Lending Club Peer to Peer Lending
Lending Club is an online peer-to-peer lender which provides a variety of loans, though borrowers typically use their loans for debt consolidation. Like its contemporaries, Lending Club quickly connects thousands borrowers in need of funds with lenders and supplements or eliminates borrowing from traditional financial institutions. Founded in 2007, Lending Club dubs itself as the most popular peer-to-peer lender in the industry. Considering the company funded over $13 billion in loans since its inception, it is hard to dispute that claim.
Lending Club also boasts an A+ Better Business Bureau rating as well. Lending Club says that borrowers using their services their debt and credit card consolidation services stand to save up to 33% in monthly payments compared to their previous debts.
Lending Club's basic requirements for a loan are standard compared to its competitors. Borrowers must be:
- At least 18 years old.
- A U.S. citizen or legal resident.
- Have a verifiable bank account.
Lending Club's application process is fast and easy, and potential borrowers receive terms and loan offers within minutes of submission. In addition, Lending Club does a soft pull of your credit report that does not affect your credit rating. And by consolidating your loans and debt into a single payment, borrowers can also quickly raise their credit scores. Lending Club reports that about 76% of its borrowers experience a raise in their credit scores within three months of receiving their loans.
Lending Club's approval process is fairly straight forward. The company runs an algorithm which considers your credit score, credit history, debt to income ratio and personal income. The average Lending Club borrower has an average credit score of 699, 17.7% debt to income ratio and about 16 years of credit history.
Lending Club typically approves potential borrowers with higher credit scores and longer established credit histories. Younger borrowers with lower credit scores, even if approved, are likely to face high interest rates when applying for a loan from Lending Club. However, if you do have a great credit score and low debt to income ratio, Lending Club will quickly approve you with highly favorable terms.
Lending Club offers loans from $1,000 to $35,000 and interest rates range from 6.6% to 29.9% (rates from 5.9% to 30% for business loans) range from depending on the applicant's credit score and other factors. Lending Club offers repayment lengths of 12, 24, 36, 48, or 60 months, so the terms are very flexible. Once approved, a borrower's loan will immediately be available for funding from investors. Depending on the size of your loan, many borrowers have their loans fully funded within a few hours. Once funded, most borrowers receive their loan in as little as one week.
However, one thing borrowers will have to be aware of is Lending Club's origination fee. The company charges an origination fee that typically lands between 4% and 5% APR, which is a hefty sum even if you were borrowing as little as $2,000. Though, borrowers with excellent credit could be charged an origination fee as low as 1%. Keeping this origination fee in mind will be very important to borrowers who need a specific amount of money. So, for example, if a borrower needs $20,000 he or she should request an extra 4% to 5% in order to receive the amount they require.
Repaying your Lending Club is simple as well. Most borrowers opt to have their accounts automatically debited but the company does offer great prepayment options. Lending Club allows borrowers to setup one-time extra payments which can be set up by calling their customer service. But, unlike most lenders, Lending Club encourages its borrowers to pay ahead so the company does also allow you to set up indefinite multiple payments until the loan is paid in full. Furthermore, Lending Club does not charge any prepayment fees so borrowers can pay their loans off ahead of time without worrying about being hit with additional charges.
Lending Club provides fast and prompt customer service over the phone Monday thru Saturday. In addition, the company provides support via multiple e-mails. Lending Club's website also features an "About Us" with a variety of brief articles responding to a number of frequently asked questions.
Potential lenders may stand to gain the most by aligning with Lending Club. Since 2007, the company has paid over $540 million to thousands of investors. Most of these investors earn a return of 5% to 9% per year. Lending Club investors can view a loan requests, called Notes, and choose which Notes they want to invest in. Furthermore, investors can fund Notes for as low as $25, which lowers their risk a bit. But in addition to lowering risk, the low minimum investment makes it easier for investors to create a diversified investment portfolio.
Another fact which lowers an investors risk is Lending Club's low default rates. Annual default rates are less than 1% for borrowers with the highest-quality loan grade. And borrowers with the lowest quality loan grades default just 15% of the time. In addition, the average annual loss rates on a diversified portfolio ranging from about 2.5% to 7.5%.
Lending Club's approval process is fast, easy and secure and they offer favorable rates. However, they aren't the ideal lender for those with weak credit scores or newly established credit. Even if you were approved under those circumstances, you would likely face higher interest rates than you would if you borrowed from one of Lending Club's competitors. Its varying origination fee isn't too appealing either if you don't have excellent credit. But if you do have a pretty good credit score and an established credit history, Lending Club is hard to beat. Your loan will be approved quickly, at rate that will be reasonable and a low origination fee. And your loan will be deposited in your account mere days after submitting your application.