Lending Club Review [Investing and Borrowing]

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If you’re reading this you’re either considering taking a loan through Lending Club or investing with their platform. I guess there’s also third option and you’ve found yourself here wonder, what the heck is Lending Club.

However you find yourself here, on this particular post I’ve got you covered. Read on to get my full review of Lending Club, the good, the bad, and the moderately painful.

There is a referral code you can use for cash back on a loan if you decide to go that route, but please read the whole review before you make that decision!

Lending Club Review

What is Lending Club?

Lending Club is a peer to peer lending company that offers a unique way to invest outside of stocks and bonds. Originally it was one of the cheapest ways to get into investing, starting an account only cost $100 but now it is at $1,000 to begin.

What are you investing in you ask?

Well, technically you’re investing in other people’s debt. Loans for folks around the country are submitted, vetted, and then offered up on Lending Club’s investment platform for your “peers” to fund. The company offers loans for anything from consolidating debt to remodeling your home and then some. You could even use it to finance a vacation, but that’s a bad bad bad idea.

Why Lending Club?

This peer to peer lending situation was a pretty fast growing business model, and I’m sure it still is. It took out the face to face of a bank lender and sped up the turn around time between application and money in your account by A LOT. When I took out a loan with them it was 48 hours between entering my request and seeing $18,000 hit my bank account. If you’re in a pinch you really can’t beat that kind of speed.

Why invest with them? Their platform is unique and offers a set of criteria you can use to search through open lending requests and vet who you invest with. Do a quick Google search and you’ll find a several posts laying out creative ways to invest in the most stable and high yield borrowers. So many finance folks have tested and swear by the different characteristic combos that will help you make the safest investments.

The idea was to find that perfect combo of qualities that would highlight a reliable investment. It could be credit score, home ownership, age, the amount of time the borrower held their job, or even type of job. It’s kind of like a game trying to set up your best features and then investment only accounts that fit them.

When it worked there could be returns of 15-20%, which is insane, and when it didn’t work it was catastrophic.

My Lending Club Review [as a borrower]

Now that you have an idea of how the platform works and why someone would use it, I’ll give you my honest experience.

I have been on both sides of the system here so I have some definite insight. If you follow my monthly budget status updates you probably know that one of our biggest debts we are paying down is a personal loan. That personal loan is from Lending Club.

About three years ago we took out a $10,000 loan to consolidate some outstanding college payments I had accrued and then ignored. We also paid off two credit cards and some other small debts. Our monthly payment was $297 for a 36 month loan which was automatically deducted from our bank account.

At the time it allowed me to re-enroll in school again and stopped us from having to pay multiple small payments. It seemed like a win at the time.

About two years into that loan we had accrued a little more credit card debt plus some and decided to roll our current loan into a new loan with Lending Club and consolidate again. (notice how we hadn’t fixed any of our problems… I’m shaking my fist at my past self) This time we took out $18,000 at 11.99% interest with a $576 payment every month for 36 months. Again, it seemed like a solid plan at the time.

The money was easy to apply for, fast to hit our account, all of the good things that Lending Club advertised.

I’m not going to lie though, I really wish I was doing something else with that $576 a month. That number seemed so doable at the time but wow does it sting now.

If you are thinking about borrowing through them I would definitely say they are more fair and better rates than a pay day loan but if you can find ANY other way to do things, find another way. A payment like that every month without a break is grueling, trust me, just say, No!

My Lending Club Review [as an investor]

At the time we were taking loans out with Lending Club I was also playing around with investing with them. I got in during the low $100 startup period and for while was putting about $40 a paycheck into the account so I could save at a higher interest rate.

I had my own secret recipe to nail down the perfect borrower. I looked for homeowners looking to consolidate their debit on loans at $10,000 or less. I liked to find those profiles where the credit score was trending upwards as it seemed a good sign that they were responsible and in the debt payoff game to win it.

It totally worked for a few years. I consistently saw 20% returns and never defaulted a single note. I had a really good streak going until one day I didn’t. Which I guess is how gambling works and I was ever so slightly gambling on this particular investment.

When things stopped going my way, they really stopped going my way. I suddenly went from never having a loan default to having 3-4 default a month. Their site has a dashboard that shows you how much of a return you’ve made for the lifetime of the account and I watched mine tank. You could look at each loan individually as it slowly moved from late payment to full default and see the notes entered by the call center as they attempted to recoup your money. So sad.

Once my earnings took a serious nose dive I stopped continuing to invest. I just let the money sit and cashed it out as funds became available. Eventually we started making a determined effort to pay off debt and I used it to help stock out emergency fund.

So final determination on whether I recommend investing with Lending Club? I would have to say no. I’m sure there is money to be made here, I’m sure there are plenty of smart people who are using this as an additional income stream and rocking at it. Unfortunately I also think that for every person who is making a killing some other poor sucker is losing their shirt. Add to that the ethical dilemma of investing in the debt of others, my current self would take a hard pass on this one. Not worth the time, energy, and risk involved.

Lending Club Quirks and Possible Perks

If you made it through my honest opinion and very clear cautionary tale, yet are still interested. I have a couple other points to highlight.

Lending Club can be a little odd and or quirky in that way they do some things and you definitely want to consider that.

First example, you can’t borrow and invest with the same email and login account. So you have a separate account and email for both and have to remember that info – annoying.

Second weird thing, when you borrow there is an initial loan fee that they take out off the top of what you borrow. It’s not a small fee either. When we took out $18k the fee was $800-$600 range, I believe, so we actually had a deposit of $17,200. So, if you need a specific amount just keep that in mind so it won’t be a surprise.

The third thing, and only thing that is kind of a perk. They do offer a referral program and if you sign up under my link we both get a little cash applied to our loan tab, I believe it’s $100. So if for some reason you are still wanting to take out a loan with these guys, help a girl out and use my referral link!

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