Lending Club offers peer-to-peer (P2P) lending, meaning your personal loan is funded by individual investors contributing to your loan amount rather than borrowing money directly from the lender. There’s no guarantee that your loan will be funded even if you meet the basic qualifications, but you will find out within a few days of applying. Having been in business since 2007, it’s one of the original peer-to-peer lenders in the United States and also the largest.
Since its inception, Lending Club has originated a total of $13 billion in loans. Although the average credit scores of borrowers are relatively high, it does offer a variety of loan terms based on all types of credit grades. There’s also a good deal of flexibility in what you use your loan funds for. An important point to note is that because of the investor matching process, the application and funding process could take up to a week to complete.
Lending Club Personal Loans
You can borrow anywhere from $1,000 to $40,000 with a Lending Club loan, with repayment terms lasting over a period of three or five years. All loans feature a fixed interest rate, so you don’t have to worry about your monthly payments fluctuating. Depending on your credit history and financial information, your interest rate can start as low as 5.32% and go all the way up to 30.99%. That’s obviously a huge range, so your actual rate will vary based on your financials and what kind of loan you’re’ looking for.
In addition to interest, you also have to pay an origination fee that ranges from 1% to 6%. When you calculate interest as an APR, the range goes up to 5.99% and 34.34%, depending on your loan grade and repayment term. To get a better idea of how interest rates and origination fees are determined, here is Lending Club’s rate chart based on loan grade.
Compared to some of the newer online lenders, Lending Club takes a more traditional approach and largely focuses on borrowers’ credit and income rather than say, your education or employment field. The company’s stated minimum credit score is 600 but the average borrower actually boasts a score of 699.
A long credit history is preferred with the average borrowing demonstrating a full 16 years of credit activity, so Lending Club loans are not necessarily geared towards young borrowers. Incomes are also relatively high, with the average salary at $76,135.
Not surprisingly, the average borrower’s debt to income ratio is low, coming in at just over 18% without including individuals’ mortgages. You don’t have to completely eliminate the possibility of a Lending Club loan if you don’t meet these qualifications, but it is helpful to understand a baseline of what they’re looking for.
Because Lending Club is a peer-to-peer lender, the application process is quite different than what you might be used to. You can start off by checking your rate offers after submitting some basic information. Lending Club then performs a soft pull on your credit report, so there’s no impact on your credit score and the inquiry doesn’t show up on your report.
Based on that information, you’re assigned a loan grade along with your interest rate, origination fee, and APR. You’ll receive a few different loan offers with a variety interest rates and terms. You’ll also see the monthly payment associated with each one. However, once you make your selection, that doesn’t mean you’re automatically approved for the loan.
Remember, this is peer-to-peer lending in its purest form. Once approved, Lending Club then lists your loan and grade on its website for investors to review. While they don’t see your personal information, they can see your credit information, your job information, and the reason you’re borrowing the money. Investors then decide whether or not they want to fund your loan.
If your loan hits the 60% funding mark, Lending Club then begins to verify your personal and financial information. The company checks your identity and your financial information, so you’ll likely be requested to upload copies of relevant documents, like pay stubs or bank statements. Lending Club also takes the time to do a hard pull on your credit report, which does affect your score and becomes listed as an inquiry. It’s not a dramatic impact, but you certainly don’t want several hard pulls performed at one time.
In the meantime, the remainder of your loan has most likely been funded. If not, Lending Club does allow you to receive the funded 60% and reapply for the remainder of the loan amount; but this doesn’t happen often. You’ll usually receive funds within four business days of having your application materials verified.
Once You’re Approved
The cost of your origination fee is folded into your loan amount so make sure you take that into account before deciding on how much you need to borrow. For example, if you borrow $10,000 with a 4% origination fee, you’ll only actually receive $9,600. Give yourself a buffer to cover the origination fee if you need the full loan amount.
Lending Club charges a few other fees in certain situations. For example, there is a $15 charge for unsuccessful payments, like if your check bounces. If you don’t pay within the 15 day grace period, you’ll be charged a late payment fee of 5% of the overdue balance or $15, whichever is greater. Finally, if you decide to pay via check, you’ll be charged a $7 processing fee each time.
Lending Club’s History
Lending Club has been in the online lending business for over ten years and actually started off as a Facebook app. It actually helped pave the way for newer online lenders by registering with the SEC in 2008. Today, Lending Club is a public company offering car loans and mortgages in addition to personal loans.
Is a Personal Loan from Lending Club Right for You?
Before you pick Lending Club for your personal loan, do a quick check-in with yourself to make sure it’s right for you. Here are a few starting points to think about.
What’s your credit history like?
We know that the minimum credit score for Lending Tree is 600, but that’s far below the average borrower’s score of nearly 700. And with most borrowers having a credit report lasting 16 years, you’re going to need quite a bit of financial history in order to qualify. Of course, you could still get approved with below-average credit scores or a short credit history. But the interest range for Lending Club loans is quite broad, which means you could end up paying a lot of extra money to compensate for your less-than-stellar application.
How fast do you need money?
Compared to other online marketplace lenders, Lending Club can be a fairly slow process. From start to finish, it can take as long as a week. Plus, going through the application process doesn’t guarantee funding since you have to rely on multiple investors contributing to your loan. Other online lenders can process your application and release funds within a few days, sometimes even less.
Analyze your personal needs to determine whether or not this is an important factor for you. If you’re financing a new pool for your backyard, a few extra days may not make a huge difference. If, however, all of your kitchen appliances decided to go out at once, you might need that extra cash sooner rather than later.
How do other loan offers compare?
Lending Club, along with most other online lenders, only perform a soft inquiry on your credit report when pulling together your loan offer. That means you can shop around with several lenders without damaging your credit score. Remember to compare both the interest rate and the APR, which includes mandatory fees in addition to your rate. This is a helpful tool to weigh all options equally and see which looks like the better offer.
What does your financial future look like?
Also, think about how long you want to be making payments. A shorter term might result in higher payments, but at least you’ll finish up with the loan more quickly than by selecting a longer term. Depending on your long-term financial goals, you might not want to commit to a lengthy repayment. For example, you might be expecting to need a new car in a couple of years. If you’re paying down a personal loan over five or seven years, that payment may become burdensome when it comes time to apply for a car loan.
Depending on your debt to income ratio, it may even prevent you from getting the best terms available further down the road. Think about everything in your life, from housing to education and everything in between. What do you think your major expenses will be during the term of your loan and will you be able to afford them?
Getting a personal loan is a big decision, whether it’s through Lending Club or any other lender. Don’t be afraid to perform plenty of research to make sure you’re informed and financially prepared for everything that comes along with taking out a personal loan.