Interest Rates and How We Set Them
Lending Club’s interest rates take into account credit risk and market conditions. The final interest rate for each loan grade is the result of the following equation:
Lending Club Base Rate + Adjustment for Risk & Volatility
The Adjustment for Risk & Volatility is designed to cover expected defaults and provide higher risk-adjusted returns for each loan grade increment from A1 to G5.
The loan grade is the result of a formula that takes into account not only the borrower’s credit score, but also a combination of several indicators of credit risk from the borrower’s credit report and loan application. All loans have either a 36- or 60-month term, with fixed interest rates and equal payments.
Table 1. Loan Grades
| Loan Grade | Sub-Grade | Lending Club Base Rate | Adjustment for Risk & Volatility | Interest Rate |
|---|---|---|---|---|
| A | 1 | 5.05% | 0.98% | 6.03% |
| 2 | 5.05% | 1.57% | 6.62% | |
| 3 | 5.05% | 2.57% | 7.62% | |
| 4 | 5.05% | 2.85% | 7.90% | |
| 5 | 5.05% | 3.85% | 8.90% | |
| B | 1 | 5.05% | 5.11% | 10.16% |
| 2 | 5.05% | 6.09% | 11.14% | |
| 3 | 5.05% | 7.07% | 12.12% | |
| 4 | 5.05% | 8.06% | 13.11% | |
| 5 | 5.05% | 9.04% | 14.09% | |
| C | 1 | 5.05% | 9.28% | 14.33% |
| 2 | 5.05% | 10.26% | 15.31% | |
| 3 | 5.05% | 10.75% | 15.80% | |
| 4 | 5.05% | 11.24% | 16.29% | |
| 5 | 5.05% | 12.22% | 17.27% | |
| D | 1 | 5.05% | 12.72% | 17.77% |
| 2 | 5.05% | 13.44% | 18.49% | |
| 3 | 5.05% | 13.70% | 18.75% | |
| 4 | 5.05% | 14.00% | 19.05% | |
| 5 | 5.05% | 14.67% | 19.72% | |
| E | 1 | 5.05% | 15.44% | 20.49% |
| 2 | 5.05% | 15.95% | 21.00% | |
| 3 | 5.05% | 16.44% | 21.49% | |
| 4 | 5.05% | 16.93% | 21.98% | |
| 5 | 5.05% | 17.42% | 22.47% | |
| F | 1 | 5.05% | 17.90% | 22.95% |
| 2 | 5.05% | 18.23% | 23.28% | |
| 3 | 5.05% | 18.58% | 23.63% | |
| 4 | 5.05% | 18.71% | 23.76% | |
| 5 | 5.05% | 18.78% | 23.83% | |
| G | 1 | 5.05% | 19.65% | 24.70% |
| 2 | 5.05% | 19.78% | 24.83% | |
| 3 | 5.05% | 19.84% | 24.89% | |
| 4 | 5.05% | 19.84% | 24.89% | |
| 5 | 5.05% | 19.84% | 24.89% |
Lending Club Proprietary Model Ranking
If an applicant passes the initial credit screening criteria, the applicant is assessed by Lending Club’s proprietary scoring models which can either decline or approve the applicant. The initial scoring model provides the applicant with a score, which when combined with the applicant’s FICO score and certain other credit attributes arrives at a Model Rank. The Model Rank is based upon an internally developed algorithm which analyzes the performance of Borrower Members and takes into account the applicant’s FICO score, credit attributes, and other application data. The Model Rank is between 1 and 25 and corresponds to a Base Risk Sub-Grade as follows:
Table 2. Initial Loan Sub-Grade Assignment
| Model Rank | Base Risk Sub-Grade |
|---|---|
| 1 | A1 |
| 2 | A2 |
| 3 | A3 |
| 4 | A4 |
| 5 | A5 |
| 6 | B1 |
| 7 | B2 |
| 8 | B3 |
| 9 | B4 |
| 10 | B5 |
| 11 | C1 |
| 12 | C2 |
| 13 | C3 |
| 14 | C4 |
| 15 | C5 |
| 16 | D1 |
| 17 | D2 |
| 18 | D3 |
| 19 | D4 |
| 20 | D5 |
| 21 | E1 |
| 22 | E2 |
| 23 | E3 |
| 24 | E4 |
| 25 | E5 |
Loan Grades and Risk Modifiers
We then modify the Base Risk Sub-Grade using credit risk indicators including:
- Requested Loan Amount
- Loan maturity: 36 or 60 months
to arrive at a final Sub-Grade.
Table 3. Requested Loan Amount Modifier by Base Risk Grade
| Requested Loan Amount |
Base Risk Grade / Modifier | ||
|---|---|---|---|
| A | B | C - E | |
| <$5,000 |
-1 | -1 | -1 |
| $5,000 - <$10,000 |
0 | 0 | 0 |
| $10,000 - <$15,000 |
0 | 0 | 0 |
| $15,000 - <$20,000 |
0 | 0 | -2 |
| $20,000 - <$25,000 |
0 | -1 | -3 |
| $25,000 - <$30,000 |
-2 | -3 | -4 |
| $30,000 - <$35,000 |
-4 | -4 | -5 |
| $35,000 |
-6 | -6 | -6 |
Table 4. Loan Term Modifier
| Loan Term (Maturity) | Loan Grade | Risk Modifier |
|---|---|---|
| 36 months | A - G | 0 |
| 60 months | A | -4 |
| 60 months | B | -5 |
| 60 months | C - G | -8 |
Decline Criteria
Borrower applications will be declined if any of the following criteria are met:
- FICO score below 660
- Fewer than two revolving accounts
- 36 months or less of credit history
- Seven or more credit inquiries within the past six months
- Debt-to-income ratio of 35% or more
