Social Lending - How it Works
Lending Club is a social lending network where members can borrow money and lend money among themselves at better interest rates. Borrowers get low interest rates, and lenders get better returns.
Borrowers get personal loans from individual lenders at a low interest rate, every time
Borrowers complete a personal loan request and instantly view the interest rate at which they qualify to list a loan (it's free to check, but we have very high credit standards such as a minimum FICO score of 640, so we do apologize if you don't qualify). There are no hidden fees, and the low interest rate is fixed for three years.
The loan request includes information that helps our proprietary LendingMatch™ system find relationships between the borrower and the lender, helping ensure that loans get funded at a better rate for both parties. There is a two-week loan listing period where loans are either fully funded and issued or the loan listing expires.
Borrowers typically request loans on Lending Club to finance purchases, pay for one-time events (like weddings or vacations), or to refinance existing high-interest loans, credit card balances or other revolving debt. Borrowers also receive the added benefit of an installment loan with a fixed interest rate and predictable monthly payments over a three-year period. Lending Club deposits the loan into the borrower's bank account, and each monthly payment is taken directly out of that same bank account.
Lenders make loans at better rates to prime borrowers
Lending Club provides a secure and flexible platform that lets people and organizations lend money to other people, while enabling them to earn higher rates than those offered by Certificates of Deposit (CDs), savings or money market accounts.
Lenders begin by choosing their risk profile and establishing loan preferences. This information is used by our LendingMatch™ system to identify a portfolio of loans that match the lender's preferences. By contributing to a group of loans in a diversified portfolio, lenders reduce risk without negatively impacting return. Lending money through diversification reduces the risk of losing your initial investment. Lenders can also build their own portfolios or search for specific loans based on their own criteria, such as credit factors or personal connections.
Lending Club manages the money movement, loan repayment, and provides detailed reporting (as well as submission of relevant 1099 tax forms). If a borrower fails to pay, Lending Club will report the borrower to credit agencies and utilize a collections agency to recover the funds, if necessary. All borrowers are risk-assessed, and anyone with a current delinquency or a credit score below 640 is turned down. Borrowers with a credit score above 640 will also be turned down if their overall debt level is too high or if they have fewer than 12 months of credit history. This filtering mechanism creates a safer environment for lenders. Lenders must be able to pass an authentication screen (requiring a Social Security number) in order to participate.
