Personal loans: How it works
From the initial online application to when you receive the money, Lending Club has a quick turnaround time (7 to 10 days) when compared to the traditional bank loan process, and they let borrowers know up front what their chances are of getting good rates from the initial free online application. This is a great way to streamline the process and weed out applications right away; however, it also means that sometimes applicants are denied later based on their verification documentation at the end of the process.
This is how their P2P system works:
- Borrowers check their potential rates online by supplying personal information and loan details.
- Borrowers receive pre-approval (or not) and several loan offers; they can then choose an offer and complete the detailed online application.
- The loan is listed on the Lending Club marketplace and individual investors contribute to the loan amount.
- While the loan is being funded, verification documents are submitted and processed. Once the loan receives funding and approval, the money is deposited into the bank within 4 business days.
Many of the positive reviews mentioned that the application and funding process was even easier than expected and took less time than advertised.
Quality customer service
When I contacted the customer service team as a potential borrower gathering information, the experience was exceptionally positive. The over-the-phone wait time was less than a minute, plus there are several other ways to contact Lending Club’s customer service department. Their representatives were friendly, knowledgeable, and helpful not only in answering my direct questions, but in explaining more of the whole picture so I could understand everything (rates, terms, qualifications) better. I never felt pressured to complete an application, which went a long way toward my overall impression.
Lending Club Borrowing: Business Loans
In addition to personal loans, Lending Club also offers business loans between $5,000 and $300,000 for terms of 1 to 5 years. Their business loans are not for startup or new companies, but rather for borrowers who meet the following requirements:
- At least two years in business
- $75,000 in annual sales
- At least 20% ownership in the company
- Good personal credit
Business Loans: Line of credit
Lending Club also recently began issuing business lines of credit for the same amounts as their business loans. The advantage to a line of credit is that it offers businesses a flexible way to manage their cash flow over time instead of receiving a large amount of capital at once. For both loans and lines of credit, each borrower works directly with a client advisor to process and manage the funds and payments as needed.
Business Loans: Rates & fees
The interest rates for the business loans are fixed and range from 5.9% to 25.9%. There is a one-time loan origination fee (sometimes called a closing fee) of .99% to 6.99% that covers the cost of processing the loan. This is taken from the total loan amount when it is distributed, so take that into account when calculating how much money to ask for. There are no early payoff fees or penalties.
For a business line of credit, there is a 1%-2% draw fee that is added to the withdrawal amount every time the line of credit is used. So taking out $1,000 from the line of credit will mean actually taking out $1,010 ($1,000 plus 1%). The interest rates for a line of credit range from 6.25% to 21.85%.
Lending Club Borrowing: Find a loan that’s right for you
Whether you are interested in a small personal loan or a larger business loan or line of credit, Lending Club has an option for you, which sets them apart from several of their competitors who only offer one type of loan. The application process is the same for all loan types and the same principles of transparency are applied in every case. The online application is free and the response time is relatively quick, making it easy to find the right loan for your situation.
Lending Club for Investors
Lending Club Investor Review
- Investment restrictions/flexibility - 4.5/5
- Investment options - 5/5
- Availability - 4/5
- Screening process - 3/5
- Customer service/transparency - 4.5/5
Open an account
Because Lending Club uses a P2P platform, individual investors completely fund all of the loans they issue. There are no application or membership fees to become an investor; in fact, the process is quite easy. Simply fill in your personal information and choose which type of account you’d like to open, an investment account or a retirement account. A wide variety of account types are available, something not every competitor offers:
- Traditional, Roth, SEP, and Simple IRA
- 401(k) rollover
- Joint account
- Trust account
- Corporation account
Once your account has been set up, you can begin to build your portfolio through either manual investing, where you choose loans one at a time, or automated investing, where you set your investment criteria and your money is invested automatically across a range of loan types. These are fairly typical options for a P2P investing company that make creating a portfolio a convenient process.
Diversify and minimize loss
A note of caution
Investors should be aware that Lending Club does not have a strict minimum credit score limit for their borrowers, nor do they require collateral for their loans. This introduces more risk to the investments, but by using Lending Club’s loan grading system to rank loans by risk, investors can spread out their money and create portfolios that will see those consistently positive returns.
Although there are no annual membership or upfront application fees, becoming an investor with Lending Club is not without its cost. Lending Club charges a 1% service fee (or $1 for every $100) on any borrower payments received by investors, which is fairly common among competitors. However, if borrowers miss a payment, investors do not have to pay Lending Club the fee for that payment.
Not for everyone
Residents of the following states are not able to set up an individual account as an investor with Lending Club:
- New Jersey
- North Carolina
- North Dakota
There are also a few additional requirements in order to become an investor with Lending Club. You must have a gross income of at least $70,000 and a net worth of $70,000, or you must have a total net worth of at least $250,000. These are the minimum requirements set by several states and are actually lower than the income limits for other P2P companies.
Lending Club Investing: The bottom line
Lending Club’s standout features are the many account options and opportunities they offer to potential investors. The simple application process and loan grading system make it easy to get started with a diverse portfolio. However, there are a few requirements that may not make Lending Club a good fit for all investors, and the additional risk factors should also be taken into consideration. Overall, Lending Club offers a solid investment opportunity for both seasoned investors and those new to the process.
Lending Club Customer Reviews
The majority of the reviews found online for Lending Club are positive and speak highly of the ease and speed of the application process. The high number of positive reviews is backed up by the Better Business Bureau’s (BBB) A+ rating for Lending Club.
The small number of negative reviews center on two main complaints: First, that Lending Club wasn’t obvious and upfront about their origination fee and it caught people off guard. It appears that Lending Club has since worked to state that fee more clearly on their website, and the number of those complaints has lessened considerably over time. The second complaint that showed up consistently was that customers were frustrated when they received pre-approval and went through the entire process before being denied because of something in their verification information.
"Super easy process! I applied on Monday and funds were in my bank account by Thursday night. All they required from me was verification of my bank account, bank statements, and email. I was asking for a $3,500 loan to consolidate a couple high interest credit cards. The only negative I see with Lending Club is that they do hold out a small fee of 6% (which kinda sucks) so I ended up being offered a loan for $4,200 which I accepted. Other than the fee, I think Lending Club is a great company and I will most likely be working with them again in the future. Nobody from Lending Club had to call me and I received updates throughout the week by email. I'm not a huge fan of talking to people on the phone, so the email updates and notifications was very pleasant. I would highly recommend Lending Club to anyone who is needing to consolidate debt. Just remember the small fee they take out, so you may want to request a little bit extra than what your exact need is. Overall, it was an A+ experience."
- Snakewrangler86, 3/28/16, Credit Karma
"I have never had such an awesome experience with loan companies. This one takes the cake by far. I applied after hours on a Tuesday and was contacted the very next day with questions in regards to my application. They were with me every step of the way. Even calling their office was easy and quick! I was never on hold for longer than ten minutes and everyone that I spoke to was nice and friendly. They actually cared about you as a customer and a person. I got confirmation that I was approved on Friday and my funds were in the account the next Monday. I have told my fellow coworkers about how this company is awesome and if they need a loan that they should contact them. Definitely will go with them in the future if I ever need another loan.'
- Kara S., 10/27/15, Better Business Bureau
"I had been receiving daily emails from Lending Club about their services, so decided to apply to consolidate and pay off my credit card debt. I was pre-approved, submitted all requested documentation, and the loan was fully funded by investors. I then received noticed that my loan was denied because of insufficient income and existing revolving balances. First of all, I was approved for the loan based on my income and now it is denied on that same basis? My documentation supported the income I reported in the pre-approval application, so why was it pre-approved if the income was insufficient? Secondly, I applied for the loan for debt consolidation and then was denied for revolving balances? Those were the balances I was planning to use the loan to pay off! How is one supposed to consolidate debt if the existing debt prevents them from getting a consolidation loan? I have written to them to appeal the decision, but I don't know if anything will come of it. The experience left me in serious doubt of their pre-approval process and their review process. I would not recommend them for debt consolidation loans."
- Anonymous, 1/29/16, Credit Karma
"I applied almost 3 weeks ago, and still don't have funds in my account. Their initial contact to me was through a "pre-approved" e-mail, so I figured that it would be relatively quick. It hasn't been. Plus, they are not really up-front about how long it takes and what the process is. I got 2 emails basically right away- within 2 days- saying that my loan was funded and my bank account had been verified... but now all they tell me is that my loan is still being reviewed... for 2 weeks... So if you needed funds for some specific time-sensitive situation, I wouldn't use these guys. I'm trying using my funds for a move, which is happening next week. Probably will not use them again, and in fact considering just canceling and going with somewhere else."
- Broncoguy75048, 8/28/15, Credit Karma
Final Thoughts on Lending Club
Lending Club is a leader among P2P lending companies because of the overall ease and speed of their application process, the length of time they’ve been operating, and the variety of options they give both borrowers and investors. Potential borrowers can apply for either a personal loan or a business loan, both with potentially good interest rates and fees, and investors can choose between investing manually or automatically among a range of account types. Investors can count on seeing overall positive returns with a diverse range of investments, and borrowers can generally expect interest rates that are lower than those from a credit card. Although Lending Club has recently had some setbacks, their long history and extensive reach make them a solid choice, and customers can expect to have a positive experience overall.