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LendingClub Review

An Overview of LendingClub

LendingClub is an online peer-to-peer lending company that allows individuals to invest in personal loans made to creditworthy borrowers. Founded in 2006, LendingClub aims to connect investors and borrowers directly, eliminating the high costs and barriers associated with traditional bank lending.

How LendingClub Works

LendingClub’s online platform uses technology to evaluate borrowers’ credit data and assign appropriate interest rates based on risk. Borrowers can apply for personal loans between $1,000 and $40,000 which investors can then choose to fund with as little as $25. Investors earn monthly payments consisting of principal and interest as the underlying loans are repaid.According to users on Reddit, LendingClub offers competitive rates for both borrowers and investors:

“I’ve had good experiences investing small amounts across many loans on LendingClub. Returns have been consistent in the 5-7% range after fees and defaults.”

“As a borrower LendingClub approved me for a loan when my bank turned me down. I got a reasonable rate too.”

However, some users note the importance of diversification when investing:

“Don’t put all your eggs in one basket on LendingClub. Spread investments across at least 100 notes to minimize risk.”

Pros and Cons

Pros

  • Competitive rates for borrowers
  • Potentially higher returns for investors than savings accounts or CDs
  • Low investment minimum ($25 per loan)
  • Automated investing through preset criteria

Cons

  • No guarantee of returns or repayment for investors
  • Higher interest rates than some bank loans
  • Origination fee of 1-6% for borrowers

Lawyers on Avvo advise reading all terms and contracts closely before borrowing or investing:

“Make sure you understand the fees, risks, and collection practices before investing on a P2P lending platform.”

“Borrowers should know that defaulting on a LendingClub loan works the same as defaulting on a bank loan – it damages your credit.”

The Bottom Line

In the end, LendingClub aims to provide an efficient alternative source of financing that connects individual borrowers and investors. It offers a way to potentially achieve better returns or lower rates than traditional banks. However, all lending involves risk, so due diligence is required.With reasonable expectations and close review of all policies, LendingClub can facilitate mutually beneficial peer-to-peer lending.

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