Lending Club Review: The best site for investors and personal loans?


Lending Club promises two things:

For investors: Higher rates of return than savings accounts, or most mutual funds (because typically those are really lousy).

For borrowers: Lower rates than credits cards and personal loans (which can be really lousy).

What is Lending Club?

Lending Club is a decade-old, publicly traded fin-tech company that promises to “take the bank out of banking.”

This online-only company offers two lines of business: Personal loans, and investments.

These are two sides of the same coin, based on peer-to-peer (or “P2P”) lending, which means that instead of being a bank or financial institution lending or managing money on behalf of clients, it is instead a marketplace where it matches people who need loans, as well as individuals seeking to lend that money as an investment.

This can be great news for everyone involved, since it can take the expensive middleman (bank) out of the equation, and give everyone a better rate — lower interest rates for the borrower when compared with credit cards, or a more traditional personal loan, and hopefully a higher rate of return for the investor.

quick links for Lending Club

  1. What is a P2P loan?
  2. P2P personal loans
  3. Auto Refinancing
  4. What is P2P investing?

What are Lending Club peer-to-peer (P2P) loans?

Peer-to-peer loans are as old as time. Once upon a time, one of our ancestors needed an extra hide for the winter but did not have one.

So her neighbor lent her an extra hide, and in the spring the first neanderthal returned the hide, along with a dozen apples as a way to grease the deal.

Since then we have been loaning each other goods and money informally, without dealing with a bank. You buy drinks, I buy dinner.

Your parents loan you money, you repay them — maybe with monetary interest, or extra help around their house each week.

Today, companies like Lending Club have created global marketplaces to formally replicate this human-to-human lending system, in which people in need of money can borrow that money from their peers, whom they will never meet in real life, and repay them with interest.

The lender takes a risk in lending their money to the borrower, with the educated risk they will make money when that money is repaid with interest.

How Lending Club peer-to-peer personal loans work

In short: Lending Club reviews borrowers, give you a rating, and then puts your loan on the marketplace for lenders, aka investors, to chose.

Lending Club screens potential borrowers based on income, loan applied for, and credit history, and gives every approved borrower a rating from A to G — just as a traditional bank might.

Once approved, your loan request will be listed for investors to considered (catch: Borrowers can't see their rating, only investors).

One of the best features of Lending Club is that, unlike loans from friend or family, you are 100% anonymous to the investor/lender (as are you to them). In other words, the site and program are totally secure and private.

Here is an example of what an investor will see when considering lending money to a borrower:

Note, this borrower received a C2 credit rating from Lending Club, which comes with a 14.03% interest rate on the $10,000 loan, as well as other details about the borrower's employment, that he or she owns their home, income and debt ratio — but we don't see where they live, work, their name or any other identifying information.

Next, expect multiple loan offers come in. It is then on you to accept the offer/s, verify your information, and close the deal.

Other information about Lending Club personal loans:

  • Borrow between $1,000 and $40,000.
  • The most common reason for Lending Club personal loans is debt consolidation, and credit card repayment.
  • Interest rates start at 5.98% for the best-rated borrowers, and up to 36%
  • Origination fees of 1% to 6%, depending on the sum you borrow and credit rating
  • Repayment terms are 36 months or 60 months.
  • Get your money transferred to your bank within 7 days,
  • All loans are fixed rates.
  • Autopay available (otherwise you are charged $7 for paying with a paper check — but you wouldn't do that in 2018!).
  • Hardship plan available in the event you cannot make timely payments (illness, unemployment)
  • No prepayment penalty!
  • Applying does not hurt your credit, nor does being denied for a Lending Club loan.
  • 100% online application — no embarrassing face-to-face meeting with a loan officer.
  • Users report quick and easy application process.

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Who should get a personal loan with Lending Club?

Lending Club is a great option for those who want to bypass banks (for whatever reason, including political!) and get a great rate on a loan.

Lending Club is discriminating, and offers its best rating, and therefore best interest rates, to borrowers with good credit.

This generally means:

  • Credit score of 600+
  • Credit history of 3+ years
  • Debt-to-income ratio of less than 40% for single people, 35% for joint applicants (excluding mortgage)

If you need to improve your credit score to qualify for the best Lending Club personal loan, consider Lexington Law, which for a fee, works to remove errors and improve your credit score — which can save you thousands in interest rates for Lending Club or any other debt.

Also, consider Prosper for personal loans. Rates can be a bit higher, but requirements less strict.

Compare your options before you commit!

Lending Club auto refinancing

Looking to lower your car payment? Has your credit improved since you bought your car or truck?

Lending Club's auto refinancing program can help.

Bonus: No origination fees! 

The process to check availability is quick and easy:

  1. Go to Lending Club's auto refinancing site.
  2. Get a rate quote in a couple minutes.
  3. If that looks good, go forth with a refinance application, and get a new auto loan, with lower payments, within a few days. Lending Club pays off your old note.

A few details for Lending Club auto refinance:

Your car must be:

  • 10 years old or newer
  • Under 120,000 miles
  • A personal-use automobile — not an RVs, motorcycle, commercial vehicles, or salvaged vehicle.

Your current auto loan must have:

    • An outstanding balance of $5,000—$55,000
    • Been initiated at least 1 month ago
  • At least 24 months of remaining payments

What is peer-to-peer (P2P) investing?

Peer-to-peer investing is the other side of P2P loans — investors looking to make money by lending money to borrowers, in exchange for interest payments.

Instead of handing a wad of cash to your cousin to help him hire a lawyer to clear up his DUI, and hope he pays your back before you retire, Lending Club offers a low-risk platform to invest, with a high likelihood of not only getting your original loan back but also making some money.

With savings accounts, money market accounts, and other traditional, bank-based savings accounts at 1% or less, peer-to-peer loans can be a great addition to your investment mix.

Lending Club's historical returns have been 3% to 8% = AWESOME. If you chose to spread your investment overall loan grades, the average at the time of writing is 5.83%.

For those who invest in a minimum of 100 funds, Lending Club promises a 99% chance of getting a return on your investment.

One of the perks of peer-to-peer investing platforms like Lending Club is that instead of just buying a piece of a publically held company, as you would with stock, bond or mutual fund investing, you directly help an individual reach their financial and personal goals.

That feels pretty damn good.

It works like this:

  1. Sign up at LendingClub.com
  2. Fund your account. $1,000 minimum to get started (see ‘Fine Print' below)
  3. Select as many funds as you like. Options include individual loans, portfolios of loans (much like a mutual fund, which spreads the risk across different asset classes), as well as one-off or automated investing (such as making regular investments weekly or monthly).
  4. As the borrower repays the loans — plus interest — each month, you receive monthly payments, including interest on your investment.

Lending Club Investor fine-print rules

Notes are available only in the United States, except for residents of Ohio, Oregon and the District of Columbia.

Investors pay Lending Club a 1% service fee of the amount of any borrower payments received each month.

Lending Club has a minimum gross annual income requirement of at least $70,000 ($85,000 if you live in California) and a net worth (exclusive of your home, home furnishings and automobile) of at least $70,000 ($85,000 in California);or a net worth of at least $250,000 (determined with the same exclusions) ($200,000 in California).

Lending Club also restricts investment to 10% of your net worth, or $2,500 if you live in California and fall below the minimum income and net worth requirements in that state.

There is a $1,000 minimum to opening a Lending Club account, and $25 is the minimum requirement to invest in any single note.

Lending Club has an A- rating with the Better Business Bureau.

The minus is for good reason: in early 2018 the federal government charged the company with over-charging consumers fees and failure to reveal upfront fees.

Looking for a personal loan to consolidate debt? Read more:

PersonalLoans.com review

Prosper personal loans review

SoFi personal loans review

About Emma Johnson

Emma Johnson is an award-winning business journalist, noted blogger, and bestselling author. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list.Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.  Find out Emma's top Single Mom Resources here.

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