Lending Club Personal Loans Review
Lending Club is a personal loan provider that isn’t a bank. Instead, it facilitates peer-to-peer loans, offering regular people the chance to invest in personal loans.
People looking for a loan to consolidate other debts, pay a bill, or meet another expense, Lending Club can help.
Learn how Lending Club works and how it can provide the loan you need.
About Lending Club Personal Loans
Lending Club’s unique way of funding loans means that the interest you pay doesn’t profit a big bank. Instead, regular people just like you get to earn some return on their investment.
Amount and Duration
Lending Club offers loans up to $40,000, which is more than enough to meet most needs that come up.
All loans from Lending Club have a payment period of 3 or 5 years. How long you have to pay will depend on the size of your loan.
The good news is that there’s no fee for prepaying a loan, so you can pay it off early if you want to save on interest.
Qualification Requirements and Fees
To apply for a Lending Club loan, you must meet a few requirements:
- Be a US citizen or permanent resident, or be living in the US on a long-term visa.
- Be at least 18 years old.
- Hold a verifiable bank account.
- If you meet those requirements, you are eligible to apply for a personal loan through Lending Club.
Once you apply for a loan, Lending Club will assign a risk rating from A through G and a sub-rating of 1 - 5. A1 is the best rating you can receive, G5 is the lowest rating. The better your rating, the better the interest rate on your loan.
Lending Club does charge an origination fee on its loans. The fee ranges from 1% - 6% and is deducted from your loan when it is issued. There is no application fee, so you won’t need to have money upfront to get the loan.
How Long Does It Take to Get the Money?
It takes roughly 7 days from the time you apply for a loan until the money arrives in your account. It can sometimes take longer if Lending Club requires additional information from you.
The reason that it takes so long for the money to arrive in your account is that Lending Club isn’t giving you the money directly. Instead, you have to wait for individual investors to fund your loan.
How Lending Club Loans Work
As was mentioned previously, Lending Club is a peer-to-peer lending website, not a bank. That means that Lending Club isn’t putting up the funds for your loan. Rather, other people are investing in your loan.
When you apply for a loan through Lending Club, they post the (anonymous) details of your application for investors to look at. Information such as the size of the loan, reason for applying, and Lending Club’s rating of your loan (A1-G5) are listed. Investors can then decide if they want to help fund your loan.
The community funds your loan, not a bank
If an investor wants to fund your loan, they can provide as little as $25, or as much as they want. That means that your loan is likely to be backed by a large number of investors. When you send a payment to Lending Club, it automatically gets divided and sent to each investor based on how much they contributed to your loan.
Anyone can become an investor on Lending Club so long as they live in an approved state and make a $1,000 minimum deposit. That means that your loan payments go to everyday people who want to help others out by offering loans.
How to Get Approved for a Personal Loan
When you apply for a personal loan the lender will need to look into your financial life. They want to make sure that you’ll pay back the loan.
When you apply, you’ll need to provide information such as:
- Date of birth
- Proof of identity, such as a driver’s license
- Social Security number
- Annual income
- Proof of income, such as bank statements or pay stubs.
- Verification of employment
While providing all of this information to a lender can be a hassle, it’s worth it. Companies that don’t request such information tend to charge much higher interest rates because they cannot determine default risk accurately. They charge higher interest to compensate for the fact that many borrowers may not pay them back. If a lender has a lot of information about you, the lender can better determine what interest rate to charge you. That usually results in you paying a lower rate.
Improving Your Chances of Qualifying for a Personal Loan
Once you’ve decided that you want to apply for a personal loan, you should work to improve your chances of qualifying. There are two big things to focus on when it comes to getting approved: your credit score and your debt-to-income ratio.
Your credit score is a numeric score determined using a formula that takes five factors into account:
FICO Credit Score Factors and Their Percentages
|FICO credit score factors||Percentage weight on credit score:||What it means:|
|Payment history||35%||Your track record when it comes to making (at least) the minimum payment by the due date.|
|Amounts owed||30%||How much of your borrowing potential is actually being used. Determined by dividing total debt by total credit limits.|
|Length of credit history||15%||The average age of your active credit lines. Longer histories tend to show responsibility with credit.|
|Credit mix||10%||The different types of active credit lines that you handle (e.g., mortgage, credit cards, students loans, etc.)|
|New credit||10%||The new lines of credit that you've requested. New credit applications tend to hurt you score temporarily.|
In the short term, you can improve your credit score by lowering credit utilization ratio. You can do this by avoiding using your credit cards or paying down any balance you’re carrying.
Another way to improve your credit score is to remove derogatory marks from your credit report. These marks, such as a missed payment or account in collections can really hurt your score. Try contacting the lender that placed the mark on your credit report. Many will be willing to negotiate a pay-for-delete agreement. Under such an agreement, you pay the balance of the loan and the lender removes the mark.
Related to credit utilization is your debt-to-income ratio. The higher this ratio, the less likely it is that you’ll be able to make payments on a new loan. That’s because all of your current income will be going towards paying your current loans. You can reduce this ratio by increasing your income or paying down your other loans.
Personal Loans from Other Lenders
If you need a personal loan but have decided that Lending Club isn’t for you, consider applying for a loan from one of these providers.
Santander Bank offers personal loans that range from $5,000 to $35,000. You can apply for a loan from Santander to consolidate other debts, fund home improvements, or to pay unexpected bills. All of Santander Bank’s personal loans have a fixed interest rate. That means that the interest will stay the same for the life of the loan, even if market interest rates rise. That way, you’ll know exactly how much you’ll have to pay over the life of the loan and your monthly payment never changes.
If you already bank with Santander, you can take advantage of a loyalty bonus. By enrolling in autopay from a Santander checking account you’ll reduce your loan’s interest rate by 0.25% automatically. That can result in big savings on a large loan when you take the full term to pay it off.
Upstart is a personal loan provider that puts a twist on the usual loan approval practices.
Like any lender, Upstart will look at your credit history and debt-to-income ratio when deciding whether to lend money to you. What makes Upstart unique is that the company takes other factors into account. Upstart looks at your education history, area of study, and job history when making a lending decision.
If you have held a stable job for years or are highly educated in a high-demand field, Upstart’s unique risk assessment protocol may be able to get you a better deal on your loan.
Discover is best known for its credit cards, but it’s also a bank that offers savings accounts, checking accounts, and personal loans.
You can borrow up to $35,000 from Discover and take as long as seven years to pay the loan back. That gives you the flexibility to pay back the loan on your terms since there’s no early payment penalty.
Discover offers a 30-day return policy, which allows you to return the loan in full with no penalties or interest. It also employs a 100% U.S.-based customer support staff. That makes it easy to get help when you need.
Lending Club is a great option if you're having trouble getting a personal loan from more traditional sources. Or, you might just want to avoid regular personal loans altogether because Lending Club loans are funded by other people and profits don't go to "fat cat bankers."