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Lending Club Overview
Just looking for the Lending Club $25 sign up bonus? Go here and you’ll be credited $25 once you confirm a lender or borrower account
Since you need a 640 FICO to borrow on the new social lending program Lending Club, I obviously can’t write a traditional review of the service at least from a borrowers perspective. I will however give my thoughts on the program as a mid-twenties, very much in debt, facebook addict.
Visual Overview of Lending Club
Why Borrow with Lending Club?
Interest rates at Lending Club start at 7.5%. Last time I checked my credit cards started at 19.9%. Also, loans from Lending Club are term loans vs. a revolving loan like a credit card. You know your loan from Lending Club will be paid off in 3 years, with a fixed monthly payment. Sounds pretty good to me…think they’d float me 300K?
Yeah, I didn’t think so either. Let’s keep going…
Why Lend @ Lending Club?
The obvious attracting to parking some cashola in your Lending Club account is the returns. According to their website their average return is 12.26%. Not too shabby at all. Lending Club also gives you access to more credit information than prosper does (I have lent at both). When looking at loans to fund Lending Club shows you connections that you might have with the borrowers (geography, work, education, friends) which is actually pretty neat. This connections feature encourages a more “personal” feel to the loan and I could see that helping in their default rates.
Prosper vs. Lending Club
The obvious peer to this peer-to-peer lender (aren’t I funny?) is prosper.com. Prosper is well established, and I even wrote about their $25 free sign-up bonus here.
While on prosper you can form lending groups, the social aspect of lending doesn’t seems as emphasized as with Lending Club. You don’t get more social than facebook, where Lending Club initially launched.
More Screenshots
Here are some more screenshots from Lending Club’s site…
The Closing
Lending Club has a shot. I’ve heard lots of rumors of not so happy lenders on prosper. By limiting loans to only those with 640+ FICO scores, they may be able to keep the lenders happy. Without enough lenders, they’ll be sunk. People will always be looking to borrow money. And people lenders will always be looking for solid safe returns. Lending Club fills the niche. You can get $25 for signing up here (and help the DebtKid out, I’ll get $25. Thanks!). It’s definitly worth trying at least a $100 investing in, with their average return hovering over 12%. Beats my emigrant direct account anyday.
DebtKid, why did you write this overview?
I’m kinda bucking for a part-time gig at Lending Club, figured I’d show them I know a bit about the company. Plus, I can’t sleep because of my throat. I have an appointment later today…
on February 15th, 2008 at 5:27 pm
Makes me wish I signed up with a referrer! I just funded my first $500 at lending club today, it could have been $25 more!
on February 29th, 2008 at 11:52 pm
[...] just myself. I’ve interacted with lots of readers and bloggers and Lending Club who know me as DebtKid, but that’s always been over e-mail, or the phone. This was actually [...]
on March 16th, 2008 at 9:27 pm
What is to prevent someone with excellent creidt/finances from borrowing money at Lending Club at a low rate, let’s say 7-8%, then loaning it on Lending Club at 12%. You could just borrow money from the community and then loan it back out at a higher rate. The system seems to be ripe for a pyramid scheme. Just some initial thoughts. I have a net worth over a million dollars and I’m considering borrowing as much as I can from prosper and lending club then loan some of it back at a higher rate and invest the rest in my real estate business. Interested to hear what everyone thinks?
on March 19th, 2008 at 5:48 pm
David,
There’s nothing to prevent that, so long as you could provide the funds to make the monthly payments. Though, honestly, for a 4-5% annual return, you’re not doing much better than a high yield money market or savings account (well, maybe right now you are I suppose). There’s also a little risk involved as there is no guarantee you’re going to get a 12% return (though the track record so far. I guess you could compound that and end up in better shape, so it does seem like a good idea. I’m lending a small amount of money, but if lending club pans out for me, I may borrow a bit to invest back to others.
We’ll see how LC ends up long term though.
on March 23rd, 2008 at 3:22 pm
If you just invest your million dollars here you’ll be making 12% interest off that, but you don’t have access to the million dollars again until it gets paid back to you. If you borrow at 7% and lend it back at 12% you’re only making 5% net profit on Lending Club, and the rest depends on how your real estate investments do. I guess there’s just pros and cons to any way of doing things, it doesn’t necessarily mean it’s a pyramid scheme etc. You can have less access to the funds and earn a higher interest rate, or more access to the funds and earn a lesser interest rate.
on March 24th, 2008 at 11:58 pm
Why not. You will still be assuming the risk. In addition, you face the ethical decision of truthfully stating why your borrowing the money. Regardless, your indebted to your lenders so your basically lending on a margin. Good luck and your not the first to think of such.