Get Low Rate Loans From Your Peers with Lending Club
In an environment where banks are (understandably) hesitant to loan money to individuals, LendingClub bills itself as a way for borrowers to get low interest rate loans and build their credit. With LendingClub, you can get a 3 year term loan (36 monthly payments) between $1,000 and $25,000 with a fixed rate. I recently signed up with Lending Club as a borrower to test it out, and I have to say, I’m very impressed. Some highlights from my experience so far:
- Sign up is extremely quick and easy – my loan was live and open for funding in less than an hour.
- The community is very sharp – I fielded two very polite questions about my loan
- The staff at LendingClub is responsive and helpful
- Interest rates as low as 7.89% (though mine was 13.72%, probably on account of my crappy income)
- On-time payments are recorded as positive items on your credit report
Interest in learning more? You can sign up for LendingClub now or read about my experience below.
Sign up Process
LendingClub’s initial sign up is streamlined to get you up and running fast. At first, this seemed a bit fishy to me – the first form doesn’t ask for any personal information, just how much you want to borrow and your “estimate” of your credit score. Then they ask you to fill in your employment information. From this, they determine your rate and loan terms.
At first blush, this seemed rife for a “liar’s loan” situation, but LendingClub does state that they may verify employment status. Being self-employed, this didn’t really apply to me. They also will pull your credit report once you apply for the loan, but as one of LendingClub’s employees explained to me on the phone, this is a soft pull. Afterward, they do a monthly soft pull on your account, similar to the monitoring that your credit card issuer will do. Lenders (actually, they are technically “investors” at LendingClub) can see information derived from your credit report, including your debt-to-income ratio, your credit score range and your revolving debt balance, but they do not have access to your credit report.
Fees and Payments
Before you receive your money, LendingClub takes a cut via a non-refundable origination fee. Purusant to Truth in Lending requirements, all the fees and finance charges are broken down for you. In my case, I paid $32.50 in origination fees for my 13.72% APR loan. If I don’t prepay the loan, I’ll pay $219.42 total in finance charges.
My monthly payment is $32.97 and this is payable by ACH deposit. During signup, you link a banking account to LendingClub which is verified the same way PayPal does (by depositing a small amount and asking you to verify the amount deposited). You can make your payments by check, but there is a $15 charge for check processing.
Funding Your Loan
When you post your loan, you are given a little bit of space to explain your situation and what you intend to use the money for. Investors aren’t allowed to know your identity or vice versa, but they can ask you questions. I received two queries, one asking to describe my employment situation further and another asking me if I had considered paying down some of my revolving debt with my loan. The latter suggestion was pleasantly surprising – of course, he wanted to ensure that I’d have the money to pay him back in 3 years, but in a way, he was also looking out for my best interests (something you don’t often see from big banks).
Anyway, after explaining that my revolving debt is just my monthly credit card bill that I pay off every month in full, my loan was quickly funded in full. (On that note, I recommend waiting until you’ve paid down most of your revolving debt before applying for a loan at Lending Club). In the end, I got 10 different investors to fund my loan.
After my loan was funded, I received a call from LendingClub to verify my identity before they disbursed the funds to my bank account. The drill was the exact same stuff they do when verifying your identity when you sign up to get a free credit report – he just asked me about items from my credit report, including my past addresses and the balances on my credit cards. I couldn’t recall the balance on my credit cards, but after telling him information about my student loans, he was satisfied.
Summary
All in all, I would recommend LendingClub. The amount of my loan was admittedly very low and my credit score is fairly decent, but I received funding surprisingly quickly. One perk that LendingClub highlights – paying off loans successfully at LendingClub will increase your credit score. Because of that, it’s a good place for people with bad credit to get some positive items on their report.
I intend to keep the loan just to see how things go and then pay it off in full in 6 months, at which time I’ll likely post an update on my experiences of the entire process.
Sign up for LendingClub and tell us about your experience in the comments.
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