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LendingClub personal loan: 2020 Review

| Money Rates Columnist.
min read

lendingclubLending Club (aka LendingClub) is a peer-to-peer (P2P) lender offering personal loans in amounts up to $40,000. This Lending Club review contains the fast facts, pros and cons, and in-depth evaluation so you can confidently choose the best personal loan for your needs.

 

Why Should I Apply With LendingClub?

LendingClub may well be a strong contender for inclusion in your short list. Its offering includes:

  1. Annual percentage rates (APRs) as low as 6.95% - Expect higher interest rates, however, if your credit score is less than great or you owe lots of money elsewhere. The amount you want to borrow also influences your rate.
  2. No hit on your credit score when you ask for a quote - This lender initially makes "soft" inquiries, which don't affect your score.
  3. You're able to make a joint application with someone else as well as one on your own. Not many lenders let you do that. And it can get you a better deal if you owe a lot in other debts, but your co-applicant doesn't.
  4. No early repayment or prepayment fees.
  5. If you're consolidating other debts, LendingClub can send payments directly to up to 12 of your creditors. That's an option. You can receive the whole amount you're borrowing and pay down other loans and balances yourself if you prefer.
  6. Solid, midrange ranking in the J.D. Power 2019 Personal Loan Satisfaction Study.
  7. The pioneer in the peer-to-peer (P2P) lending field. So a very experienced company.

Drawbacks? Very few. But watch out for origination and late fees.

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How Does LendingClub Work?

That last bullet point mentioned that LendingClub is a peer-to-peer (P2P) lender. But what does that actually mean?

Well, P2P lenders' websites operate a bit like online dating services. But instead of introducing romantic couples, they introduce people who want to borrow to other private individuals (investors) who wish to lend.

However, it's unlikely you'll borrow from just one person. Typically, each loan is funded by many investors, allowing them to spread the risk of your defaulting. So, while the P2P lender facilitates the loan and manages the processes involved, it doesn't lend you its own money.

What Kind of Loans Does LendingClub Offer?

Here are the main characteristics of LendingClub loans:

  • Minimum loan is $1,000 and the maximum $40,000
  • Minimum APR 6.95% and the maximum is 35.89% - as of this writing
  • You can borrow over either 36 months or 60 months
  • Minimum credit score of 600
  • No formal maximum debt-to-income ratio*, but LendingClub hints that anything over 40% is regarded as high
  • No prepayment fees
  • Co-applicants or co-signers are allowed
  • Pre-qualify for financing without affecting your credit score
  • All loans have fixed rates, meaning your payments should all be the same amount
  • Origination fees of 1%-6% of the loan amount on successful applications, deducted from the loan balance. No application fees
  • Late fees of 5% of the overdue amount or $15, whichever is greater

*Your debt-to-income ratio is the proportion of your gross (before taxes) monthly income that you have to spend on servicing your existing debts and obligations. These include minimum payments on cards, actual payments on installment loans and things like alimony and child support.

How To Apply With LendingClub?

The LendingClub loan application process is wholly online. The questions are simple, and the process is straightforward. And it's at this point that LendingClub will carry out a soft inquiry that will reveal your credit score without affecting it.

You should then receive multiple offers from different investors. Compare these, mainly paying attention to the interest rates and APRs shown. But pick the deal that works best for you overall.

Once you've chosen your best deal, your account page on the LendingClub website should provide you with a to-do list. Chances are, that's going to include submitting documents that prove some of the claims you made in your earlier application. You're likely to be asked for documentary evidence of your identity and address - and your finances. So expect to upload bank statements, pay stubs and 1099 forms and paperwork that shows other forms of income, such as W-2s.

It's unclear whether LendingClub makes your having a bank account an actual condition of the loan. But it seems to assume you have one and expects to pay your funds into it.

How Soon Can I Get My Money With LendingClub?

"How long does it take to get your money?" That's a big question for many borrowers. Most people received their loan funds from LendingClub within four days in 2018. And there seems no reason to think that it takes on average longer now.

But there are loads of things that could add to that time. Some you can control. Getting through your LendingClub to-do list as fast as possible should help. And you can drive the time down by getting together the documents you're likely to need before you apply.

Other factors are beyond your control. You might apply when LendingClub is particularly busy - during the holiday season, for example. And your documents may raise queries. For instance, expect to explain any bounced checks on your bank statements.

Still, having the money in your account (or your creditors' accounts) within four days is pretty good. And it's what you can expect for a straightforward application.

LendingClub BBB Rating

LendingClub has been an accredited business with the Better Business Bureau since late 2007. However, at the time of writing, it is rated NR (No Rating). That's because the Federal Trade Commission is currently taking action against it. The company vigorously denies the FTC's allegations and makes a persuasive case for its innocence on its website.

Consumer Financial Protection Bureau and LendingClub

We searched federal regulator the Consumer Financial Protection Bureau's (CFPB's) database of consumer complaints. For this company, such complaints are listed under Lending Club Corp. rather than LendingClub or LendingClub Corp.

During the calendar year 2019, the CFPB received 84 complaints under the "installment loans" (another name for personal loans) category. Most of those related to problems making payment. But some concerned "charged fees or interest you didn't expect." So make sure that you understand the company's policies over lender fees before you sign up. Those are origination fees and late fees.

MoneyRates Editorial LendingClub Rating

4.25 stars

LendingClub may not top the J.D. Power survey or have the fewest CFPB complaints, but it has some undeniable strengths. And its customers seem to like it - a lot. Of 875 personal loan reviews (when this was written) on nationwide, 96% rated it either "excellent" or "great."

The company is especially likely to make it onto your short list if you value some of its less common characteristics. It's particularly strong if you want to make a joint application with another borrower or co-signer or if you want to consolidate debt. And your ability to get a quote without affecting your credit score raises a question: What's the downside of asking for one?

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What Are the Alternatives to LendingClub?

Still not sure if LendingClub is your perfect choice? Compare it to some other lenders, each of which has slightly different offerings:

Payoff

A tight focus on credit card debt consolidations. Loans capped at $35,000, but rates can be competitive. Origination fees are routinely charged but late fees aren't. You should have at least fair credit to stand much chance of getting approved.

Best Egg

At 640, its credit score threshold is higher than LendingClub's. And it, too, charges origination fees and late fees. But it has a reputation for getting your money to you quickly and for charging competitive rates.

Upgrade

You need fair credit to qualify. And you should probably expect to pay an origination fee, plus late fees if applicable. But, like LendingClub, this is one of those fairly rare lenders that accepts joint applications.

Prosper

You'll likely need a better minimum credit score than LendingClub requires to see your application approved. But, if your finances are in good shape, this lender might give you a good deal.

Sofi

A good bet if you hate fees: this lender charges none for origination, late payment or "prepayment" (paying off your loan earlier than scheduled). But this is another lender that prefers you to have a good or great credit score.

Lightstream

This might be your best choice if you want a large loan: You can borrow up to $100,000. There are no fees and rates can be low for creditworthy borrowers. But those with a patchy credit history may see their applications declined.

How to Find Your Best Personal Loan

Every borrower has a unique demographic and financial profile. And every lender is more or less comfortable helping borrowers with particular profiles. In other words, different lenders like different sorts of borrowers. This makes it particularly important that you compare personal loans from multiple lenders. If you get quotes from only one or two, you risk paying much more in interest -- and perhaps fees -- than you need.

If you've time before you apply, you may be able to get an even better deal by working on your attractiveness as a borrower. In particular, you could try to improve your credit score and pay down some of your other debts. Either of those could earn you a lower rate.

It's rarely a good idea to borrow over the long term to satisfy a short-term need. So, if you need money for a party, you should probably get a loan with a briefer payback period than, say, if you want money to remodel your kitchen. But your first priority is to be able to comfortably afford your monthly payments. So keep that thought front and center.

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