Lending Club Review

Lending Club is a solid choice for a loan. They are a publicly-traded company on the NYSE (stock ticker: LC). They consider traditional credit, income, and debt factors when making loans. They generally attract better credit profiles. They are a peer-to-peer lender.

They offer fixed-rate loans with either 3-year or 5-year repayment periods. APRs range from 6.95% to 35.89% APR (as of Dec 2019), with no prepayment penalties. These loans are all unsecured. They have over 3 million customers and have originated over $50B in loans.

Lending Club loans are made via WebBank (i.e. they rely on WebBank's licenses to lend). Lending Club makes loans in all states except Iowa. They fund loans through banks, financial advisors, institutions (hedge funds), retail investors, and securitizations.

Products

Lending Club offers personal loans from $1,000 to $40,000. The interest rates range from 6.64% to 28.80%. Your rate will be based on several factors including things such as the amount you want to borrow, how much you owe other creditors, and your credit rating. Lending Club charges a one-time origination fee of 1% to 6% of the total loan amount. This fee is based on your credit rating and only charged when you receive your loan. The average fee for grade A (the best credit scored loans) was 3.46% as of 2017 Q1. The effective APR when considering origination fees ranges from 6.95% to 35.89% APR.

They may also charge a late fee if your payment is more than 15 days late. The late fee is 5.00% of your unpaid payment or $15, whichever is greater. This fee is charged once for each late payment. There are no prepayment penalties.

The loans are all made by WebBank, a member of the FDIC. The rates and fees listed above are just estimates. The actual rate will depend upon your credit score, loan amount, loan term, credit usage, credit history. As an example, if you received a $20,000 loan with an interest rate of 7.99% and a 5.00% origination fee of $1,000. Your APR would be 10.19% and you would receive $19,000 and have 60 monthly payments of $405.43. The total amount of your monthly payments will be $24,325.80 for the $19,000 you received. The origination fee ranges from 1% to 6%. In 2018, the average origination fee was 5.2% (as of 12/5/18).

Rates and fees may change over time so always check Lending Club's website for the latest on fees, rates, and terms.

Application and Eligibility

To borrow through Lending Club, you must,

• be over 18 years of age,
• be a U.S. citizen or resident alien,
• currently reside in the U.S.,
• have a verifiable bank account,
• have a street, rural route or APO/FPO residential mailing address,
• have a U.S. social security number (SSN),
• have a valid government issued photo ID, and
• have an email address.

Lending Club facilitates loans in all U.S. states with the exception of Iowa and the U.S. territories.

The entire application process can be done online or over the phone. The application process basically takes four steps:

1. Check your rate. Answer some questions like requested loan amount, the purpose of loan, name, address, etc. There will be a soft pull of your credit so your credit score is not impacted.
2. Choose your offer. If you qualify you will be shown multiple loan offers with the loan amount, interest rate, APR, monthly payment, and loan term (either 36 or 60 months).
3. Complete the application and verify your information. Additional information will be collected like your social security number, income, and employment. Your application will then be reviewed. If you receive a loan through Lending Club, then a hard credit inquiry that may affect your credit score will appear on your credit report.
4. Get your money. If your loan is approved and backed by investors, your money will be automatically deposited into your bank account.

According to Lending Club, for the majority of people in 2018, borrowers received funds in as few as four days once they were approved.

Lending Club allows you to add a co-borrower to strengthen your application. This is fairly unique among personal loan lenders. The co-borrower will be responsible for the loan in addition to you.

What is Peer-to-Peer Lending

Peer-to-peer (P2P) lending is a process where borrowers are matched to lenders. It generally refers to online platforms that started around 2006. The original idea was that it could cut out the middle person (i.e. banks). People put money into banks and then banks lend them out to people. These lending platforms connect lenders directly to borrowers, making lenders more money and saving borrowers money. Some of this still happens today as individuals can sign up with a P2P platform and make loans to individuals, but the full reality is not as straightforward.

Individuals are not the only people making loans on P2P platforms. As the P2P platforms developed, a couple of things happened: 1) P2P platforms became very good at finding borrowers and taking applications online, 2) P2P platforms found more borrowers than lenders. To solve this inbalance, they expanded their lender networks to institutions. Many hedge funds and banks started to lend via these platforms. Today, there's a mix of banks, hedge funds, and individuals that lend via P2P platforms. Some platforms like Lending Club also lend their own funds. These funds generally come from debt or securitizations.

P2P platforms also encountered some legal issues around who was actually making loans and regulations around the investors. These issues resulted in many of them stopping making loans for a period. These issues have largely been settled and resolved. Today, P2P networks are solid options if you need to borrow money.

Lending Club

Lending Club is headquartered in San Francisco, CA. They were founded in 2007 and were one of the early peer-to-peer lenders. At the end of 2018, they had over 1,750 employees. They also have operations in Utah and Massachusetts.

Lending Club was charged by the FTC for hidden fees in 2018. Since then they have removed their "no hidden fee" statement and updated their website. It appears they have put processes in place to address these charges and are a solid choice if you need to borrow money.