•  Consumer Loans

Lending Club Review

LendingClub is a P2P online lending platform offering fractional investments in unsecured consumer loans. Returns seem to be slipping over time, and new loan types aren’t open to individual investors

Lending Club

  • Investment Types: Consumer Loans
  • Sectors: P2P Loans
  • Minimum Investment: $25
  • Advertised Returns: 4-6%
  • Open to all investors
  • Open to anyone
  • Low minimums ($25)
  • Regular cashflow
  • Automated investing
  • Detailed data available on each loan allows for highly customized investment strategies
  • Need to invest in many, many notes (100+) to achieve diversification
  • Loans are unsecured
  • Loan terms are only 36- or 60-months
  • Average returns appear to be declining over time


This Lending Club Review will help you learn more about Lending Club's investment offerings, including how the alternative investments on Lending Club are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.

LendingClub is one of the two main players in P2P lending (the other is Prosper), and is one of the few online alternative investment platforms that is also a publicly traded company.

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Types of investments Lending Club offers

LendingClub is effectively (if not technically) a 2-sided marketplace, matching borrowers looking for personal loans up to $40,000 with investors willing to loan to them. All of the loans are divided into $25 fractional notes, so each loan is spread across dozens or hundreds of investors.

What do you get when investing with Lending Club?

Each loan made by LendingClub is graded from A-G (with A being the lowest risk and G being the highest risk). High-risk borrowers are charged higher interest rates (up to 30% or more), though they are in turn much more likely to default.

How does Lending Club make money?

LendingClub charges a 1% fee on the monthly payments collected from borrowers, though does not charge that fee if the payment is more than 15 days late. In the case of delinquent accounts, LendingClub charges up to 35% of the amount collected (or up to 30% of attorney’s costs).

Potential returns and cashflow

LendingClub advertises returns in the 4-6% range, a number that has been declining in recent years. In part because they’ve been around for several years, and in part because of the substantial disclosure requirements from the SEC, there is a wealth of historical data about note performance. Individual investor performance depends heavily on diversification as well as the particular mix of loan grades and other borrower factors.

Payments are collected montly and deposited regularly into your LendingClub account, where they can optionally be automatically re-invested.

Breadth of offerings on Lending Club

LendingClub processes a large volume of loans, so there is usually a wide selection of available notes. In some cases there may not be notes available that meet your specific criteria, though the automated investing option will match you with a note that meets your criteria when one becomes available.

In addition to several automated risk profiles, you can also manually set a note profile mix, or even individually pick loans to invest it.

There are also two 3rd-party firms that emerged to provide alternative (and they would argue more sophisticated) algorithms for selecting notes and managing investments across both LendingClub and Prosper. The firms, LendingRobot and NSR have recently merged, and like LendingClub have also been tuning their more recent offerings more toward institutional investors.

Regulatory framework and due diligence expectations

The regulatory framework for P2P lenders is quite distinct from the rest of the investment crowdfunding ecosystem. The borrower side of the equation is regulated via the Consumer Financial Protection Bureau and the Federal Trade Commission, while the lender/investor side is regulated by the SEC. As part of the process in place, each loan is registered and filed with the SEC to comply with securities regulations.

Once a borrower applies for a loan, the platform grades the loan quality and files a detailed disclosure with the SEC. The loan is then made available to prospective investors; once enough investors express interest, the loan is funded.

While LendingClub does perform a credit check, much of the application is information supplied by the borrower and not independently verified.

(Here’s much more on the gory details of the rather-complicated regulatory landscape around P2P lending from Harvard Business Law Review.)

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