LendingClub personal loans review: Limited loan terms and an origination fee

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In a Nutshell

LendingClub offers personal loans through an online marketplace that connects potential borrowers with investors. You’ll need to have decent credit to qualify for a personal loan with this peer-to-peer lender. And interest rates and origination fees can be high.

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Pros Cons
Personal loan amounts range from $1,000 to $40,000 Charges an origination fee
Offers a prequalification application to get an idea of potential loan rate Only two loan repayment terms: 36 months and 60 months
Allows co-borrowers Loan funding takes at least four days

What you need to know about a LendingClub personal loan

LendingClub is a peer-to-peer lender that offers personal loans through an online marketplace. With peer-to-peer lending, investors — rather than a financial institution — fund the loans.

The San Francisco-based company offers personal loans that can be used for such things as credit card debt consolidation, home improvements and other major expenses such as weddings and vacations. Its loan amounts range from $1,000 to $40,000. 

Origination and late fee

Although LendingClub doesn’t charge an application fee or a prepayment penalty, it does charge other fees. LendingClub personal loans come with a loan origination fee ranging from 2% to 6% of the total loan amount, which is based on your credit.

The loan origination fee will be deducted from your loan funds. For example, if you’re approved for a $5,000 personal loan with a 2% origination fee, you’ll receive $4,900.

But that’s not the only fee that LendingClub charges. If you’re more than 15 days late on a payment, you’ll be charged a 5% late-payment fee on the unpaid payment or $15, whichever is greater.

Only two loan terms offered

You’ll have only two term options for repaying a LendingClub personal loan — 36 months or 60 months. That can be limiting since other personal loan lenders offer more loan repayment terms.

Check that you can afford the monthly payments, and remember that you can pay off your loan early without penalty.

Check your potential rate with a prequalification application

Want to get an idea of your potential personal loan rate with LendingClub? You can check online — and get estimates of the interest rates you might qualify for — before you apply for a loan. To provide you with estimated rates, LendingClub completes a soft credit inquiry, which won’t affect your credit scores.

If you prequalify, you may receive multiple loan offers. If you proceed with a loan offer, you’ll complete an online application, which will result in a hard credit inquiry. This can lower your credit scores.

And remember that prequalification isn’t a guarantee of approval or terms.

The upper limits of its APR range are high compared to some other personal loan lenders — so shop around to compare loan offers to find the best one for your situation.

A closer look at LendingClub personal loans

If you’re considering a personal loan from LendingClub, here are some other details to know.

  • No next-day funding — LendingClub says you may receive your loan funds in as little as four days, but the process can take longer.
  • Not available in all states — You won’t qualify for a LendingClub personal loan if you live in Iowa or any U.S. territories.
  • Co-borrowers accepted — If you want to apply with another person, LendingClub allows co-borrowers on your loan application. Adding a co-borrower with solid credit may help you qualify for a lower rate.
  • Direct payments for debt consolidation — If you plan to use a personal loan to consolidate debt, a LendingClub balance transfer loan could help simplify the process. The lender will pay a portion of your loan directly to your creditors.

Who is a LendingClub loan good for?

A LendingClub personal loan may be a good option if you have fairly strong credit or have a co-borrower who does. LendingClub says you must meet certain minimum credit requirements.

If you want to consolidate debt, LendingClub is a good option to consider since it offers direct payments to your creditors to help you pay off bills like credit card balances.

But keep in mind that LendingClub charges origination and late-payment fees. And if you need funding quickly, LendingClub may not be the best option either since it takes at least four days to fund a loan. 

How to apply with LendingClub

To qualify for a LendingClub personal loan, you must be at least 18 years old, have a bank account and be a U.S. citizen, permanent resident or be living in the U.S. on a long-term visa.

You can see what rates you might qualify for within minutes on the LendingClub website by checking if you’re prequalified.

If you prequalify for a loan through LendingClub, you may receive multiple loan offers. If you choose a loan offer, you’ll complete an online application. At this point in the application process, you’ll need to provide some additional details.

  • Address
  • Social Security number
  • Income and employment verification
  • Address verification, with a photo ID or utility bill

From there, LendingClub will work on finding investors to back your loan. If it’s approved, you may receive your money via direct deposit into your bank account in as little as four business days. 

If this personal loan isn’t right for you, consider these options

If you’re not sure if a LendingClub personal loan is right for you, you might want to consider these alternatives.

  • Avant: If you need your loan funds quickly, Avant may get your money to you as soon as the next business day.
  • Upstart: Upstart may be a good fit for someone seeking a peer-to-peer lender that considers factors beyond your credit.

About the author: Erica Gellerman is a personal finance writer with an MBA in marketing and strategy from Duke University. She’s also the founder of The Worth Project: a weekly money newsletter you actual… Read more.