Lending Club Review: Should you Apply for Personal Loan?

What is Lending Club for Borrowers

There’s been a lot of coverage on the web about investing through Lending Club, but the equally important lending facility the platform provides for borrowers seems to get less attention. That’s too bad – Lending Club is a serious alternative loan source for borrowers. This is especially true for those who either may not qualify for traditional bank loans, or simply would prefer to bypass them – and their red tape – entirely.

How Does Lending Club Work?

Lending Club is a Peer-to-Peer (P2P) lending site, that bypasses the middleman in the lending process – banks – and allows people to borrow more directly from investors on the platform. For this reason, interest rates are generally lower with Lending Club than they are with banks on the same loan programs.

You can handle the entire transaction online – no need for face-to-face contact with a banker, and all the discomfort that brings. And you can generally get your funds within just a few days.

When you apply, you provide certain information, and you’re assigned a risk grade, ranging from A (best credit risk) to G (lowest allowable risk grade), that is based on your income, employment, debt-to-income ratio, credit history and credit score. Loans are then priced according to your risk grade.

All loans on the platform are made by Utah-based WebBank. Lending Club has funded more than $6.2 billion in loans since its founding in 2007.

What a Lending Club Loan Can Do For You

One of the biggest benefits of using Lending Club is simplicity. Not only do you not have to go to the bank, meet with a loan officer, and fill out reams of paperwork, but simply have to go on the website and fill out an application in the privacy of your own home.

The process looks something like this:

  • You complete a simple application at LendingClub.com
  • Lending Club evaluates the information (with no impact to your credit score), and determines a grade for your loan, sets the applicable interest rate, then instantly presents you with a variety of offers
  • Investors, which includes both individuals and institutions, select loans in which to invest and can earn monthly returns

Once all parties agree to the transaction, the loan goes through and your funds are available within a few short days. Lending Club is able to offer lower interest rates and more generous terms precisely because they have removed the middleman from the process. And they are able to offer the following benefits:

  • Easy online application
  • Low fixed rates, starting at 6.03% on the best credit grade
  • Fixed monthly payments
  • Flexible terms
  • No prepayment penalties
  • No hidden fees
  • Friendly service

In addition, one of the best features is privacy. The investors who will fund your loan will never know your identity. And the site vows never to sell, rent, or distribute your information to third party sites for marketing purposes.

Loan Types Available Through Lending Club

Lending Club offers the following loan types:

Debt Consolidation/Credit Card Refinance. These loans enable you to consolidate credit cards and other loans into a single monthly payment with a fixed rate. That alone will remove the variable threat that comes with credit cards. Lending Club calculates that by doing a consolidation, you can reduce your effective rate of interest by average of 31%, or about 6.8% below the average rate on other debts.

One other advantage that a credit card refinance provides is that it can result in an almost instantaneous improvement in your credit score. This is particularly true if you have a large number of credit cards with balances, or just one or two that are maxed out.

Business Loans. It’s no secret that banks are very reluctant to make loans to small businesses. But this is where Lending Club can really help. You can get fixed interest rate loans as low as 5.9%, on loan amounts as high as $300,000. Terms are between one and five years, and you can use this loan to help build your business credit.

Home Improvement. Lending Club offers unsecured loans of up to $35,000. But perhaps the best feature is that the loan is based on your personal credit rating, and not on the equity in your home. Lending Club home-improvement loans feature fixed-rate installment payments, rather than the credit card type payment systems typically found with traditional home equity lines of credit. Your monthly payment will never increase.

Patient Solutions. This is probably the most interesting loan offering from Lending Club, because it’s a loan that’s becoming increasingly necessary as medical deductibles and co-insurance provisions increase. It also extends to include elective procedures including dental, fertility, hair restoration and weight loss surgery.

Lending Club offers two loans programs to cover medical procedures:

Extended Plans – You can get a loan for anywhere from $2,000 up to $50,000, at rates between 3.99% and 19.99%, depending on the size of the loan and your credit history. Terms can be anywhere from 24 months, to 84 months.

True No-Interest Plans – These loan arrangements offer 0% APR for terms of 6, 12, 18 or 24 months, and for loan amounts up to $32,000. After the no-interest term expires, a variable rate of 22.98% APR applies on the remaining balance. But if you can pay off the loan within the 0% interest term, you can get funds for medical procedures without having to add interest to the already high cost.

You can also get loans for just about any other purpose – auto financing, major purchases, vacations and moving and relocation.

If you’re looking for a different loan source, one in which you can get a loan from direct lenders – who are people like you – check out Lending Club. It won’t cost you anything to apply, and getting loan quotes won’t have any effect on your credit scores at all.

Lending Club just might be the preferred loan source of future – but you can take advantage of it now. Checking your rate with Lending Club does not impact your credit score.

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Jason Vitug

Jason Vitug is founder at phroogal, creator of the award-winning project the Road to Financial Wellness, and author of the bestseller and NY Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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