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Lending Club Review | Is It Safe?

3 lending-club-reviewsHere is a small write up on Lending Club and its functioning.

Read on to find the legitimacy of the company and also details about how it works and the loan application process.

A few tips for both lenders and borrowers are discussed, along with the pros and cons of the Lending Club.

  1. What is Lending Club?

Lending Club is a Public company in the United States of America.

It is the first of its kind P2P lending company.

P2P lending is short for Peer to Peer lending, where in the lenders and borrowers are matched directly.

Like any peer to peer lending company, Lending Club also operates online, thereby cutting a majority of the overhead costs in comparison to the traditional brick and mortar finance lending institutions.

The effect of operating online, with low overhead charges, is that the investors or the lenders get a higher rate of returns for their investment and the borrowers get the loans at lower rate of interest.

Lending Club is supposedly the world’s largest peer to peer lending platform. The company gives personal and business loans apart from providing finance solutions for certain medical procedures.

  1. How does it work? Its working decoded.
  • Completely online, having no branch infrastructure.
  • Uses the latest technology to cut costs and provide an easy lending platform.
  • A very convenient, easy, fast and private process.
  • Loans facilitated through Lending Club are issued by a bank and are protected.
  • For Borrowers:

Lending Club gives unsecured loans to the borrowers who have registered and applied for the same. In return they get lower rates of interest, when compared to the other finance lending institutions. The loan period is generally around 3 years and loans can be applied for $1000 upto $40,000.

The charges that Lending Club collects are called the origination charges for the borrowers. Applying for loans through Lending Club is absolutely free. Once the loan is approved, which is very fast, easy and convenient, Lending Club deducts the origination fee from the loan proceeds.

The origination fee is generally between 1% to 6% of the loan amount. This again depends on the borrower’s loan grade. The borrower’s loan grade ranges from Grade A1 to Grade G5, depending on the credit rating.

  • For investors:

Investors search for loans that they would like to invest in, based on certain provided information such as the loan purpose, loan amount etc. In return for his investment in the loan, the investor gets higher rate of returns in terms of money, in comparison with other finance institutions and banks. The charge that Lending Club collects from investors is called the service charges.

  • Loan Application Process for Borrowers:

3 money coinsCustomers who are interested in taking a loan are called borrowers. Borrowers could be individuals or small scale business owners.  There is a simple process for loan application. It is all done online. The various steps involved are:

  • Borrowers should check the credit rate on the Lending Club website to find out if they qualify or not.
  • Once qualified for the loan, the borrower is eligible for multiple loan offers. A borrower then selects the loan offer best suited.
  • Then the online application form should be filled. This form has details that Lending Club needs. All the information solicited is private and confidential. The details include name of the borrower, address, social security number, bank details, income and employment.
  • Since this is a completely online process, once the application form is filled, a verification email is sent to the borrower’s email id. At times Lending Club also asks for certain supporting documents that help in the verification process.
  • Then the application is reviewed and investors are matched to the particular loan. Borrowers can view the account summary anytime to see the progress of the loans.
  • After doing the necessary checks, the loan is approved.
  • Once the loan is approved, and the right investors are found, the loan amount is deposited directly into the borrower’s bank account, which has already been verified by Lending Club, within four business days.
  • The whole approval and funding process generally takes up to a week’s time. In certain cases the process may take a longer time and the maximum time period can extend to up to 45 days, in very rare cases.
  • Process for Investors:

Potential investors need to open an account at the website of Lending Club as Investors, by agreeing to the terms and conditions. Once the whole process is completed, investors then scour for different loans to invest in.

An investor can select the loans that he wishes to invest in. An investor invests in notes, which are nothing but fractions of various loans applied by the borrowers. Investing in different notes helps in diversifying the investment portfolio of the investor.

Once the borrowers start to repay the loans, amounts are deposited into the investors account. It is then up to the investor whether to invest back or withdraw the amount.

  • Table showing the benefits of Lending Club for both Investors and Borrowers 
Benefits for Borrowers Benefits for Investors
Easy, fast and uncomplicated Quick and easy to build a diverse portfolio
Lower fixed interest rates Monthly cash returns
Fixed automated monthly instalments Uncomplicated
No hidden fees Great returns of up to 8.57%
Prepayment without fine Reinvest or withdraw
Flexible and friendly terms and services

** Source: Information provided on the Lending Club website.

  1. What are the advantages of Lending Club?

Outlined here are some of the pros of taking a loan through Lending Club as well as for the investor.

  • Simpler loan application process.
  • Much lower interest rates for borrowers.
  • Easy and convenient process.
  • Personal loans that can be applied for can be as low as $ 1000 and business loans available up to $ 100,000
  • The origination fee charged for borrowers is much lower when compared to other lending institutions.
  • Borrowers can get lower rates or bigger loans by having a good credit score and clean credit history.
  • It has default rates that are much lower with transcribe to fewer losses for an investor.
  • Loan funding happens by real people.
  • Lending Club IRA, allows an investor to combine tax advantages of retirement account and the returns of an investment.
  • It also offers joint loans.
  1. What are the disadvantages of Lending Club?

Given below are some of the cons of borrowing or investing through Lending Club.

  • Not all states are covered under the Lending Club program. Borrowers and investors belonging to a few states cannot avail of this facility form Lending club, giving rise to geographical limitations. A few states where Lending Club is not available for borrowers are Idaho, Nebraska, Maine and North Dakota.
  • As an investor, the minimum amount to be invested is $ 100. Variations here are not possible. For example, if an investor wants to invest $ 90 in one loan and $110 in the other loan, it is not possible.
  • A borrower has to have a very good credit score and hence a stricter process.
  • Each time a borrower shops for a loan, the credit score gets lowered.
  • Loan repayments may sometimes be very expensive, if the loan borrowed is much higher than the need.
  • Certain restrictions on investors, sometimes excludes probable lenders in getting into Lending Club.
  • Borrowers also face some issues with regard to partial funding for a loan.
  • Any delay in payments, can lead to several follow ups by Lending Club.
  1. What are the tips for borrowers and tips for investors in Lending Club? 
  • Tips for Borrowers: 
  • Maintain a good credit score of 650 or above.
  • The greater the credit score, greater is the chance for quick approval of loan.
  • Have a good credit history.
  • Better the credit history; lower the rates of interest for the borrowers.
  • A debt- income ratio of above 50% makes it difficult to get a loan. Reduce this ratio.
  • Being employed is a major criterion for credit approval
  • Be safe and understand the transparency structure of Lending Club. They do not ask for any advance payments.
  • Do not fall for online scams in the name of Lending Club. Verify all the facts. Remember, Lending Club does not ask for any advance payments. Emails that are sent are sent from the company’s official email id. 
  • Tips for Investors:
  • Be an intelligent investor and do proper research before investing.
  • To be an investor, one should be a resident of certain states. There are a few states where Lending Club is not open to investors.
  • Understand the risks involved.
  • Have a proper diverse investment portfolio. This helps in risk mitigation. Investing the minimum $100 across many loans is better than investing a huge amount in a single loan.
  • If there is an increase in the defaults, then the investor returns may decrease.
  • Choose loan filters to select only those that are of interest as an investor.
  1. How does Lending Club fare? What are its reviews?

3 cash stack loanHere is a summary on Lending Club Review and BBB:

Lending Club is a great online platform which brings both the borrowers and the investors together. It has a very smooth and easy process. It follows absolute transparency in its dealings. The whole process of loan application and approval gets done quite fast, with all the requisite checks in place.

They follow certain strict rules, with regard to the credit score and credit history of the borrower. The borrowers have to maintain a high credit score in order get loans funded through Lending Club. Some loans may not be processed if they do not meet the requirements of Lending Club, such as a high credit score of 640 and above, a good job and a good salary.

It has been observed that most of the borrowers are satisfied with the low interest rates offered and there are substantially lesser borrower complaints. Following the right tips and rules ensures that borrowing from Lending Club is a great option.

One of the rule is that apply only for the amount required. If a higher amount is applied for, then the repayment rates become quite high and sometimes unmanageable, and hence the absence of the lower interest rate benefit.

A few prospective borrowers and lenders have had this notion as to whether Lending Club is an online scam and if it were legitimate. Going by the features and the security on the website, company’s history and other relevant details, it has been observed that Lending Club is a legitimate destination for borrowers to look for their loans and for investors to invest.

There are also several newspaper reports on the efficient functioning of the company. The company has had investments from Google. (Around $125 million were invested by Google in Lending Club) They have also had partnerships with Home Advisor, Alibaba.com, and Banc Alliance.

BBB accreditation for Lending Club:

BBB stands for Better Business Bureau. The business accreditation program run by BBB, determines if a company meets the standards of accreditation set by BBB. These standards include good resolution of consumer complaints and also the commitment of the business to do so in good faith.

A BBB accreditation indicates that the business is trustworthy, honest and fair. Consumers will always prefer an accredited business. Lending Club has been continuously accredited by the BBB for the past 8 years. It has been rated A+ by the BBB, for having met all the standards.

Some of the rating factors, according the information provided on the BBB website, that raised the accreditation rates of Lending Club are as follows: Length of time business has been operating, Complaint volume filed with BBB for business of this size, Response to 197 complaint(s) filed against business, Resolution of complaint(s) filed against business.

Conclusion:

Lending Club has emerged as the largest online market place, making credit affordable to those in need and creating real rewarding experience with respect to returns for the investors.

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