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Lendingclub.com is person-to-person lending site that matches lenders with borrowers. By matching investors (lenders) directly with borrowers, it allows investors to achieve a higher rate of return on their money in exchange for assuming some risk. In turn, it offers borrows the chance to receive a lower interest rate than that available from most bank or credit union loans. As a borrower on the site, users post their loan request and wait to receive offers from lenders. Users can post their loan request using only a screen-name, thus remaining anonymous, but detailed credit information is required from borrowers.
The loans at Lendingclub have fixed interest rates, with the average loan term being 3 years. The average loan size is around $5,5000, while the minimum loan size is $1,000 and the maximum is $25,000. Borrowers undergo a credit assessment before they can place a loan request, and are given a credit grade of A to G by the site, with A being the best rating and G the lowest. Typically, the higher the credit grade the lower the interest rate the borrower will receive on their loan. The overall credit standards to secure a loan at the site are quite high. Investors can also buy and sell the notes that they hold among themselves using the Trade feature of the site.
Lendingclub.com was launched in March of 2007 by founder and CEO Renaud Laplanche. John Donovan is currently COO, and Joaquin Delgado is CTO. The site has tens of thousands of unique monthly visitors, and currently has an Alexa page rank well below 100,000. The site received venture capital funding from Angel Investors, Canaan Partners, and Norwest Venture Partners.
Lendingclub’s competition includes Zopa and Prosper. Zopa is really a member-owned social networking credit union with sites serving several countries. They are a full-featured credit union, offering checking accounts and credit cards. Prosper is more similar to Lendingclub, but has a larger member community. Prosper also has a stronger social networking aspect than Lendingclub.
The Lendingclub site is very well done, with a pleasant look and feel. Members with a basic account can easily find out all they need to know before submitting their personal information to act as a borrower or lender. The site has a convenient top menu bar for navigation. The tabs on the bar are labeled Home, Invest, Borrow, Trade (where investors can buy/sell notes they hold), My Account, and Invite (where users can invite their friends and family to join the Lendingclub site. The site is very responsive, with page loads happening quickly. The site is a secure site (https:) once the user has logged into their account. There is no advertising displayed on the site, as the site earns its revenue by charging a commission on loan transactions.
Membership is free at Lendingclub, and the registration process for a basic account is straightforward. The registration procedure asks for email address, password, security question and answer, and a screen name. User’s who wish to act as borrowers must enter detailed personal and credit information (8 pages of it). Those wishing to act as investors must furnish detailed personal information as well (4 pages). There is no premium membership to the site available.
Lending Club charges a service charge to lenders for servicing loans, making Note payments and maintaining the accounts. The service charge paid by lenders is one percent of all amounts paid by the borrowers to Lending Club.
Lendingclub is recommended to borrowers with good credit who are looking for an excellent interest rate on a credit card consolidation, home improvement or auto loan. It is also recommended to investors who are willing to assume some risk in return for a higher return than they can achieve through more traditional investment avenues. Potential users should be comfortable with providing a large amount of personal and financial information over the Internet.
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