What is Lending Club?
How they work and how to apply
If you have been thinking about getting a personal loan, you’ve probably heard some of the buzz surrounding Lending Club. As one of the biggest places for personal loans online, this platform can be a great resource for borrowers with a particular need.
Typical Lending Club customers may use the services for things like debt consolidation and credit card payoffs. This peer-to-peer lending model used by Lending Club has become increasingly popular, but there are always positives and drawbacks to consider.
This guide has a round-up of everything you need to know about Lending Club, including pros, cons, and how it works.
What is Lending Club?
Lending Club was created in 2007. Lending Club was founded to be a peer-to-peer lending platform. In this marketplace type environment, borrowers are matched with investors who are willing to fund their loans.
Many Lending Club borrowers use the service for short term loans, including debt consolidation, student loan payoffs, credit card debt, and home refinancing. The typical Lending Club borrower has an established financial history, and they have excellent track records for paying their debts on time.
Lending Club is one of the biggest peer-to-peer lending marketplaces available. In 2018, Lending Club had $694.8 million in net revenue. Lending Club also hit a $10.9 billion loan origination record for the year according to their public release.
As a leader in the personal loan market, Lending Club had served over $130 billion in loans at the end of last year.
How Lending Club works
Lending Club is a service where borrowers are approved for a loan and then matched with potential investors. The investors are actually the ones who determine whether or not they will lend the money.
To help lenders determine eligibility, borrowers are each given a grade. This grade is calculated by credit score, income information, and previous payment history. This information is also used to show the interest rate ranges they qualify for. Typically, borrowers will receive an interest rate between 5.99% and 35.89%. On top of this, there is an origination fee of 1% to 6% taken off the top of your loan.
As a borrower, once you are approved for a loan, you will typically receive your funds within a week. Your repayment schedule will be spread out over 36-60 monthly payments.
The Lending Club borrower has good credit with a score that is over 700, a low debt-to-income ratio, and has a steady income. If you’re borrowing with a co-borrower, you may also qualify for more money since you can combine incomes.
Pros of Lending Club
There are several pros when considering Lending Club as a financing option. To start, you will typically receive a long-term loan. Your repayment terms can usually be stretched over a three to five-year period.
You will also only see a soft-pull when it comes to checking your credit. If you’re applying to a few lenders and shopping around, this is a really nice feature. Instead of dinging your credit each time a credit check is run, a soft-pull won’t affect your credit.
If you’re a borrower with a low credit score, Lending Club may not be for you. There is a minimum score of 600 to apply for Lending Club. If you are accepted with this low of a score, keep in mind that you will have to pay a higher interest rate.
If you have middle of the road credit, Lending Club can be a great option since you will usually be met with subprime loan offers from banks and other common lenders.
Lending Club drawbacks
When you’re working with an online lender, you are probably hoping for a pretty quick turnaround. One of the disadvantages of Lending Club is that it can take up to seven days for you to receive your funds. There are other forms of financing and lending that can give you access to money in as little as one business day. If you need your funds quickly, this may not be for you.
In addition to your interest rate that is determined by Lending Club, you will also need to pay an origination fee. This will take a piece out of your loan, so you should compare other companies and shop around for someone who doesn’t charge this fee if you’re concerned.
One of the drawbacks of Lending Club is that it can take up to seven days for you to receive your funds
As with most lenders, there are several other fees associated with a loan from Lending Club. There is a fee, for example, of $7 if you pay by check. If you set up automatic payments, there is no fee associated with paying your loan. Keep in mind that if you overdraw and there isn’t enough to pay your payment, you will be charged $15. Late payments will also be hit with a 5% late payment fee, a flat $15 or whatever equals more.
Lending Club application process
The application process is relatively simple, but you should keep in mind that you won’t typically see any funds before seven days. A typical Lending Club loan is between $1,000 and $40,000. You must have a credit score of at least 600 to be considered and also a credit history of at least three years.
In addition to these requirements, you should also have a fairly low debt-to-income ratio. Lending Club prefers applicants who have a debt-to-income ratio that is less than 40% for a single person, and joint applicants should be under 35%.
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