Lending Club has made its name as the best-known P2P (peer-to-peer) lender around. A sharing economy pioneer, Lending Club has originated millions of loans collectively worth tens of billions of dollars. Even as it moves away from the P2P model toward a more traditional lending framework, it shows no signs of slowing down.
If you’re in the market for an unsecured personal loan and your FICO credit score is comfortably north of 600, you’ll want to give Lending Club a closer look. Lending Club also originates loans for small-business owners and independent entrepreneurs, making it a fantastic way to secure financing for your startup or growing business. It also offers auto refinancing loans.
Lending Club isn’t for everyone, including applicants with severely impaired credit or recent bankruptcies. Here’s what you need to know about the process of getting a loan with Lending Club, the advantages and disadvantages of doing so, and the platform’s overall suitability.
Lending Club Loan Options
Lending Club has three core loan products:
- Unsecured personal loans for general (but not unrestricted) use
- Unsecured small-business loans
- Auto refinancing loans
There’s also a fourth loan product, the Patient Solutions loan, which is briefly mentioned below.
1. Personal Loans From Lending Club
Lending Club issues unsecured loans with principals ranging from $1,000 to $40,000. You’re not entitled to your full funding request, nor to the maximum loan amount. Instead, your loan size depends on your borrower profile, which comprises underwriting factors such as your credit score, credit history, and household income.
Lending Club allows couples to apply jointly for loans and co-borrowers to co-sign for loans. Co-borrowers are fully responsible for loan repayment.
Rates and Common Fees
All Lending Club personal loans have terms of 36 months (three years) or longer. Origination fees range from 2% to 6% of the loan principal, depending on your borrower profile and loan term. The origination fee is deducted from your loan principal before funding.
So, if you’re approved for a $10,000 loan with an origination fee of 3%, your net loan proceeds are $9,700. Interest rates are fixed for the life of the loan and currently range from about 11% to about 36% APR (annual percentage rate), although they’re subject to change at any time with prevailing interest rates.
Lending Club does not levy prepayment fees if and when you choose to make additional principal payments or pay off your loan in full before your final payment date. Beyond the origination fee, the most common Lending Club fee is a late payment fee assessed on payments made more than 15 days after the payment due date.
Getting a Second Loan From Lending Club
If your borrower profile permits, Lending Club may allow you to apply for a second personal loan before paying off your first. You’re not entitled to the same rates and terms on subsequent loans, and Lending Club may consider your current loan’s status and payment history in any underwriting process.
Acceptable Uses for Lending Club Personal Loans
You can use your Lending Club personal loan for:
- Debt consolidation
- Paying off high-interest credit card debt
- Funding major projects or purchases, such as home improvements or a new car
- Paying major bills, such as medical or car repair bills
- Covering tax expenses (instead of paying taxes with a credit card)
- Financing discretionary expenses, such as an international vacation or wedding
You cannot use your Lending Club personal loan for:
- Anything related to post-secondary education, including refinancing existing student loans or taking out new student loans to cover tuition and expenses
- Financing investment activity, including purchasing cryptocurrencies like Bitcoin
- Financing gambling activity
- Any activities deemed illegal by state or federal law
2. Business Loans From Lending Club
Lending Club issues unsecured business loans with principals ranging from $5,000 to $500,000. These loans can be used for any legal purpose related to your business.
Like personal borrowers, business borrowers don’t necessarily receive their full funding requests or qualify for the maximum principal. Actual loan size depends on your borrower profile. Also, Lending Club holds all business borrowers to certain minimum standards. They must:
- Have at least $50,000 in annual sales
- Have been business for at least 12 months
- Have ownership of at least 20% of the company
- Have no recent bankruptcies and no tax liens
Unlike some lenders, Lending Club doesn’t require extensive documentation from business borrowers or perform invasive due diligence. You don’t have to provide a business plan or projections, and Lending Club doesn’t send staffers or appraisers to inspect your business in person. Collateral is not required for loans under $100,000.
Rates and Common Fees
Lending Club business loan terms range from one year (12 months) to five years (60 months). Origination fees are a bit higher than for personal loans. They’re deducted from the loan principal before funding. Annualized interest rates currently range from about 5% to about 36% APR and remain fixed for the life of the loan, although they’re subject to change with prevailing interest rates.
Lending Club doesn’t charge prepayment fees, so you can pay off your loan in full at any time without fear of additional charges. The most common non-origination fee is a late payment fee. At its discretion, Lending Club may assess check processing fees for payments made by mailed check.
3. Auto Refinancing Loans From Lending Club
Lending Club issues auto refinancing loans with principals ranging from $5,000 to $55,000. You must use your loan to refinance an existing loan on a vehicle that:
- Is for personal use only
- Is classified as a passenger automobile (in other words, cars and light trucks)
- Is less than 10 years old
- Has less than 120,000 miles on the original odometer
Loans eligible for refinancing must:
- Have an outstanding balance of $5,000 to $55,000
- Be at least 1 month old
- Have at least 24 months remaining in the term
Refinancing may not be available for certain discontinued vehicle makes or models. Check with Lending Club to confirm your vehicle is eligible.
Rates and Common Fees
Lending Club auto refinancing loan terms start at 24 months and increase from there. Lending Club doesn’t charge origination fees on these loans. Annualized interest rates currently range from about 4% to about 25% APR and remain fixed for the life of the loan, although they’re subject to change at any time with prevailing interest rates.
Like other Lending Club loans, auto refinancing loans don’t have prepayment fees. The most common non-origination fee is a late payment fee. You may also encounter third-party fees not charged by Lending Club, such as title transfer fees when transferring your vehicle title from your prior lender to Lending Club.
4. Patient Solutions Loans From Lending Club
A separate type of Lending Club loan, the Patient Solutions loan, works differently from the other three and isn’t covered as extensively here. Medical providers are more closely involved in the Patient Solutions loan process, and you generally need a dedicated provider — and a bill for services, or at least the expectation of one — before you can proceed.
Getting a Loan From Lending Club
Here’s a look at the loan application process.
Checking Your Loan Rate
The first step to getting a Lending Club loan is checking your rate. The process is similar for all three core loan types.
To get started, you’ll need to enter your requested funding amount and loan purpose (if asked), income, address, date of birth, and any other requested identifying information. For business loans, you’ll need to enter basic information about your business as well.
Lending Club then executes a soft credit pull to check your credit score. This doesn’t adversely affect your credit score; that comes later, if and when you choose to proceed with your application.
Evaluating and Accepting a Loan Offer
Once you submit this information, Lending Club takes a few moments to check your credit score and issues an application decision. If your application is denied, you’ll receive an explanation as to why. If you’re cleared to proceed, you’ll see at least one loan option.
For personal loans, you’ll likely receive two loan options: one with the lowest possible payment (and generally a longer term), and another with the best rate (and generally a shorter term). Each offer includes your loan principal, total monthly payment, loan term, interest rate, and APR, which includes the origination fee.
You may have the option to increase your principal beyond what you requested; for instance, on a $10,000 personal loan request, I had the option to up my loan amount to $16,000.
If you wish to proceed, you’ll need to provide additional information about your life and business (if applicable), including whether you rent or own, your employment status, bank account information, and Social Security or Employer Identification (for businesses) number.
Before you submit your application, you’ll have the opportunity to review a Truth-in-Lending disclosure statement and consent to a hard credit pull (credit check) that gives Lending Club access to your credit report from one of the three major credit bureaus. This can temporarily lower your credit score.
Lending Club verifies all the information you provide during the underwriting process. You may be asked to provide additional details or documentation, so it’s best to watch your phone or inbox until your loan is fully funded.
Funding Your Loan
Lending Club has an idiosyncratic funding process that can lengthen your loan’s origination timeline. You can learn more about this in our separate Lending Club review, but the short story is that your loan must be funded by Lending Club investors before it originates.
In the unlikely event your loan doesn’t attract enough investor interest, you’ll have the option to accept partial funding or cancel your application process and reapply.
Because Lending Club relies on outside investors over whom it does not have full control, the funding process can take a while; seven business days is typical, according to Lending Club. Assuming your business or personal loan does attract enough investor interest — and the vast majority do — you’ll receive funds in your preferred bank account. The origination fee, if any, will be deducted from the funding amount.
The funding process for auto refinancing loans is a little different since the proceeds go to your previous auto lender, not your bank account. According to Lending Club, the loan servicing transition can take a week or two, during which you’ll need to continue paying your previous lender if a payment becomes due. Once Lending Club assumes responsibility for servicing the loan, it will refund any overpayments.
Repaying Your Loan
Beginning 30 days after your loan is partially or fully funded, you’ll make regular, fixed repayments at the agreed-upon amount by the monthly due date you’ve set. If you need to change your due date, contact Lending Club for assistance.
Repayment options include automatic debit (autopay), manual electronic transfers, over-the-phone payments by credit or debit card, and mailed checks, which may incur a payment processing fee at Lending Club’s discretion. Payments include principal and interest calculated on the loan’s total principal.
Payments are generally considered late after 15 days past due. With no prepayment penalties, you can pay your loan off in full at any time or make additional principal payments as desired.
Advantages of Getting a Loan With Lending Club
- No Prepayment Fees. Lending Club doesn’t charge prepayment fees on personal, business, or auto refinancing loans. That’s great news for borrowers whose budgets allow them to accelerate scheduled payments or even pay off their loans altogether.
- No Origination Fees on Auto Refinancing Loans. Lending Club waives origination fees on auto refinancing loans. If you pay on time and avoid mailed checks, which may incur payment processing fees, your auto refinancing loan’s only expense will be regular, fixed interest.
- Impressive Borrowing Power. Lending Club has higher borrowing maximums than some online-only competitors. You can borrow up to $40,000 for general personal expenses, $500,000 for your business, and $55,000 to refinance your existing auto loan. You’re not entitled to these maximums, of course, but it’s nice to have the option to stretch if your borrower profile allows.
- Multiple Credit Products. Lending Club has several distinct credit products: unsecured personal loans, business loans, auto refinancing loans, and medical provider loans, which work differently from the other three. That’s a big advantage over leaner competitors, which generally offer only unsecured personal loans.
- Wide Range of Acceptable Loan Uses. You can use your personal loan for just about any legal personal expense — save for education and investments — and your business loan for pretty much anything legal related to your business. This isn’t the case at lenders tailored more narrowly to specific-use cases, such as education financing or debt consolidation.
- Low Minimum APRs on Personal Loans. Lending Club’s personal loans have a low minimum APR — several percentage points, at least, better than most credit cards’ regular APRs. If you have good credit and a debt-to-income ratio that qualifies you for low-cost unsecured financing, look to Lending Club first.
- Joint Loans Are Permitted. Lending Club allows co-signers on its unsecured personal loans. This is a boon for couples with unevenly matched credit and younger folks whose credit might not otherwise qualify them for an affordable rate — and whose parents are willing to shoulder the risk of co-signing for them.
- Up to Two Simultaneous Personal Loans Permitted. Lending Club allows up to two simultaneous personal loans. In other words, you can apply for a second personal loan before paying off your first, assuming you’ve kept the first loan in good standing and your borrower profile hasn’t deteriorated. Some online-only lenders maintain a strict one-loan limit per borrower.
Disadvantages of Getting a Loan With Lending Club
- Potential for High Origination Fees on Personal and Business Loans. Lending Club’s personal and business loan origination fees can be quite high — 6% and 7.99%, respectively, on the high end. That may be untenable for borrowers looking for low-cost financing, even if they’re able to secure competitive interest rates.
- Personal and Business Loan Rates May Be Higher Than Credit Card Rates. Lending Club’s personal and business loan rates span a wide range, from around 10% to well over 30%. If your credit isn’t perfect, you’re likely to pay on the higher end of this range. By contrast, personal and small-business credit card APRs generally top out at 25%, and well-qualified applicants often qualify for rates under 15%.
- Risk of Partial Funding on Approved Loans. Unlike many online-only lenders, Lending Club isn’t in complete control of its loan funding process. If your loan application attracts insufficient interest from investors, it may originate with partial funding, with the attendant complications for your financing strategy.
- Funding Process Takes Longer Than Some Competitors’. Lending Club’s funding process takes seven business days, give or take. That’s longer than most online-only competitors, some of whom offer next-business-day funding.
- Personal Loans Can’t Be Used for Education or Investments. You can’t use your unsecured personal loan proceeds for any education-related expenses, including student loan refinancing. You also can’t use personal loan proceeds for any investment activity, including cryptocurrency purchases. If you find either restriction problematic, look elsewhere for funding.
Lending Club didn’t singlehandedly invent the personal lending business, but it remains one of its leading lights. It joins ridesharing apps like Uber and Lyft, whose collective vision for seamless local transportation has disrupted — and, in many places, crippled — the taxi industry and may soon threaten public transportation systems too.
It’s not yet clear whether Lending Club will disrupt the financial industry to the same extent as its ridesharing brethren. Traditional banks seem to be waking up to the long-term threat posed by competitors like Lending Club. But I wouldn’t bet against Lending Club and its ilk, either.
In the meantime, why not check your rate? You might be pleasantly surprised by what you learn.