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FAQs for New Investors

The Basics

How does Lending Club work?

Lending Club is the world's leading online credit marketplace, where investors back creditworthy borrowers in exchange for interest income. Here's how it works:

  • Customers interested in a loan complete a simple application on our website.
  • Application information is evaluated and Lending Club determines an interest rate and presents loan offers to qualified borrowers.
  • Applications are approved based on strict credit criteria and the majority of applicants do not receive a loan.
  • Investors, ranging from individuals to institutions, select loans in which to invest and can earn monthly returns.

How does Lending Club make money?

Lending Club collects fees from both borrowers and investors. We only collect fees from investors when they receive payments, so our revenue is directly tied to their cash flow.

  • As an investor, you will pay a 1% service fee on each payment received. If borrowers miss a payment, you do not pay a fee unless and until the payment amount is collected.
  • When borrowers miss payments and loans become late, Lending Club uses best practices from the banking industry to bring delinquent loans back to “current” status. Currently, Lending Club charges investors one of the following collection fees, which is deducted from any amount recovered: 1) Up to 35% of the amount recovered if a collection action must be taken with respect to a loan and no litigation is involved, or 2) 30% of hourly attorneys' fees, plus costs, if litigation is involved. Lending Club does not charge a collection fee if no payments are collected, and no collection fee will be charged in excess of the amount recovered.
  • Please note that the collections fee described above is a reduced collection fee, which may be discontinued at any time. The normal collection fee is a percentage of the amount recovered: up to 35% if a collection action must be taken in respect of a loan and no litigation is involved; or 30% of hourly attorneys' fees in the event of litigation, plus costs.

Investing Mechanics

How do I pick which Notes to buy?

When selecting Notes and building a portfolio, investors may consider information about the loan grade, purpose, term (36 or 60 months), the debt-to-income ratio (DTI) and most recent credit score, as well as other factors. Learn more about loan grades.

There are two primary ways to invest your cash at Lending Club.

  1. Manual Investing: You browse loans currently listed on the site and build your portfolio one Note at a time.
  2. Automated Investing: You set your investment criteria and orders are placed automatically as matching Notes are found.

    Learn more about Manual Investing and Automated Investing

Lending Club does not offer investment advice. You should consult your financial advisor if you have any questions or need additional information.

Am I investing in the loan of a single borrower?

It depends on whether you purchase Notes corresponding to different borrower loans. Each borrower loan is divided into many fractions called Notes. Investors purchase Notes in $25 increments and each Note entitles the investor to a portion of the borrower loan repayments of principal and interest. By purchasing many small Notes that correspond to different borrowers, you can diversify your portfolio and reduce the impact of any single loan loss. With just $2,500, you can invest in 100 different borrowers. Learn more about the benefits of diversification.* Learn more about Notes.

*This information is not intended to be investment advice, guidance, or a guarantee of the performance of any Note.

How often do I get payments and when do I get all of my money back?

Payments of principal and interest on each loan are due from borrowers monthly. The cash received by Lending Club from these monthly payments is disbursed to investors and, once disbursed, is available for investors to reinvest or withdraw at any time. The final borrower payment of principal and interest is due to arrive on the date a Note reaches maturity (currently 36 months or 60 months from the date the Note was issued).

Folio Investing operates a Note Trading Platform that may provide additional liquidity in certain circumstances for Lending Club investors prior to the maturity of a Note. The Note Trading Platform is a marketplace where Lending Club investors may buy and sell Notes from one another.* Learn more about the Note Trading Platform.

*The Note Trading Platform is not available for all account types and investors must be granted access by Folio Investing before transacting on the Note Trading Platform. Folio Investments, Inc. ("Folio Investing") is a registered broker-dealer and member of FINRA and SIPC and operates the Note Trading Platform. Folio Investing is based in McLean, VA and is not affiliated with Lending Club. Folio Investing has no role in the original issuance of the Notes and is not responsible for and does not approve, endorse, review, recommend or guarantee the Notes or the accuracy, reliability, or completeness of any data or information about the Notes. More information about Folio Investing is available at www.folioinvesting.com.

How do I exit my investment?

The solid returns, monthly cash flow, and low volatility of Lending Club Notes come with less liquidity relative to other asset classes. Currently, Lending Club Notes mature 36 months or 60 months from the date the Note was issued, and investors should be prepared to hold any Note through to its maturity. As payments of principal and interest are received each month, investors may withdraw available cash through an ACH transfer to their bank account or through other means.

Folio Investing operates a Note Trading Platform that may provide additional liquidity in certain circumstances for Lending Club investors prior to the maturity of a Note. The Note Trading Platform is a marketplace where Lending Club investors may buy and sell Notes from one another.* Learn more about the Note Trading Platform.

*The Note Trading Platform is not available for all account types and investors must be granted access by Folio Investing before transacting on the Note Trading Platform. Folio Investments, Inc. ("Folio Investing") is a registered broker-dealer and member of FINRA and SIPC and operates the Note Trading Platform. Folio Investing is based in McLean, VA and is not affiliated with Lending Club. Folio Investing has no role in the original issuance of the Notes and is not responsible for and does not approve, endorse, review, recommend or guarantee the Notes or the accuracy, reliability, or completeness of any data or information about the Notes. More information about Folio Investing is available at www.folioinvesting.com.

I placed an order and some money was returned to my account. Why?

When you place an order for a set of Notes, it is likely that one or more of those Notes will not ultimately issue because the loans associated with the Notes will not issue. Historically, about 30% of the loans listed on the Lending Club platform are not issued. A loan might not issue for a variety of reasons. For example:

  • Borrowers may decide to cancel the loan request
  • Borrowers may fail to provide all of the information we need to verify a loan application
  • Borrowers may fail an income verification screen

If a loan does not issue, the cash you committed to that loan will become available to you to commit to other loans. For real-time updates on your orders, please view your order history.

To learn more about the Note review process, click here.

How do I withdraw money?

You may withdraw available cash from your account at any time.

To move funds back to your bank account, click on the "Withdraw Funds" link in the "Transfer" section of your account. You can reach the link by clicking here. A bank transfer initiated by 3pm PST M-F is typically posted to your bank account at the end of 4 full business days.

You can also request to withdraw available cash via check. If you want to withdraw funds, Lending Club will mail a check in the name of the account owner to the address on record within 10 business days of the request. To cover the cost of the check, a fee of $15 will be deducted from the amount requested. To request a withdrawal via check, please contact Investor Services at investing@lendingclub.com.

Please note: funds must be sent back to the same source from which they originated except in limited circumstances consistent with anti-money laundering policies.


Borrowers and Underwriting

Who are the borrowers and why do they choose Lending Club?

Lending Club borrowers must complete an online application and qualify for a loan based on stringent credit criteria.

Many borrowers choose Lending Club because it offers a lower interest rate and less hassle than traditional financing options. Borrowing through Lending Club offers attractive fixed rates, an easy online application, friendly service, and no hidden fees or prepayment penalties.

Over 80% of Lending Club borrowers report using their loans to refinance existing loans or pay off their credit cards. Other borrowers use their loans for home improvement, major purchases, or other financing needs.

How are borrowers screened for quality?

Qualified loan applications are approved based on stringent credit criteria designed to focus on the most creditworthy borrowers.

To evaluate the credit risk of borrowers and to assign an interest rate to approved loans, proprietary models examine a variety of inputs including borrower credit reports, loan applications, and behavioral data. The models also incorporate the historical performance of the billions of dollars in loans facilitated through our marketplace. The models are consistently refined and improved with the goal of minimizing risk while providing consistent returns for investors.*

* Models and estimates are not guaranteed to be accurate and may differ materially from actual results. Historical performance is not a guarantee of future results. Lending Club Notes are not guaranteed or insured, and investors may lose some or all of the principal invested.

How does Lending Club set interest rates?

Lending Club assigns a credit grade and an interest rate to every approved loan. Our interest rates increase for each loan grade increment from A1 to G5. For example, an A1 grade loan has a lower interest rate than a B1 grade loan, reflecting the lower expected losses and lower expected volatility of returns associated with A1 loans. Similarly, a G5 grade loan has a higher interest rate than an F5 grade loan, reflecting the higher expected losses and higher expected volatility of returns.* Learn more about how Lending Club sets interest rates.

* Models and estimates are not guaranteed to be accurate and may differ materially from actual results. Historical performance is not a guarantee of future results. Lending Club Notes are not guaranteed or insured, and investors may lose some or all of the principal invested.


Delinquencies and Defaults

What happens when a borrower misses a payment?

Delinquencies are a natural component of investing in Notes, and you should expect some borrowers to miss loan payments.

When borrowers miss a loan payment, Lending Club makes reasonable efforts to collect outstanding payments and bring the loan back to "current" status. The collections process in general is highly regulated and our collections teams take action to collect payments from delinquent borrowers in accordance with federal, state, and municipal laws related to collections activities. Learn more about the tools Lending Club uses to address delinquent borrowers.

Why do some borrowers default on their loans?

Loan applications are evaluated and approved based on stringent credit criteria and review processes. However, it is impossible to predict whether particular borrowers will repay their loans.

Borrowers may miss payments and default on their loans for a variety of reasons. For example, borrowers may not make payments if they become unemployed, if they incur unexpected expenses, or if they file for bankruptcy.

When borrowers miss a payment, Lending Club makes reasonable efforts to collect outstanding payments. In certain circumstances, our collections team may work with borrowers to structure a new payment plan to help bring a delinquent loan back to "current" status. Even with our collection efforts, it is inevitable that some borrowers will default on their loans.

What happens when a borrower defaults?

It is unavoidable that some borrowers will stop making payments on their loans altogether, regardless of any additional collections efforts. When borrowers miss several payments and there is no longer a reasonable expectation of further payments, a loan becomes "charged off". A charge off typically occurs when a loan is 150 days past due. When a loan is charged off, the remaining principal balance of the corresponding Note will be deducted from the investor's account balance. Lending Club may sell charged off loans to a third party that attempts to collect the outstanding payments. In the event that funds are recovered by Lending Club on a previously charged off loan, investors will receive a pro rata share of the recovery amount, less any collections fees. In general, recoveries on previously charged off loans are infrequent.


Returns, Performance, and Taxes

How do we measure returns?

Lending Club calculates Net Annualized Return (NAR) for investors and displays it on their Account Summary page. We calculate and display NAR to provide investors an annualized measure of returns on their Notes that may be useful in evaluating the performance of their portfolio. Annualized return measures may be more reflective of returns in accounts that buy and hold Notes through to their maturity. If you do not hold Notes through to the date of their maturity, the displayed NAR may not be reflective of the returns in your account.* Learn more about NAR.

NAR is just one way to calculate the return on funds invested through Lending Club. There are other methods for evaluating the return on fixed-income securities that you could consider.

* NAR and all models and estimates are not guaranteed to be accurate and may differ materially from actual results. Historical performance is not a guarantee of future results. Lending Club Notes are not guaranteed or insured, and investors may lose some or all of the principal invested.

What can I do to improve my returns?

While it is impossible to predict the performance of any particular portfolio, there are many factors that can influence returns, including the number of Notes in your portfolio that correspond to different borrower loans, the concentration of your investment, the composition of your investment, and the performance of the loans corresponding to your Notes. Learn more about how returns typically change over time and the factors that can influence returns.

How is this taxed?

Interest and other payments received in your Lending Club account are generally taxable as regular income. In addition, the cost basis of a Note corresponding to a loan that charged-off is generally classified as a capital loss and reportable to the IRS. Lending Club does not provide tax advice and recommends that you consult your financial or tax advisor if you have any questions or need additional information. Learn more about the tax documents issued by Lending Club.

Is my money insured?

Lending Club is not a bank and does not take and hold deposits. All cash balances reflected in your Lending Club account (e.g., funds not invested in Lending Club Notes) are held at Wells Fargo Bank, National Association, an FDIC member banking institution, in a pooled bank account titled in our name "in trust for" investors. The account is FDIC-insured on a "pass through" basis to the individual investors, subject to applicable limits. This means that your Lending Club account cash balance is covered by FDIC insurance, up to the limits established by the FDIC.

Lending Club Notes are not guaranteed or insured and investors may have negative returns. Borrowers make payments on their loans to Lending Club and Lending Club passes those payments on to investors net of fees.

  • If borrowers miss a loan payment, you will not receive a monthly payment on the corresponding Note. Lending Club uses best practices from the banking industry to collect payments from delinquent borrowers, but it is inevitable that some borrowers will default on their loans. Learn more about what happens when a borrower misses a payment.
  • Lending Club has taken steps to protect investors and borrowers in the event that Lending Club were to go out of business or if our services were disrupted, including entering into a backup and successor servicing agreement with a third party organization. Read the prospectus to learn more.

More questions? Check out our searchable Help section

Lending Club Notes are offered by prospectus filed with the SEC. Please consider the risks of investing.

1 Lending Club's preferred IRA custodian is Self Directed IRA Services, Inc. (SDIRA), a subsidiary of Horizon Bank. SDIRA charges an annual account fee of $100 at account opening and then annually on the anniversary of account opening. Lending Club will pay the $100 annual account fee due at account opening on your behalf if your account has an initial minimum balance of $5,000 or more invested in Lending Club Notes and maintains this minimum invested balance for the following 12 months. For every subsequent year in which your account maintains a minimum balance of $10,000 or more invested in Lending Club Notes, Lending Club will pay the annual account fee of $100 on your behalf on the anniversary of account opening. All account balances are determined as of the last business day immediately prior to the anniversary date of the opening of your account. You will be responsible for the account fee for any accounts that don't meet the above requirements. Lending Club reserves the right to modify or discontinue this offer at any time. See the SDIRA IRA Fee Schedule for more information.