The Lending Club operates a credit marketplace that allows peer-to-peer investing and lending. The way it operates allows the Lending Club to offer far lower rates than banks offer. If you are looking for a personal loan, then there is a good chance that the Lending Club will be able to offer you a better deal than your bank. In addition, the Lending Club may be more willing to approve your lending than your bank is. If you are using Lending Club to get a consolidation loan to pay off your debts, then you may pay an average of 30% less than what you were paying on your credit cards.
The Lending Club Peer-To-Peer Lending Business
The peer-to-peer business is risk adjusted in a way that means investors get a return on their investments, and borrowers are able to enjoy lower rates. The marketplace function means that both investors and borrowers have some control over interest rates. The investor may decide upon a rate that he or she wishes to receive, and the borrower may conduct searches over a period of months (as his or her credit rating improves) to find a rate that suits him or her.
There are now quite a few peer-to-peer lending companies in the US, in Canada, the US and Australia, and this is fantastic because it takes business from banks and puts it back into the hands of private investors like you and I.
The Lending Club is a very large P2P marketplace that connects investors with borrowers. The Lending Club allows private citizens (consumers) to borrow from the P2P marketplace, and they allow small businesses to borrow too, which is a little different to other peer-to-peer companies.
The Lending Club Does Things A Little Differently
Most other peer-to-peer companies steer clear of lending to businesses because they do not want to copy the system that banks use. That is why the Lending Club only lends to smaller businesses where the owner is typically the driving force behind the business, and where larger amounts are not required.
The borrowing experience is far better than it is with traditional banking, and you get to know where your money is coming from. You also have slightly more control over the process than you do when borrowing from a bank. In addition, the risk-adjusted returns that investors earn make it a pleasant experience for them too.
How The Borrowing Process Works
Go to their website and fill in their simple loan application form. Companies like Lending Club have ready access to things such as your credit rating and parts of your credit history without needing to run a full check into your credit rating and history. The information they are able to pull from reliable sources means they may get a reasonably good idea of your financial and credit standing within seconds of processing your application form.
Using the same technology and online data that so many other businesses do in the financial industry, the Lending Club system is able to assess your risk. They are able to determine a rough idea of your credit rating, and they are able to assign you with a series of interest rates and offers based on your estimated credit rating.
Offers for loans are produced within minutes, and they are all the result of the Lending Club lending system, which is powered by the information they researched via online databases. All the information they have is retrieved via soft searches, which means your credit score is not affected.
The Lending Club search will not appear on your credit history unless you go through and authorize a credit check before finalizing your loan, and all of that comes later.
What Happens After You Are Offered Your Loans?
Once you have seen the types of loans they may offer and the interest rates that apply to you, you are then asked if you would like to move forwards. If you take the loan, complete the application, and your final loan approval is given after all due checks, then the money appears in your bank account within just a few days.
Your loan is then entered onto the Lending Club marketplace where the investors may see it. They may decide to invest their money into your loan. This means that the repayments you make go to the investor. The interest payments you make will also go to the investor, but the interest is split between the investor and the Lending Club Company.
Lower Interest Rates Are Possible Thanks To Online Investing
The rates that Lending Club offers are not mind-blowing, but they are good. The Lending Club claims their interest rates are good because much of their service is automated, which means they save on wages. They also mention that the investing and borrowing process is done online, which speeds things up and reduces the need for extra staff members, locations and so forth.
All of this automation and online working means that operating costs are kept low. The Lending Club takes a share of the interest that is paid on loans, and they say that they take less because their operating costs are kept low. This interest saving is passed onto the consumer, where customers are able to access slightly lower rates.
The company has found numerous ways of keeping expenses down to make savings. They have passed the savings on to their consumers by simply taking a smaller cut of the interest rates that borrowers are charged. This also puts more money in the pockets of the investors, which encourages them to return with their money.
How The Lending Club Describes Their Borrowers Service
They say their service is better for people who are looking for a loan because it is slightly cheaper than using banks, and because the application process is fairer. The company has cut out the complexities that come with bank loans, and that too has helped lower operating costs in a way that allows Lending Club to pass the savings down to their customers.
Fixed monthly payments
Most peer-to-peer companies operate with simple loan setups where only a monthly payment is required.
No hidden fees
As far as we can tell, their claim that there are no hidden fees is correct. The loan setup is easy, and all their fees are laid out for things such as missing payments.
Low fixed rates
This is partially true. Many of the rates you find are lower than what you find with banks and larger lenders. It is fairer to say that their rates are very competitive.
When setting up your loan, you are given more options than you may otherwise be used to. It is partially due to how they have set up their business, and is partially due to how peer-to-peer marketplaces work.
Easy online application
It is not uncommon for lenders to create a very easy online application system. The Lending Club also has a very easy and quick online application process.
No prepayment penalties
This means you may repay your loan a little faster and they will not charge you. If you are a wealth builder and have read our other articles, then you will know this is a good thing.
They claim their service is friendly, and we have found no reason to doubt it. Even their online reputation supports their inoffensive customer service department.
A Quick Rundown Of How The Lending Club System Works
Go to their website and check your rate. Your rate result will spawn relatively quickly, it will not affect your credit rating, and it is free. You must then choose the type of loan you wish to have from all the loans they offer.
People will invest in your loan, and these are the people who you pay back when you repay your loan. They are also the people who get a share of the interest you pay back.
You may use their “Fast funding” function to have the money sent to your bank account. When setting up your loan, you get to affect your automated monthly payments. When your loan is approved, a fixed amount will be auto-paid (direct debited) from your account, and you may pre-pay at any time without suffering any fees.
Conclusion – There Is A Good Reason They Are So Successful
They are a peer-to-peer lending company that is doing its job correctly. The lending and investing process is easy, and the simplification of the process has allowed the company to offer lower rates by cutting the amount they take out at their end.
The Lending Club has managed to automate and keep most of the process online, which means their operating expenses remain relatively low. This is another mechanism by which they have lowered their interest rates. There are no major issues with the company, there is nothing they are doing wrong, they are not making administrative mistakes, and they are not misleading people. If you are looking to invest or borrow, then place the Lending Club near the top of your shortlist.