Since you need a 640 660+ FICO (use a myfico promotional code to get your score) to borrow at Lending Club, I obviously can’t write a traditional review of the service at least from a borrowers perspective. I will however give my thoughts on the program as a mid-twenties, very much in debt, facebook addict.
Update December 2009 – I’ve become a lender at Lending Club, and currently my 6 loans are all current and I’m earning just over 9% on my money! Not bad!
How Lending Club works
Why Borrow with Lending Club?
Interest rates at Lending Club start at 7.5%. Last time I checked my credit cards started at 19.9%. Also, loans from Lending Club are term loans vs. a revolving loan like a credit card.
You can borrow up to $25,000 at Lending Club.
To submit a loan application to be funded Click HERE.
You know your loan from Lending Club will be paid off in 3 years, with a fixed monthly payment. Sounds pretty good to me…think they’d float me 300K?
Yeah, I didn’t think so either. Let’s keep going…
Why Lend @ Lending Club?
The obvious attracting to parking some cashola in your Lending Club account is the returns. According to their website their average return is 12.26%. Not too shabby at all. Lending Club also gives you access to more credit information than prosper does (I have lent at both). When looking at loans to fund Lending Club shows you connections that you might have with the borrowers (geography, work, education, friends) which is actually pretty neat. This connections feature encourages a more “personal” feel to the loan and I could see that helping in their default rates.
Click HERE to signup as a lender at Lending Club.
Lending Club Secondary Market
Lending Club launched a secondary trading market for their lender notes in October of 2008. This is cool because it allows you to resell your notes that you’ve invested in, giving the investment a liquidity that was not available before. You can also purchase notes on the secondary market.
Prosper vs. Lending Club
Update December 2008 – Prosper is currently shut down while they try to register with the SEC. Lending Club has already completed this SEC registration process.
The obvious peer to this peer-to-peer lender (aren’t I funny?) is Prosper. Prosper has been a P2P lender since 2006. I’ve been a lender on both Prosper and Lending Club, and I prefer Lending Club.
While on prosper you can form lending groups, the social aspect of lending doesn’t seems as emphasized as with Lending Club. You don’t get more social than facebook, where Lending Club initially launched.
Lending Club Screenshots
Here are some more screenshots from Lending Club’s site…
Why I Choose Lending Club
Lending Club is clearly the leader now in the peer to peer lending arena. I’ve heard lots of rumors of not so happy lenders on prosper. By limiting loans to only those with 660+ FICO scores, and rejecting 90% of loan applications, they are keeping the investment pool very safe. People will always be looking to borrow money. And people lenders will always be looking for solid safe returns. Lending Club fills the niche. It’s definitely worth trying at least a $100 investing in, with their average return hovering over 12%. Beats my emigrant direct account anyday, or my Zecco for sure.
Apply For A Lending Club Loan
To apply for a person to person loan for up to $25,000 at Lending Club, click here. To become a lender at Lending Club, click HERE.
Keep in mind you must have a 660 or higher FICO score. If you don’t know your credit score, use a MyFico Code to get a discount on your score before you apply at Lending Club.
DebtKid, why did you write this overview?
I’m kinda bucking for a part-time gig at Lending Club, figured I’d show them I know a bit about the company. Plus, I can’t sleep because of my throat. I have an appointment later today…
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Makes me wish I signed up with a referrer! I just funded my first $500 at lending club today, it could have been $25 more!
What is to prevent someone with excellent creidt/finances from borrowing money at Lending Club at a low rate, let’s say 7-8%, then loaning it on Lending Club at 12%. You could just borrow money from the community and then loan it back out at a higher rate. The system seems to be ripe for a pyramid scheme. Just some initial thoughts. I have a net worth over a million dollars and I’m considering borrowing as much as I can from prosper and lending club then loan some of it back at a higher rate and invest the rest in my real estate business. Interested to hear what everyone thinks?
If you have a net worth in excess of a million dollars, but think that borrowing a few thousand bucks, in order to earn 5% is worth the risk then you probably inherited your money. Not a bright move. However, if it is a decision between the market, savings, and Lending Club, diversifying a bit (heavy emphasis on a bit) of your cash into Lending Club is not a bad strategy. I find that the metrics actually make Lending Club as safe a bet as the market–perhaps safer.
David,
There’s nothing to prevent that, so long as you could provide the funds to make the monthly payments. Though, honestly, for a 4-5% annual return, you’re not doing much better than a high yield money market or savings account (well, maybe right now you are I suppose). There’s also a little risk involved as there is no guarantee you’re going to get a 12% return (though the track record so far. I guess you could compound that and end up in better shape, so it does seem like a good idea. I’m lending a small amount of money, but if lending club pans out for me, I may borrow a bit to invest back to others.
We’ll see how LC ends up long term though.
If you just invest your million dollars here you’ll be making 12% interest off that, but you don’t have access to the million dollars again until it gets paid back to you. If you borrow at 7% and lend it back at 12% you’re only making 5% net profit on Lending Club, and the rest depends on how your real estate investments do. I guess there’s just pros and cons to any way of doing things, it doesn’t necessarily mean it’s a pyramid scheme etc. You can have less access to the funds and earn a higher interest rate, or more access to the funds and earn a lesser interest rate.
Why not. You will still be assuming the risk. In addition, you face the ethical decision of truthfully stating why your borrowing the money. Regardless, your indebted to your lenders so your basically lending on a margin. Good luck and your not the first to think of such.
@ Aaron – It’s my understanding that the income requirement are only for the secondary market, not just general lending. Also, the couple loans I own were made pre-quiet period.
Curious about the lending requirements – I guess they are similar to being an investor in a hedge fund.
Keep in mind he's talking about BORROWING and investing, so he's not making 4-5% on his money, he's making 4-5% on whatever he borrows. This is an immense return on invested capital. If he borrowed 100K and sent 100K and earned a net 4%, his actual return would be infinity becuase he has zero of his own money involved.
He's still leveraged 100,000 dollars
I’m just trying to figure out how David has a net worth of over a million when hes calling people who borrow money from LC and then reinvesting at a higher rate a pyramid scheme…
Thats called arbitrage, and the largest most successful for profit business (Banks) do it every day. Next time you go to your bank look at the two signs on the wall, one says “Savings Account 1.5% APY!!” and one says “Get a Home Equity Loan for 7.0%!!”
If you borrow money this way you are making an infinate rate of return not 4-5%.
two cents..
Lending Club rocks btw
David, you are a DB
i need customer service number please hit my email or call me 919-400-1987
Nice review, DebtKid. How are your loans performing now, almost two years after you started? It seems like for borrowers, Lending Club is a no-brainer if the interest rates are better than anywhere else. Investors have a little more to think about before jumping in, but it seems like Lending Club is quickly becoming the leader in social lending.
Theoretically i guess you could borrow money at a low rate and then use it to lend to people at a higher rate, but theres one flaw here. Lending club lenders often ask what the money will be used for (they almost always ask this). In fact the title of the note almost always contains a description of how the money will be used. The borrower would theoretically have to lie. I cant see many people wanting to lend money to someone who will use it in this manner.
After three months on lending club, i am very happy with the results. i have over 50 notes now, and all of them are performing and current. My net annualized return is over 10 percent and im focusing mainly on A B and C quality loans (lending to people with good credit history and income). I recommend Lending Club to anyone who can tolerate a moderate amount of risk, and wants to diversify away from an ever increasingly volatile stock market.