Personal loans are becoming increasingly common, and for good reason. According to Experian, this type of debt is the fastest-growing category in the U.S., with $305 billion in outstanding balances as of 2019’s second quarter.
More and more consumers are looking to personal loans to consolidate high-interest debt, pay large medical or veterinary bills, invest in home renovations, or make large purchases. And this steady demand for unsecured loans has led to the creation of many types of online lending companies and business models — notably, the peer-to-peer (P2P) model, which matches borrowers with individual investors who have money to lend. This model cuts out a lot of the red tape associated with traditional bank loans and is making borrowing more accessible to consumers with varying credit scores.
LendingClub has been around since 2007 and has grown to be a leader in this industry. If you’ve been thinking about taking out a personal loan, you want to be sure that you choose a lender that is trustworthy and dependable. We’ve prepared this guide to help you learn everything you need to make an informed decision about borrowing through LendingClub.
An overview of LendingClub
San Francisco-based LendingClub launched in 2007 as a P2P lender, a business model it continues to operate today. By 2014, LendingClub had grown so much that it became the first P2P lender to go public on the New York Stock Exchange. Since then, the company has grown exponentially, having lent more than $40 billion in loans by the end of 2019’s third quarter.
At its heart, LendingClub is a technology company aimed at building creative financial solutions for individuals, businesses, and investors. Its focus on making borrowing and investing easy for anyone has helped LendingClub rise as one of the leaders in the P2P lending industry.
LendingClub cultivates opportunities for individuals to invest in loans that have historically paid returns between 3% and 8%. Anyone can become an investor by opening an account with a minimum of $1,000 and making investments in $25 increments. Investors collect money each month in the form of dividends and principal payments borrowers make on the loans the investor has funded.
This system enables borrowers to apply for loans at potentially lower rates than what traditional banks offer. Borrowers never know who has invested in their loans, which are issued by FDIC-insured WebBank. LendingClub brokers and administers the loans that are offered. Everything is done through LendingClub, streamlining service for both investors and borrowers.
Which loan products does LendingClub offer?
LendingClub offers a variety of loans, including personal debt (which can be used for many purposes), business loans, and auto loan refinancing. Most LendingClub loans are used to refinance existing debt, according to the company.
All of LendingClub’s loans start with what they call a “rate check.” This is a pre-qualification to see how much you might be approved for when you apply for a loan. You’ll provide your personal information, including your Social Security number, address, and annual income. Then the company will perform a soft inquiry to determine if you could be eligible for approval, for how much, and what your interest rate options might be.
When you decide to move forward with an application, you’ll be given several loan options, terms, and rates to choose from. Once you make your selection, you may be asked to provide additional information, such as proof of income, before your loan is finalized.
After you’ve received the money, repayment of your loan can be done through an automatic monthly bank draft, pay-by-phone, or via check. You can also pre-pay or pay off your loan early with no fees or penalties.
Here is a closer look at the types of loans you could apply for with LendingClub.
Personal loans from LendingClub
A personal loan can be used for almost anything. Credit card debt consolidation, existing loan refinancing, medical and dental bills, home improvement projects, and big-ticket purchases are among the most common reasons borrowers take out personal loans. If you find you have any of these needs, you may want to consider looking into this type of loan.
With LendingClub’s personal loans, you can expect to be offered a repayment term of three or five years. The APR you’re offered will depend on your creditworthiness. The higher your credit score and lower your credit utilization percentage, the lower your APR is likely to be.
LendingClub is best for borrowers with good-to-excellent credit. This means if you have a minimum score of 600, you could be approved for a loan. If you fall below that mark, you could try applying with a co-signer. You must also be a U.S. citizen or permanent resident who is at least 18 years old to be eligible.
LendingClub personal loans come with one-time origination fees between 1% and 6%, but no fees or penalties for early repayment.
|Loan amount||$1,000 to $40,000|
|Loan term||36 or 60 months|
|APR||6.95% to 35.89% (as of December 20, 2019)|
|Origination fee||1% to 6%|
Auto refinancing from LendingClub
If you find your monthly car payment is too much, refinancing your auto loan may be worth investigating. LendingClub offers a quick and easy online application for auto refinancing and no origination fees for this type of loan. To check your rate, you’ll be asked to provide information about yourself and your vehicle to determine eligibility and APR.
- A personal-use vehicle that is newer than 10 years old and has fewer than 120,000 miles.
- An outstanding balance of between $5,000 and $55,000 on your current loan.
- A loan that was originated at least one month ago and has at least 24 months of payments remaining.
The same credit eligibility requirements for personal loans also apply to auto refinance loans. Some types of vehicles are ineligible for refinancing, including Hummer, Pontiac, Saturn, Daewoo, Isuzu, Suzuki, Oldsmobile, diesel Volkswagen vehicles, Dodge Neons, or any commercial vehicles. RVs, motorcycles, and salvaged vehicles are also excluded.
|Loan amount||$5,000 to $55,000|
|Loan term||At least 24 months|
|APR||3.99% to 24.99% (as of December 20, 2019)|
Small business loans from LendingClub
LendingClub gives small businesses the chance to grow with loans from $5,000 to $500,000 that can be repaid over 6 months to 5 years. If you own a small business, this kind of cash can help you make capital investments, create and store inventory, expand operations, and more.
To qualify for a LendingClub business loan, you need to have:
- Been in business for at least 12 months and generate a minimum of $50,000 in annual sales.
- No recent bankruptcies or tax liens.
- At least 20% ownership of the business.
- Fair-or-better credit.
To apply for a business loan, you’ll need to provide basic info about yourself and your business, including gross sales and net profit from last year, your average business bank account balance, and your personal annual income. For loans that are greater than $100,000, you’ll be required to use your business assets as collateral.
|Loan amount||$5,000 to $500,000|
|Loan term||6 months to 5 years|
|APR||5.99% to 29.99% (as of December 20, 2019)|
|Origination fee||1.99% to 8.99%|
What LendingClub customers are saying
LendingClub reviews from customers and trusted financial information sources are largely very positive. Of the more than 53,000 customer reviews on the LendingClub website, the company generally received mostly four- or five-star mostly for the ease with which people were able to complete their application process and receive their money.
Customer reviews left on ConsumerAffairs.com average out to three-and-a-quarter stars out of five. Most of the positive reviews also focus on ease of applying and getting funds, while many of the negative reviews discuss the handling of early pay-offs, interest rates, and prolonged process of getting issues resolved through customer service routes. Customer reviews from the Better Business Bureau website run along these lines, as well.
Other popular personal finance websites hover between four and four-and-a-half stars for LendingClub, citing similar pros and cons to using this P2P lending company.
FAQs about LendingClub
How does LendingClub affect your credit?
Borrowing through LendingClub is the same as borrowing from any other type of lender. Your credit will be assessed during the application process, first as a soft inquiry to give you an idea of what you may be eligible to borrow. Once you decide to formally apply for a loan, a hard inquiry will be performed on your credit files, which will result in some negative impact to your score. This should only affect your score for a few months.
Once you have the money from LendingClub, you will have a new personal loan account on your credit report. Timely payments to your loan will keep your credit score healthy, while late payments may lower your score. If you use the funds from your loan to pay off credit cards, your scores could get a boost, as the percentage of your available revolving credit that you are using will be significantly lowered. This is one of the factors that has the most impact on your overall score.
What credit score do you need for LendingClub?
LendingClub is looking for borrowers with good-to-excellent credit. This means if you have a minimum score of 600, you could be approved for a loan. If your score is not quite up to scratch, LendingClub does have the option of adding a co-borrower to your application.
Is LendingClub a bank?
LendingClub is a P2P lending service, which acts as a middle-man between those looking to borrow and investors who want to lend. You can get one or more loan offers that will be funded by investors, but issued by WebBank and serviced by LendingClub.
Are LendingClub and LendingTree the same?
LendingClub and LendingTree are not the same company. LendingClub is a P2P lending company that connects investors with borrowers. LendingTree is an online marketplace where you can compare and shop for loans.
Can you pay off a LendingClub loan early?
Yes. LendingClub does not charge any penalties or fees for paying off a personal loan early.
The final word on LendingClub
If you’re in the market for a loan, whether for personal or business purposes, LendingClub has a lot to offer. However, they’re not the only P2P lender around. Make sure to research other lenders and see what offers they might have for you and your individual situation. After you get all of that information, you’ll be in a good place to make a smart borrowing choice.
Disclaimer: All rates and fees are accurate as of Dec. 20, 2019.