club will charge a $15 unsuccessful payment fee. There is a 15-day grace period before late fees are charged. Your late fee will be either 5.00% of the late payment or $15, whichever is greater. Significant lateness will be reported to the credit bureaus and, in extreme cases, sent to collection agencies.
How Much Money Can I Borrow from Lending Club?
Borrowers can apply for loans ranging from $1,000 to $40,000. Lending Club offers 36-month and 60-month loan terms, but you can always pay the loan off early with no prepayment penalty to worry about.
What Is Lending Club's Application Process Like?
Lending Club's loan application is processed online. Your first step is to check what rate you qualify by filling a short questionnaire. This will not affect your credit score. If you qualify, you will receive several loan offers from individual investors. Choose the loan you like the most and complete an online application form and data verification process. You will get a response within minutes and the money should be deposited in your bank account in as few as five days.
How Is Lending Club Better Than Other Lenders?
Lending Club provides better returns for investors and lower interest rates for borrowers than most traditional financial institutions.
According to a survey performed on 20,913 Lending Club customers, borrowers who used Lending Club to consolidate their debt reduced their rates by an average of 31%. Investors receive an average return of 9-10%, which isn't bad when you consider savings banks rarely give more than 1% on savings accounts.
The application process is simple and you can expect a quick response to your application. The catch is Lending Club rejects 90% of applicants, so don't feel bad if you're not immediately successful. Your credit score must be higher than 600 and your debt-to-income ratio must be below 25% to be even considered.