What to Expect When Borrowing from Lending Club

 

If you’re looking for a loan–and in particular, if you want to consolidate debt– Lending Club If you click this link and make a purchase, we earn a commission at no additional cost to you. can be an excellent option.

The peer-to-peer model allows borrowers to access loans at better rates than they could get through traditional banks because they are borrowing from individual investors, rather than monolithic banks.

What is Lending Club?

Consolidate your debt with a personal loan through Lending ClubLending Club is currently the largest peer-to-peer lending network, responsible for over $41 Billion in loans as of September 2018. While in the past, residents of Idaho and Iowa were not able to get loans through Lending Club, this is now an option.

More than 67% of Lending Club borrowers report using their loans to refinance existing debt or pay off their credit cards. The average interest rate for all loan terms hovers around 13 percent. Some are lower and some higher depending on credit history, income, and so on. Some of the top states with Lending Club borrowers include California, Texas, Florida, and New York.

What You Can Expect From Your Loan

The Lending Club loan application process is relatively simple. You can apply online in minutes by filling out an application indicating how much debt you want to consolidate.

Review your options for monthly payments and interest rates. Pick the consolidation option that works best for you. Your loan is automatically deposited into your bank account.

How Much Can You Borrow From Lending Club?

You can get loans ranging from $1,000 to $40,000, and get your money in as little as seven days. In some cases, this may take a little longer, depending on what information you need to provide. You can complete the entire process online or by phone.

Once your loan is approved and backed by investors, the money is deposited into your bank account. This step can take anywhere from one to several days depending on your bank’s policies.

Get started with Lending Club If you click this link and make a purchase, we earn a commission at no additional cost to you. .

Lending Club Rates and Fees

Lending Club interest rates vary between 6.46% and 27.27%, depending on the loan grade. Loan are graded from A to E with A being the best grade with the lowest rate. There are no application, brokerage, or prepayment fees.

There is an origination fee you pay for each personal loan. The fee ranges between 1 and 6% of the loan amount. How much you pay depends on your credit rating and what information you provided in your application.

Keep in mind the APR includes the origination fee. The fee also deducted from the loan when it’s issued, so the funds received when you get the loan are less than the full amount of the approved loan. Make sure to factor this when requesting the loan amount.

If you’re late on your loan payments, you may be charged a collection fee of up to 40% on all amounts collected on a delinquent loan in cases involving litigation. For cases not involving litigation, the charge is up to 30% on all amounts collected on a delinquent loan.

You can go on the website and check your rate before applying for a loan. According to Lending Club, checking your rate won’t affect your credit score. Additionally, applying for a Lending Club loan generates a soft inquiry, which is only visible to you.

Four Steps to Borrowing from Lending Club

For well-qualified borrowers, the process of applying for and receiving a loan is reasonably quick and painless. Here are the four steps you can take to get a loan through Lending Club.

Step 1: Check Your Rate

The Lending Club website If you click this link and make a purchase, we earn a commission at no additional cost to you. asks you to specify the amount of money you are looking to borrow, the purpose of the loan, and your (self-reported) credit score.

Once you click “Check My Rate” you are then asked to provide some more information, including your name, birthdate, mailing address, and annual income. (As the website points out on this page, checking the rates available to you will not affect your credit score.)

Once you click the “Get Your Rate” button after providing this information, you are either approved or denied for your loan. If you are denied at this point, it is likely because either your credit score is below the minimum score of 620, or because the amount you want to borrow represents too much debt compared to your income.

If you are approved, you will see your interest rate and monthly payment for the specific amount you have requested. In addition, you’ll be shown other loan amounts for which you may have qualified. For instance, if you ask for a $2,500 loan, you may also receive approval for loans that are higher or lower than that amount.

You can compare the loan payment amounts and terms, which will range from 36 to 60 months, to see what will best fit your needs. Once you have selected the loan you want, you will click on the “Get Loan” button to move on to the next step.

Step 2: Provide Personal Information

Lending Club needs to know your Social Security number, employment, and housing status to verify your identity. The website secures this page with 128-bit encryption, so it’s safe to provide such personal information.

Once your personal information has been verified, you are presented with the terms of the loan, which you must agree to by e-signing your name to the loan application.

Thus far, all you have done is qualify for the chance to receive a loan. You have to remember that Lending Club is peer-to-peer, so there is not yet any money available to you since investors have not yet decided to loan you money. What happens next is that your loan becomes open for funding so that investors can choose to fund your loan.

Step 3: Receive Funding

Once your loan has been approved, it will be ranked with a letter from “A” to “E” to approximate your risk of default. Your loan will then be open for funding for a listing period. Investors can choose to put as little as $25 toward any particular loan, which means your loan will be funded by a number of different lenders.

A loan with a lower risk of default will be more likely to attract lenders than E loans. However, more than 99% of approved listings on Lending Club receive full funding within 14 days.

If you reach the end of the listing period without receiving a full commitment, you will be offered the amount committed as a loan, provided it is at least 60% of the requested amount, and at least $1,000. (This is a rare phenomenon.)

In most cases, funding happens very rapidly.

Step 4: Verify Your Identity and Banking Information

The final step to receiving your Lending Club loan will require the most legwork. Lending Club asks that borrowers who have reached this step to submit a variety of paperwork electronically to prove income.

You may be asked to submit anything from tax returns to pay stubs to bank statements. Each borrower is different, so you may be asked to provide any or all of these items. Also, Lending Club will need to verify your bank account, which it will do by making a small trial deposit of less than a dollar into the account.

Once the deposit has been made, you will log back into Lending Club to verify the trial amount on their site. This bank account will be where Lending Club deposits your loan once the funds become available.

Finally, Lending Club may also run a hard credit inquiry on you. While simply checking your rate to get the ball rolling with Lending Club does not affect your credit score, this hard inquiry will lower your score for a few months. If you do take a loan with Lending Club, it’s a good idea to wait at least six months before applying for another loan to let your score recover.

Lending Club Rates and Fees

While Lending Club advertises rates as low as 6.46%, it is improbable that you will see a rate that low. It is only available to individuals with near-perfect credit. Even borrowers who have an A grade loan may pay as much as 8.81% APR for a 36-month loan. Borrowers whose loans are graded D or E may want to think twice before signing up since the interest rates can go up to 27.27%.

In addition to your APR, it’s important to remember that Lending Club charges an origination fee of between 1 and 6% on each loan, depending upon your credit. The origination fee is how Lending Club makes its money. This is something you need to take into account when you request your loan. For instance, if you need to have exactly $5,000, you should apply for $5,260 to compensate for the 5.2% average origination fee.

Paying Back the Loan

One month after the loan is deposited in your bank account, Lending Club will begin automatically debiting your monthly payment from the same account where the loan was deposited. If you do nothing, your monthly payment will continue until the loan is paid off.

If you want to make extra payments or pay the loan off early, there are no prepayment fees. You need to call Lending Club at 1-888-596-3157 to arrange extra payments or an early payback.

What If I Can’t Make a Payment?

While all borrowers have a 15-day grace period to make payments with no penalty, interest will accrue on your loan daily. If you accumulate extra interest because you delayed your payment, you may end up with an additional payment at the end of your loan term.

Payments that are not received within the 15-day grace period window are subject to a late fee. Depending on how late your payment is, your loan may be sent to a collection agency to recover the loan proceeds owed to investors.

Keep in mind that your loan repayment record will be shared with credit bureaus. As such, this can either positively or negatively affect your credit score. All late or missed payments as well as other account defaults will be reported and may affect your credit.

Alternatives to Borrowing from Lending Club

If Lending Club denies you a loan, there are some other options you may want to consider.

But before you move on to other lenders first review your credit report and make sure there are no negative marks that would affect your ability to get a loan. You can request your credit report information for free through annualcreditreport.com. Or you can review your credit score and report through Credit Karma If you click this link and make a purchase, we earn a commission at no additional cost to you. .

If everything checks out ok, consider these alternatives to borrowing from Lending Club.

Upstart

Founded by ex-Googlers, Upstart prides itself on offering fair and fast personal loans. Loan rates range from 7.74 to 35.99%. According to the site, borrowers save an estimated 23% compared to their credit card rates.

The company originated $2.9 billions in loans in 2017. You can borrow from $1,000 to $50,000. Get an estimate on your rate by filling out a quick questionnaire. This won’t affect your credit score.

To apply for a loan, you must be a U.S. citizen or permanent resident currently living in the U.S. There’s an exception for active duty personnel. Residents in all states except Iowa and West Virginia can apply for a loan.

Prosper

Another alternative to borrowing from Lending Club is Prosper If you click this link and make a purchase, we earn a commission at no additional cost to you. . This was one of the first peer-to-peer lending platforms and has grown to $14 billion borrowed since its inception in 2005.

Loans have fixed three or five-year terms, and a single monthly payment with no pre-payment penalties. Fixed-rate loans range between $2,000 and $40,000.

The application process is fairly quick, and you can choose the offer with the terms that work best for you. Once you’re approved, the money goes directly to your account via direct deposit.

The Bottom Line

Depending on your credit-worthiness and your financial needs, Lending Club can be an excellent option for an unsecured personal loan. This is particularly true if you need to refinance a loan with unfavorable rates or consolidate credit card debt.

Take a look at the below example of using Lending Club to refinance a credit card.

It’s important to recognize that Lending Club is not for everyone. Even if you can qualify for a loan through their peer-to-peer network, it’s a good idea to crunch the numbers to determine if their rates and repayment terms are your best option.

Click here if you’d like to learn more about Lending Club and if it meets your needs. If you click this link and make a purchase, we earn a commission at no additional cost to you.

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About Emily Guy Birken

Emily Guy Birken is a former English teacher and respected personal finance blogger. She lives in Milwaukee, Wisconsin with her engineer husband and two high-energy little boys. She has written four books: The Five Years Before You Retire, Choose Your Retirement, Making Social Security Work For You, and End Financial Stress Now. Emily's thoughts on parenting and life in general are found at The SAHMnambulist.

Comments

  1. Lending Club truly is great – especially as an investor in this rate environment. Since I first heard of it I thought it was a great idea that people who have built up too much credit card debt have a more reasonable alternative to eventually being able to pay off the balance at a more realistic interest rate versus the 20%+ the large banks charge.

  2. Yasir Khan @ WealthKept says

    I think if you’re considering taking out a “personal loan” at all, you should probably reconsider. The idea that taking out a personal loan is ever an acceptable thing to do just baffles me. If you can’t afford it without taking out a loan, don’t buy it. I would even apply that to things like auto loans as well, but that’s just me.

  3. Florence C. Johnson says

    Thanks for info,
    I would like to be borrower,but how I can protect my investment. As I understand this is deal between me and lender. If I want in short period to return money from bad lander who always late. I don’t have instrument like mortgage or similar. I have to go on cort.