Review of Personal Loans Through LendingClub

LendingClub is one of the most experienced non-bank lending partners in the market and is the pioneer of the peer-to-peer (P2P) lending model. LendingClub has lent more than $50 billion to over 3 million customers since 2007, so let’s take a look at its personal loans to see if they might make sense for you.

Like every loan product, loans through LendingClub have pros and cons, especially when compared with personal loans offered by other financial institutions. With that in mind, here’s a rundown of some of the things I like about them:

• Soft credit pull -- LendingClub allows potential borrowers to check their interest rate and loan terms without a hard credit pull, so it won’t affect your credit score to pre-qualify.†††
• Loan amounts -- LendingClub provides access to personal loans in amounts ranging from $1,000 to $40,000. This isn’t the widest range in the industry, especially on the top end, but a $1,000 personal loan can be difficult to find elsewhere.
• Rates for borrowers with strong credit -- With APRs starting at 6.95%, loans through LendingClub could be a relatively inexpensive option for people with strong credit, especially if the loan is being used to consolidate high-interest credit card debt.
• No prepayment penalty -- LendingClub doesn’t charge prepayment penalties or application fees.
• Loan terms -- Loans through LendingClub have terms of 3 or 5 years.
• Transparent credit standards -- Unlike many other lending partners, LendingClub is quite transparent about minimum credit qualifications, which we’ll discuss in detail later on.
• Joint applicants -- Most lending partners don’t allow for joint applications, but loans through LendingClub do, as long as one borrower meets the required credit standards. The other applicant must meet other, more relaxed, standards, but this makes loans through LendingClub a good choice for borrowers who need to apply with a cosigner.

As I mentioned, most lending products have drawbacks, and loans through LendingClub are no exception. While not all of these drawbacks will affect everyone, here’s what you should know about loans through LendingClub before applying:

• Funding time -- It takes a minimum of seven days to receive your loan proceeds. Because your loan comes from investors, and not the lender’s capital, LendingClub needs to find backers to fund your loan. While this isn’t necessarily a deal-breaker, it’s considerably longer than many other personal lenders take.
• APR range -- Loans through LendingClub have an APR range from 6.95%-35.89%. While the low end is quite competitive, the high end of this range is among the highest in the industry.
• Origination fees -- LendingClub charges an origination fee ranging from 1%-6% of the loan amount, based on the borrower’s credit rating. To be clear, this is reflected in the APRs mentioned above. In contrast, many of LendingClub’s competitors don’t charge origination fees at all.

As I mentioned, there are specific minimum credit standards for loans through LendingClub, including a minimum credit score of 600, at least three years of credit history, and a debt-to-income ratio of 40% or lower. In addition, joint applications are allowed, as long as one borrower meets the minimum standards.

While loans through LendingClub have some of the looser credit standards in the industry, it’s important to realize that only borrowers with excellent credit will qualify for the best loan terms.

LendingClub provides access to personal loans ranging from $1,000 to $40,000. However, it’s important to realize that your qualifications need to justify the loan amount you request. In other words, even if you have excellent credit, you aren’t going to qualify for a certain loan amount unless your income and other debt obligations justify it.

In a nutshell, personal loans through LendingClub make sense for borrowers with strong credit histories, stable employment, and a relatively low debt-to-income (DTI) ratio. Personal loans through Lending Club have loan terms that are quite competitive -- on the low end of its APR and origination fee ranges -- but in order to get the best terms, you’ll need top-notch credit and a low DTI.

It’s also worth pointing out that if you need to borrow more than $40,000, there are other lending partners who could be better options. Some of our favorite personal lenders will make loans for as much as $100,000, so if you need a large loan, be sure to explore all of your options.

Finally, LendingClub can be an excellent option for borrowers who need to apply with a cosigner, or who want a joint account. For example, if you and your spouse both want to be responsible for the loan, that’s possible with a loan through LendingClub, but isn’t available through many competitors.

You can apply for personal loans through LendingClub by clicking this link and applying on their secure website. As I mentioned earlier, you can check your interest rate and loan term options without affecting your credit score. If you decide to move forward, you’ll then choose the loan offer that suits you best and formally apply. (Note: Once your loan is issued, a hard credit inquiry will be conducted.)

The application process is rather quick, but because of the nature of LendingClub’s business model, it can take some time before the money shows up in your bank account. LendingClub advertises that you can “get your money in as little as 4 days,” while several other lending partners fund loans considerably faster.††

As I mentioned, it’s a smart idea to check your loan offers from a few lending partners. You can do this without a hard credit pull, and you might be surprised at how much interest rate offers can vary. So, it’s advisable to at least consider some of our favorite personal lenders as potential alternatives.†††

Furthermore, while personal loans like those offered through LendingClub can be great, it may be a good idea to consider a credit card balance transfer offer if you have debt to consolidate and think that you’ll be able to pay it off within the next 18 months or so.