Lending Club is an online social lending network which brings together lenders and borrowers to lend money among themselves at competitive interest rates.
As with Prosper, traditional banks are bypassed which may offer borrowers lower interest rates. The lenders in the lending club network often get higher returns on their money.
Getting a Lending Club Loan
To get a loan, borrowers must become a member of the website (no cost to join) and create a listing to request a loan. You can get an unsecured personal loan from $500 to $25,000 to help start a business, aid debt settlement with credit cards or students loans, or for any other purpose.
The loans are funded by other members of Lendingclub.com and the entire process happens online. Once a listing is created you will instantly receive feedback as to what interest rate you qualify for, and you then confirm the amount or pick a different amount at a different rate.
Lenders on Lending Club
Lending Club loans are funded by individuals or organizations. The LendingClub Corporation is also a lender. Lenders can choose to either lend directly to one or several borrowers. The lender browses through the various loan listing and decides who to loan money to. Lenders can also get a recommendation from lendingclub.com on whom to lend money to.
There are seven main types of loans, A, B, C, D, E, F and G. These letters refer to the credit grades assigned to borrowers based on their credit scores. “A” loans are from borrowers with the highest credit scores (deemed to be the lowest credit risk).
Qualifying for a Lending Club Loan
Borrowers must be a US citizen or permanent resident, and at least 18 years old with a valid bank account and a valid Social Security number. In order to qualify your FICO score must be at least 640 with a debt-to-income ratio (excluding mortgage) of no more than 30%. Your credit file should not contain any current delinquencies, recent bankruptcies (7 years), open tax liens, and charge-offs or collections account in the past 12 months.
Lending Club’s interest rates are determined by the borrower’s credit risk and market conditions. Current interest rates start at approximately 7% and can go as high as 18%. All borrowers are assessed a loan grade which takes into account the borrower’s FICO score, debt-to-income ratio and loan amount.
All loans are 3-year installment loans with fixed interest rates and equal installments. There are no penalties or charges if you decide to repay your installment loan early.
Borrowers pay a processing fee based on the loan grade (A-G) that ranges from 0.75% to 2.00% of the loan amount. The fee is deducted from the loan proceeds prior to depositing the loan into your bank account.