LendingClub personal loan review

LendingClub overview

LendingClub is a publicly-traded company on the NYSE. It is a peer-to-peer lending platform and connects borrowers to individuals, banks, institutions, etc. that fund the loans. (You can learn more about peer-to-peer lending below.) LendingClub has over 3 million customers and has originated over $50B in loans.

Product overview

LendingClub offers fixed-rate, unsecured personal loans from $1,000 to $40,000 with either 3 year or 5 year repayment periods. The interest rates range from 6.64% to 28.80% as of December 2019. Your rate will be based on several factors, including the amount you want to borrow, how much you owe other creditors, and your credit rating.

Eligibility requirements

LendingClub considers traditional credit, income, and debt factors when making loans. It generally attracts those with better credit.

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 except in Iowa and the U.S. territories.

Application process

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

1. Check your rate. Answer some questions like loan amount, the purpose of the 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 LendingClub, 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 LendingClub, for the majority of people in 2018, borrowers received funds in as few as four days once they were approved.

Co-borrowers allowed

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.

LendingClub fees

Note: the rates and fees below are just estimates. The actual rate will depend upon your credit score, loan amount, loan term, credit usage, credit history.

Origination fees

LendingClub 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 the best credit score loans was 3.46% as of the first quarter of 2017. The effective APR when considering origination fees ranges from 6.95% to 35.89%.

Late fees

LendingClub may charge a late fee if your payment is more than 15 days late. The late fee is 5% of your unpaid payment or $15—whichever is greater. This fee is charged once for each late payment.

Prepayment fees

There are no penalty fees for repaying your loan early.

APR

Interest rates range from 6.64% to 28.80% as of December 2019.

Example costs

As an example of how LendingClub’s fees and costs add up, 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.

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 these platforms 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 no longer 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 imbalance, P2P platforms 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 LendingClub also lend their own funds. These funds generally come from debt or securitizations.

P2P platforms have encountered some legal issues around who’s actually making loans and regulations around the investors. These issues resulted in many P2P platforms stopping to make loans for a period. These issues have largely been settled and resolved. Today, P2P networks are solid options if you need a personal loan.

Some more about LendingClub

LendingClub is headquartered in San Francisco, CA. It was founded in 2007 and is one of the earliest peer-to-peer lenders. At the end of 2018, it had over 1,750 employees. It also has operations in Utah and Massachusetts.

LendingClub was charged by the FTC for hidden fees in 2018. Since then it has removed its "no hidden fee" statement and updated its website. It appears LendingClub has also put processes in place to address these charges.