Lending Club Reviews For Investors And Borrowers

Joseph Meyer
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Table of Contents

{1}. Introduction
{2}. What is Lending Club?
{3}. Why Use Lending Club?
{4}. How does Lending Club Work?
{5}. How does Lending Club Make Money and why is it free for investors?
{6}. How much interest can investors make?
{7}. How much interest do borrowers pay?
{8}. Can I trust Lending Club?
{9}. How much can I earn from lending on Lending Club?
{10}. What is the Lending Club rating?
{11}. What happens if I want to sell my portion or my loan?
{12}. What happens to the principal on an individual loan?
{13}. What do I need to get started?
{14}. How do I invest through Lending Club?
{15}. Can I get a loan through Lending Club?
{16}. What is Lending Club’s Bad Credit program?
{17}. How safe is it to invest in peer to peer lending?
{18}. Is peer to peer lending regulated?
{19}. How long does it take to get started?
{20}. What is Lending Club and why would you want to use it?
{21}. How does Lending Club work?
{22}. What do I need to get started?

Lending Club At A Glance

If you’re looking to get started investing online, it’s probably a good idea to look at companies that enable investors to put their money up for peer-to-peer loans, like Lending Club. As I previously mentioned, investing in peer-to-peer loans isn’t very different from investing in other kinds of loans written by banks. But Lending Club enables you to put your money to work without having to worry about all the hassles involved in maintaining your own mortgage portfolio. In addition, you can also be confident that your money is working harder than it would in a traditional bank account. For example, Lending Club charges borrowers up to 0.6 percent of the principal balance, but investors can take that risk on for just 0.25 percent. Then, you can use the rest of your money to buy loans from other banks, which will, in turn, pay you higher interest than you could earn from an average CD account … with perks.

Is Lending Club Right For You?

Lending Club is a peer to peer lending platform. The platform facilitates the matching of borrowers with individuals or institutions seeking to invest.

For borrowers, you can use the platform to request loans for just about any purpose. The process to request a loan is fairly simple – you just need to fill out an online form which takes a few minutes to complete.

On the other hand, as a Lending Club investor, you can make loans out to borrowers and earn a higher rate of interest than you usually see offered by banks and other conventional lenders.

So, how does Lending Club work and what does the platform offer?

How Does Lending Club Work?

Lending Club caters to two different types of borrowers, prime and non-prime borrowers. Prime borrowers have the best credit rating and they are typically the ones who can get loans at the lowest interest rate. As the loan increases in duration, the interest rates increase. At the time of this writing, there are no Lending Club loans under 3 years in duration.

Non-prime borrowers tend to have lower credit scores and they are locked in with a minimum interest rate of 7.99% and a maximum rate of 35.99%.

Lending Club Review For Investors

Lending Club is the largest peer-to-peer lending company in the U.S. It allows individuals to borrow and lend money to other individuals, with the goal of minimizing banks’ markup.

The following Lending Club review will give you details about the price structure and lending procedure. We’ll also discuss my experience over the past three and a half years, after I signed up for the company.

Lending Club was founded in 2006, and began offering peer-to-peer lending in 2007. It now has on-time payments over 99.98 percent for A and B grade loans, and 83.43 percent for the C grade loans (their lowest grade for loans sold to the public).

If you’d like to use another online lending service, we recommend Prosper, which is a similar company to Lending Club.

Investor Requirements

A few of Lending Club’s requirements for investors are you can’t live in North Carolina, your FICO score must be 660 or above, and you can’t have had more than three credit inquiries in the last six months.

Lending Club IRA

Lending Club is an online financial marketplace, specialising in peer-to-peer loans. It allows investors and savers to lend to and borrow from each other in a secure business-to-consumer environment.

The company started lending in 2007, and for the first three years, it was almost exclusively used for business loans. The big shift, however, started in March 2010, when the platform began to accept consumer applications, as well. After that, peer-to-peer lending became a viable option for many people from a variety of backgrounds.

Its launch into the personal loan market enabled individuals and companies to borrow money in a way that was previously only available to the largest and most well established of businesses; companies that could afford to fund themselves by issuing their own corporate bonds.

The thing that makes peer-to-peer loan sites like Lending Club so attractive is their ability to offer borrowers rates that are below the ones that they find on the open market.

The traditional banking sector gives very low interest rates to those who have a lower credit score. The rich and well established have the money to buy the best, and they also have the capital to cover defaults, something that makes a lot of sense to the lender.

Choosing Notes to Invest In

As a lender on Lending Club you can buy notes from the platform either directly off your web browser or from the free downloadable application. Once you’ve made an investment, you can review the criteria and risk associated with the loans.

Investment criteria on Lending Club define the loan amount, the borrower’s credit score, the industries they work in, their credit history, and the purpose of the loan. The higher the risk in the borrower’s profile and the higher the risk associated with the loan purpose, the riskier the note. Notes with high risk are generally more expensive and have higher late payment penalties associated with them, but they also tend to have higher interest rates.

Borrower data and loan purpose are the two biggest factors on the criteria of risk to watch out for. Lenders and borrowers can’t change borrower profession, so that portion of a profile is fixed. But if you see a potential borrower working for a high-risk company, you could decide to invest in them if you’re confident in their ability to pay.

Let’s say you’re investing in a borrower to help them purchase a home. If the borrower has a low credit score and a short credit history, or if they are a first time home buyer, it could be a red flag for you.

Collecting Investment Returns

Lending Club is a peer-to-peer (P2P) online loan platform that uses innovative technology to try to lower the cost of borrowing and lending. First launched in 2006, Lending Club tries to simplify the borrowing and lending process for small businesses, individuals, and investors.

Here’s how it works: potential borrowers can browse through a variety of loan offers and apply for the one that’s right for them. Applicants can set their own terms and interest rates, and they can receive their loan as a lump sum payment or multiple payments over a specified period of time. And once the borrower has been approved for a loan, investors can then look through a variety of loans, which they can purchase as individual notes or bundles that are organized by risk level.

After your loan request has been fulfilled by a borrower, you’ll be able to view an invoice for the repayment of the loan, which is typically set to your Lending Club investor account monthly or weekly. The next time you log into your account, you’ll be able to withdraw the amount of your loan payment from any of your linked bank accounts or opt to reinvest the payment.

Lending Club has become one of the leading peer-to-peer online loans platforms on the web, helping thousands of investors collect their returns and helping thousands of borrowers pay down their debt.

Lending Club Loan Types and Loan Grading

Borrowers have a variety of loan choices with the lower scores being a choice with higher interest rates. Loan grading is an important factor in your ability to obtain the best rate. Every loan will come with a grade for interest risk level: A-B, C, D, E and F.

High Grades: A-B

If a borrower has a combined credit score above 680 along with verified income of at least 3x the monthly payment, then they are given this grade. Here, the borrower’s credit, income, and history show a low risk of default.

Low Grades: C-F

If a borrower has a combined credit score between 560 and 679, they will be offered this grade. The borrower’s credit score is not as strong as the borrower with the high grade A-B, but it’s not as bad as those with a credit score below 600.

Investors grade the loan as well based on the following criteria:

  • Color of the car with varying risks
  • Credit
  • Car condition
  • Income
  • Other factors

Buying and Selling Notes Before they Mature

The process of buying and selling notes on the Lending Club platform can be a bit confusing to new investors. This is because of the different ways that you can buy and sell notes. For example, you can sell a note that is coming due, or a note that is already months past due. In many cases, notes that are past due come at a significant discount to their value when they mature. In other cases, a note may have come due, but the borrower has not yet paid it back. For investors who choose to buy the note, then they can collect interest off of the borrower until the borrower finally pays back the loan. If the borrower does eventually pay back the loan, then the investor can choose to sell the note.

The Lending Club platform has recently been updated to include the ability to sell notes before they mature, which allows investors to profit off of notes before they end. While there are a few reasons why you’d want to sell notes before they mature, the primary reason is that you believe that the borrower will not pay back the note.

Risks with Lending and How to Minimize Them

Lending Club is the world’s largest peer-to-peer, or P2P, personal lending service. This means that you use the service to lend your money out to other people instead of a bank. According to Lending Club, statistics show that P2P lending is significantly safer than traditional avenues of investing.

When you invest in peer-to-peer lending, you don’t deal with brokers or investment advisors. Instead, you deal directly with other people through the online service. These people are the ones you will be loaning money to.

When you invest money in peer-to-peer lending, you can choose to loan it to people who are seeking funds for personal reasons, such as paying off credit cards or college loans. Whether you decide to lend money for small loans or larger loans, you will earn money from your investment.

Lending Club reviews show that unlike many P2P lending services, this one is regulated by both the SEC and the SEC. The company is also audited by PricewaterhouseCoopers and the security is American Bondurant Company.

However, peer-to-peer lending is not without risks. As with other investments, there are inherent risks to this method of lending. Potential risks, including fraud and the possibility of not receiving your money back, should be noted before you begin to form your lending strategies.

Investor Fees

Lending Club fees are broken up into two categories: platform fees and transaction fees. The platform fees include the borrowing fee, the safekeeping fee, and the loan servicing fee. Transaction fees include the funding fee, which covers the cost of transferring funds from your bank account to your Lending Club account, and the loan servicing fee, which covers services that aren’t covered in your Lending Club account.

You can view all of your Lending Club accounts, including your loans, on the investor dashboard ….

Lending Club Review: For Borrowers

Lending Club's online lending platform makes it easy for individuals to obtain loans from investors or other borrowers. It protects investors by matching borrowers with potential investors. Its risk-based model helps users find the best interest rates and the best possible loans. For this reason, we feel it’s an excellent site for future borrowers and investors to look into.

Borrowers

Prior to applying for a loan, credit reports should be obtained from each of the three major credit agencies (Experian, Equifax, and TransUnion). This will show the borrower how they score and any negative or positive experiences they’ve had in the past.

Borrowers will set a maximum within which they’re willing to go and the maximum interest rate they’ll accept. This builds trust because it will indicate to the investors they are willing to pay a reasonable interest rate and not overspend on scenarios like a lavish vacation.

The borrower will look to apply for new loans regularly because the rates are always changing. If the rates are better, investors have the option to accept the new terms or not take part at all.

Lending Club also offers foreign language versions of this site, such as Spanish, Chinese, and French. This is great for people internationally looking to take part in this opportunity.

How the Lending Club Loan Process Works

Lending Club is one of the most innovative peer to peer lending companies that exist today. In this article, I’ll disclose how the lending club loan process works.

If you’re looking for a great way to diversify your investment portfolio or a simple way to earn some extra cash, Lending Club offers a unique method for investing in your community.

Although Lending Club orders their loans from lowest to highest interest, the process for that is a bit more complicated. I’ll explain it below:

This is one of the first questions that many people have, so it’s important that I cover it first. The answer is simply no. Your investing plan will not be affected in anyway by the number of loans that you choose to invest in. In fact, many people choose to invest with five or more loans in their accounts.

The flexibility of the platform offers a tremendous amount of opportunity for investors. While this may seem counterintuitive, the average net annualized return for investors that borrow is 5.1%. Not to mention, it can help you to diversify your portfolio by borrowing from multiple sources.

Profile of Lending Club Borrowers

Looking at the median incomes of borrowers in 2013 we can see that the median income of Lending Club borrowers is almost the same as the median income of all Americans. A borrower’s income is a big factor in our creditworthiness evaluation, and this data suggests that it plays an important role for both borrowers and investors.

Lending Club lends in every state except Alaska. In some states, like California, Texas, and New York, we have a very high share of the marketplace. In other states, we may only have a relatively small percentage of people that we're funding loans to. It's very interesting to compare this distribution of loans by state to the map of population.

Residents of some states are more likely to borrow on Lending Club than residents of others. One factor that may contribute to this is the median income level. Below, we've graphed the average loan amount versus the state's median income. Let's see if we can spot any lower or higher average loan amounts.

This tells us that borrowers in states with lower median incomes are borrowing at higher amounts. There is still a positive correlation between money lent and money borrowed, but it's not as strong as you would expect. This data doesn't imply that it's okay to lend in states with lower income, but it does make you consider whether other criteria might be contributing to your credit decision.

What Types of Loans Are Available?

Lending Club offers more than 300 different loan types, offering rates of interest from 6.6% to 35.89%. So the challenge is to decide which loan is right for you. The first thing you need to decide is how long you’re planning to keep your investment. The longer you plan to keep the loan, the more interest you’re going to earn on your investment. You also need to ask yourself about the risks. Though it can be a little time-consuming, we recommend shopping around for the highest interest rate you can find, then looking at the loan payments and considering the risks involved with that loan.

The loan types offered by Lending Club fall under two broad categories: personal loans and small business loans.

Personal Loans

As the name suggests, these loans are for individuals. The amount you can borrow is based on your annual income, where you live, and your credit score. Your credit score is also used to determine interest rate and the loan term. Lending Club’s rates of interest range from around 6.6% to 35.89%, but as you can see from the image, a large portion of the loans are in the 9-14% range. Those in the 9-14% range are generally loans of longer terms (most around 3-5 years).

Auto Refinancing

| How You Can Refinance Your Car FAST!

Opting for auto refinancing at Lending Club is an outstanding choice if you wish to finance your car.

The advantages of getting auto refinance loans through Lending Club are many. First of all, you can have the loan settled as quickly as the next day, depending on your requirements and your credit worthiness. Secondly, your payment amount will be highly predictable and consistent.

Since it is possible to refinance your car every two years, you can get some cash out of your car if you are short on money at a time.

This flexibility is the best way to ensure that you do not fall into a financial crunch at a given time. Also, the rate of interest is also quite low and the application procedure is quite easy.

Lending Club is the best place to consider for auto refinancing.

Loan Terms and Pricing

Lending Club offers various loan durations, from 3 to 60 months. Loans can have fixed or variable interest rates for your choice of risk profile. Loans for terms less than 3 years carry higher interest rates than standard loans, but have shorter terms so that payments are made on a more regular schedule.

When borrowers apply for a loan, they are actually applying to obtain a line of credit. The credit amount is determined by their unique credit profile and Lending Club’s assessment of the likelihood that the borrower will repay the loan. Although Lending Club provides a credit range that the borrower falls into, the actual credit line amount may vary based on the borrower’s unique credit profile. In addition, the borrower can borrow beyond the requested amount and pay only the interest.

The Lending Club Loan Application Process

Like all peer-to-peer lending companies, Lending Club wants to know the basics: your name, phone number, address, Social Security Number and employer. It also needs you to be 18 years or older, a U.S. citizen, have a current job and an open bank account.

The last requirement is Lending Club’s unique offering. Rather than you trying to figure out how to set up income and asset pay sources, the company does it for you. You only need to provide income documents such as a W-2 and a pay stub.

If you’re getting the loan at a bank, you have to set up your income and asset pay sources. And you may have to pay the bank to do it. Some Lending Club borrowers, however, still experience problems when it comes to setting up pay sources.

How I’m Investing Using Lending Club

So I have been fully paying attention to the Lending Club scandal on my blog and elsewhere. I have used Lending Club and Prosper as a passive investing method before, and I still am. I did my research before I decided to invest and everything checked out. And then it didn’t.

Since that time, I have invested in 35 notes and reinvested in others I have purchased over the past 2 years. I am now actively monitoring my accounts and the notes I have purchased.

The news of increased investor fraud has caused the notes I own to drop significantly.

I have looked at my account’s activity over the last hour. I have invested in 8 Personal Loans and 4 Notes. My highest interest loan is 5.52%. Every other loan is over 4%, and I do not worry about these loans because the borrower has between 35 and 45 payment and has already been repaid principal plus interest.

The note rates are lower because the credit worthiness of the borrower is not as high. The weaker borrower is not in default, but my return on these notes is between 3-5.7%.

Lending Club Notes

There are no shortage of online reviews and usually the most disturbing part, if you are one of the parties involved, is finding out that the other party is not satisfied with your performance.

So the first question is, why do we keep doing things that do not make us happy?

My first thought is that we are addressing this question from the wrong perspective. I am not saying that you should only do what makes you happy.

However, I think the first question should be, are the parties involved happy with the service provided?

Choosing Note Options

Lending Club gives you complete control over the types of loans you invest in or the loans you want to apply for. This is a major advantage over the traditional banks and lends a lot of credibility to the peer to peer lending model.

Lending Club gives you options to choose from loans in three different loan types – Prime, Subprime, and Blanket Loans. There are also additional options to choose whether you want to invest in the loans of borrowers with excellent or just acceptable credit scores. I have always invested in Prime loans as I get higher returns.

I use this in conjunction with the filters to choose the loan amount, term duration, borrower’s goals, geographic location and the middle credit score filter to find loans that fit my portfolio.

Furthermore, there are additional filtering options such as the type of bank the borrower is with, the borrower’s employment status, and income. One of the biggest advantages for me is the ability to filter on the employment status. I only choose borrowers who are employed as those are considered lower risk borrowers. This ensures that I don’t end up investing in high delinquency loans.

How Lending Club Fits in My Overall Portfolio

When you invest in stocks, you own a piece of the company. When you invest in real estate, you own a piece of the land and a building. When you invest in notes at Lending Club, you own a fraction of another person’s student loan, mortgage or personal loan. And you get paid back with interest over time.

Using a debt-based investment strategy has some distinct advantages, the most obvious being the safety. Although nobody wants to lose money, there is a limit to how much a company or a piece of property can lose. However, borrowers can default on a loan, meaning they can walk away from it with nothing to show for it.

This risk is mitigated when you invest in the company directly, but is not eliminated. When you invest in real estate, there is also some amount of risk that the property will not sell. Notes at Lending Club provide another layer of security, as you are guaranteed to be paid back. Even if the borrower defaults on the loan, you still get back your initial investment. And if the borrower manages to repay the loan, you will also get your investment back with interest.

You can also diversify your Lending Club investment strategy across dozens of notes in different borrowers and asset classes. This can help reduce your overall risk even more.

There are some things to remember about these different types of notes:

How Does Lending Club Compare?

Lending Club is a peer-to-peer lending platform that allows users to borrow and invest in debt. Similar to other peer-to-peer loan and investing platforms such as Prosper and Bondora, this site allows users to rate loans alongside the platform itself.

Taking a look at the lending club reviews, from both borrowers and investors, will give you a better idea if you’re interested in using the services.

The Bottom Line

Very small loans (starting at $ 2500) with a personalized approach.

Lending Club has become the largest peer to peer platform. Among its biggest strengths are:

The personalized service that is given to both investors and borrowers that have a track record of timely and full repayments.

The maturities are fixed at 3/5/7 years (other peer to peer platforms offer variable duration loans).

Lending Club has a broad variety of investment opportunities and different available loan types.

Features a personal profile with a detailed credit profile.

Allows for free and immediate withdrawals of capital.

Is a member of the National Mortgage Licensing System (NMLS).

Allows investors to re-invest interest-only payments.

Offers lower default rates than other platforms.

About the Author

The Peer to Peer Lending Group was founded in the fall of 2011 by a group of students at the MIT Sloan School of Management. The goal of our group is to bring the larger MIT communities together through meetings at which we can discuss our experiences with peer to peer lending, share our experiences, and provide a forum for people to ask questions. This process is intended to help students make an informed decision about whether or not to become peer to peer lenders and to make the best possible investment decisions.

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Lending Club is one of the easiest places to get started with peer to peer lending. I say “easy” because you only fill the website and confirm to a few things before you’re fully approved. The good news is that Lending Club is safe. They are rated among the top 5 safest internet lenders by the Internet Lending Association, the leading organization. They’re also FCC registered and have received multiple accreditations. You can read more detailed information in the Lending Club review on the Lending Insight website.