Lending Club Review – Peer to Peer Lending Platform Review Comments14 Comments


Hey everyone, thanks for joining me for today’s review. We’ve been talking a lot about investing platforms. I wanted to hold tight to that, but bring something new at the same time this week. So, let’s talk about what I find to be one of the most interesting forms of investing, peer to peer lending.

There’s a company out there called The Lending Club that claims to be the biggest player in the peer to peer lending game, but are they? If so, what’s so great about The Lending Club? Is there anything bad that could be said about them? I’ll tell you all of that in today’s review!

The Lending Club Short Review

The Lending Club Pros – They are a big player! At the time of writing this article, the lending club has funded more than $1.7 billion in loans, that’s no small cash! Peer to peer lending can get pretty risky, but to combat that, The Lending Club offers a way to set the level of risk you’re comfortable with. I also really like the returns as they usually range from 5% to 13% depending on the risk you’re willing to take. Finally, from a borrowers standpoint, it’s an easy way to get the hard loans!

The Lending Club Cons – The Lending Club only has 1 major drawback. For the busy investor, the time it takes to rummage through the available loans and find ones that you’re comfortable with funding can take some time. There are tons of loans to fund at any given time, and time is money. So, you’ve gotta decide if the time spent sifting through the available loans is worth the return on investment of both funding and sweat equity.

The Lending Club Overall – The lending club is a great company. They’ve got experience, funding and capabilities that go far beyond the vast majority of their competitors. From a borrower standpoint, the fees are incredibly competitive and money is easy to access. There’s no reason not to borrow from The Lending Club. However, from an investors standpoint, you’ve gotta decide how much money your time is worth to decide if this is going to be a good option for you. On a 10 point rating, I would give The Lending Club and eight!

The Lending Club Long Review

OK, lets get into the juicy details. When thinking about peer to peer lending as a way to invest, one of the first things you’re going to want to look at is the credit profile of the average borrower to be sure the risk isn’t going to be too high. That being said, the average borrower at The Lending Club has a credit score that sits around 706, which is pretty good.

With peer to peer lending, it’s important to remember that credit score isn’t the only gauge of risk. For instance, someone with a good credit score can also have a high debt to income ratio. If that’s the case, that borrower may not be able to pay off their loans because they have overextended themselves. That being said, the average Lending Club borrower has a debt to income ratio of 15.8%. Although it’s not incredibly high, it is getting close to where banks would generally cut someone off. One of the reasons many people seek out peer to peer lending in a pinch.

For those with limited capital, one big question you have to ask is, “How much money do I have to invest to get started?”. As far as The Lending Club is concerned, you can fund loans with as little as $25, but as far as I’m considered, that’s not enough. We’ve all heard the phrase, “Don’t put all of your eggs in one basket.” It’s a phrase that’s never more true than when it comes to investing.

As a smart investor, you are going to want to add a little diversity to your investment profile to protect you from taking on too much risk. I do this with my stock and bond investments as I would with any other form of investment. That being said, I would never put more than 10% of my eggs in one basket, and that’s only if the basket was very pretty! If you are going to start with a small amount of money, I would say to start with no less than $500. This way, you can fund 20, $25 loans or put more of your money into lower risk loans and only give smaller high risk loans. Let’s face it, someone is bound to default some time, if you don’t diversify, you really could lose!

For The Borrower

OK, so I’ve talked a lot about the investing side but I haven’t really touched much on the borrowing side. The truth is, Lending Club is great for borrowers. Because you’re borrowing from peers, you’re not going to pay as high of an interest rate as you would in most cases borrowing from a bank.

As with any loan, the interest rate that you pay is going to go up with bad credit and down with good credit. Other factors like your debt to income ratio will also play a role in the interest rate that you pay. None the less, most interest rates range from 7% to 15%. So, it’s a very competitive atmosphere for borrowers.

The Lending Club Overall

As I stated in the short review, the Lending Club is a great company with tons of experience. They are and always have been very transparent with stock holders, borrowers, and lenders alike. The interest rates for borrowers are competitive and profits for lenders are on the high end of the chart. The only negative thing that I can say about Lending Club is that for investors, searching for loans to fund may take more time than desired. However, as the years pass, they continue to develop great tools for the lenders dashboard that reduces the time it takes to search for a loan to fund. Overall, I give them an 8 out of 10. The Lending Club is definitely one I would recommend to a friend or family member who wants to borrow or invest money!

Also check out Lending Club as a borrower if you need a loan.

Lending Club Review

Rating: 4.4 / 5
Lending Club ratingLending Club ratingLending Club ratingLending Club rating

Lending Club Reviewed by Clarkgym on .

Author Bio: This Lending Club review was written by , a proud staff writer for Clarkgym!

If you enjoyed this post, please consider or you are welcome to leave a comment below.
By : Josh Rodriguez | 20 Sep 2013
Tweet this article :
Div line

14 thoughts on “Lending Club Review – Peer to Peer Lending Platform Review

  1. Bryce @ Save and Conquer

    One other problem I have with any peer-to-peer lending is the amount of time it can take to get your money back. Loans at Lending Club are for 3 years. It will take at least that long to get your money back. It can take longer then 3 years if a borrower had trouble making payments and renegotiated their minimum payments.

  2. a terrible husband...

    From what I understand the investment returns are taxes as ordinary income because it’s interest income. I’m not sure if that’s 100% true in all cases, but either way, it certainly puts a dent in the returns, particularly given the risk and relative treatment of an index fund.

    1. Joshua from CNAFinance.com

      Hey terrible husband, thanks for your comment. This is very true. With most investments, interest earned is taxable income. However, the taxes are only a small piece of the interest earned not your total balance. So, in my book, it’s still worth investing!

  3. Andrew@LivingRichCheaply

    I do have a small amount in lending club just for fun, but I don’t know if I’d invest a lot into it. I do think it is taxed as interest income. I think there are more investors than borrowers nowadays because there aren’t many loans that I’d like to invest in. I’m kinda conservative in the loans I invest in.

  4. Micro

    I really like my account with Lending Club but their secondary market to sell loans isn’t very easy to work with. This isn’t an issue because I plan on holding things for the long haul. If I needed to access the money quickly, I would have some trouble getting access to the money.

    1. Joshua from CNAFinance.com

      Hey Micro, thanks for your comment! I don’t know much about the secondary market, but could understand how that could be a bit lacking. When it comes down to it, I never invest money I think I’ll need access to before the investment is mature. So, I don’t think that would be a problem for me. Thanks again!

  5. Justin @ RootofGood

    Good article on Lending Club! I was ready to sign up and throw $500 or so in to see what I can make without risking too much. But apparently they don’t accept new accounts in North Carolina! Boo. Anyway, looks like a neat program to make way more than what the banks are paying on deposit accounts.

  6. Romona @Monasez

    This article really gives me a lot to think about. I’ve been looking into peer to peer lending so this was very helpful.

  7. Stu

    Joshua,I think you did a pretty good job describing how LC works.
    I am very active in this area and have a regular blog about it at p2plendingexpert.com. You’re very right about the need to diversify loans and that interest is taxed as ordinary income. Like all fully amortizing loans (think mortgage), more of the payment goes to interest in the early months and more towards principal in the later months.

    keep up the good work.



Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>