Lending Club Investor Review – How to Become a Bank

Lending Club
  • Review of: Lending Club
  • Reviewed by:
  • Published on:
  • Last modified: August 21, 2015
  • Editor Rating

    Rated 4.5 stars

Did you ever wish when applying for a bank loan that you were the loan officer sitting on the other side of the table? Now you can with Lending Club. Lending Club is a peer-to-peer (P2P) lending service.

With Lending Club you can get a higher rate of return (over 9.6%) than many other traditional fixed income investments. Compared to other types of investments, you have some ability to manage risk. It’s similar in class to bonds, but is more like if you owned a bank and were the loan officer. You determine which loans you want to approve and which ones to pass on. Sounds interesting? Keep reading for more details. This Lending Club review has been updated for 2014.

Lending Club Borrowing Process

Some background on borrowing from Lending Club first. Applicants apply for a Lending Club loan online. The applicants must have a FICO score above 660, which is above subprime. Over two-thirds of the loan applications get rejected by Lending Club. Only a small subset of individuals get approved, which is part of the risk management they perform.

Borrowers can apply for a loan from $1,000 to a maximum of $35,000. The interest rate is determined by Lending Club and based upon the applicant’s credit rating. Rates are very competitive when compared to traditional banks and start as low as 5.99% APR. The highest possible rate is 32.99% APR. Best APR is available to borrowers with excellent credit.

The interest rate is fixed for the term of the loan. There are three and five-year loans available. All loans are unsecured lines of credit and no different than credit card loans. Also, like credit cards, any defaults are reported to the three credit rating agencies (Equifax, TransUnion, and Experian).

Lending Club Investing

Since this is a blog about investing, let’s discuss how to get started. The sign up process as an investor is simple and takes a few minutes to complete. You can fund your account either via an electronic transfer from your bank, mailing in a check, or, for instant availability, using PayPal.

In my case, I choose PayPal to fund my account, so I also got credit card points in the process. Once setup, Lending Club requires you must invest at least $25 per note. Notes are graded from A1 (lowest risk/lowest rate) to G5 (highest risk/highest rate), with subgrades per rate.

Lending Club Investing Requirements

Unfortunately, Lending Club isn’t available to everyone. As per requirements by the SEC and each state, Lending Club has a net worth and income requirements. Though Lending Club did not perform any means testing to ensure, I fit the requirements.

  • Income Level – In most states, you must have a gross annual income of $70,000 or more and have a net worth of $70,000 or more. In the state of California, investors must have a gross annual income of $85,000 and a net worth of $85,000.
  • Approved States – You can invest if you are you a resident of: California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kentucky, Louisiana, Maine, Minnesota, Missouri, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, North Dakota (New), South Dakota, Texas (New), Utah, Virginia, Vermont, Washington, Wisconsin, West Virginia, and Wyoming.
  • Net Worth – If your total net worth is greater than $250,000, there is no annual income requirement. In the state of Kentucky, investors must qualify as an “accredited investor” under the securities act.
  • Asset Allocation – Lending Club investors must not deposit more than 10% of their net worth in Lending Club notes.
  • $25 Deposit – Only $25 is needed to start.

Lending Club Investing Strategy

Here’s what I do to maximize my return, yet try to minimize risk. Use how you see fit and do your own research.

  • Job Tenure – Look for someone who has a job for a long time (10 years+ being ideal)
  • Government Job – Hold some sort of government position in local, state or federal.
  • Low Debt to Income ratio – Make sure it is low (sub 30%)
  • Debt refinance – Go for primarily people looking to pay off higher interest rates, than the more riskier types of loans (like new business).
  • Many small loans – Build up a portfolio of at least 200 notes. The more notes you own, the more even your portfolio’s performance will be. More notes help spread the risk out to many loans, should one default. Based upon this diversification, this then means a recommended minimum of $5,000 to invest. A total of 800 notes being the ideal investment strategy, which means $20,000 to invest.
  • Loan Term – 36 months only. The additional 2%+/- return for 5 year notes in my opinion isn’t worth the additional risk.
  • Interest Rate – Loans D through G only. I used to look at higher quality loans with lower returns, but in my opinion, the risks didn’t justify the returns.
  • Loan Purpose – I tend to focus on customers looking to get a better rate and reducing their debt
  • Minimum Length of Employment – greater than 1 year. The longer the employment, the better.
  • Maximum Debt-to-Income Ratio – 30%
  • Credit Score – greater than 678
  • Interest Rate – All. Though I trend towards selecting the higher rates. You should own a mixture of loan grades to increase and stabilize returns.
  • Delinquencies (last 2 years) – none
  • Reviewed by Lending Club – Yes. I prefer Lending Club has checked them over. It gives a better chance the loan will complete and information is legit.
  • Verified Income – Yes. At least as the initial search filter I perform. I also look at unverified income applications.

While I do make exceptions to the filtering, I tend to look at the big picture. The question you should always ask, “Will the individual pay back the loan?” and “Are they a good credit risk?”. If you have any doubt in an application, skip it and find a better one.

If currently no good applications exist, wait a few days and check again. There is no need to rush the process. Take your time picking what you consider the cream of the crop, rather than getting stuck with a bad note. Once you purchase a note, it’s not so easy to unload it though there is a secondary market. In most cases, the goal of buying the note is to hold it for the life of the loan.

Lending Club itself has plenty of statistical information, and so does LendStats.com. Analyzing borrowing trends is something I recommend.

Secondary Market

Should you want to unload a loan, there is a secondary market from Lending Club called FOLIOfn. This is great if you have a bad performing loan or need cash for other investments. It’s also a great way to pick up notes from others selling.

In my opinion though, this section of the Lending Club site is not too usable in its current form and needs drastic improvement. The searching options are simplistic at best and unlike their new loan search. If this section was improved, it could definitely increase the liquidity of Lending Club notes.

Lending Club Risks

With any investment, even “secure” ones, you have risk. In summary, here are some possible risks when investing with Lending Club:

  • Default Risk – Investments are not FDIC insured, and not equivalent to bank CDs or treasury notes.
  • Inflation Risk – Similar to bonds since it’s a fixed rate, you have the risk of inflation eating at your returns. Though at the high rate of return of investments, this possible risk is minimized.
  • Management Risk – Lending Club’s annual fee is 1%; this rate has already increased from I believe an initial 0.5% fee. This fee could increase in the future.
  • Callable Risk – Loans can be paid in full early and affect your return. The downside is you will need to find another loan to replace it.
  • Diversification Risk – If you have a small amount of loans, (under 100) one default can dramatically affect your overall return. Ideally you should have over 400 notes (otherwise $10,000 or more) invested with Lending Club.
  • Liquidity Risk – Loans can be sold on the secondary market, but it can take some time to unwind every single note. Lending Club is a long term investment.
  • Pricing Risk – Lending Club will properly price the borrower’s risk to default.

With the last issue, you can minimize this risk by specifically picking the loans you want to fund. You don’t think it’s a good loan? Don’t invest in that note.

Lending Club and Taxes

Lending Club investments are not considered passive investments by the U.S. Government. This means you cannot lock in the long term capital gains tax rate. Therefore, the IRS taxes any profit as ordinary income.

If possible, you are best in a self-directed IRA retirement account. It is much more tax efficient than in a taxable account like I currently have. Lending Club does offer IRA investment accounts. A $5,000 minimum deposit is required to open a no-fee IRA. It is also possible rollover your existing 401(k) or IRA into Lending Club.

My Investing Returns

Lending Club - May 2015 Investment Returns

I started with Lending Club in May 2009 with just $1,000 ($925 deposited, $75 in sign-up bonus) in my account. As of May 2015, I have over $24,000 invested and my current ROI is 9.78%. I have over 825 current loans, and currently 113 have defaulted.

Peer To Peer Lending Resources

To help increase your Lending Club returns, I recommend visiting the following web sites:

  • Lend Academy – Peter’s site is a great resource for the latest happenings in the P2P lending/investment space.
  • Nickel Steamroller – Has many useful tools such as: portfolio analyzer – get your real APR return, and Secondary Market Portal – makes Lending Club’s FolioFN useable.
  • LendingMemo – Another great resource and new site exclusively about P2P investing.

Disclosure: I have over $24,000 invested in Lending Club notes.

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Reader Comments

  1. says

    Gotta say if I was Lending Club, I would give you a “high five” b/c this is a great review!

    I’m just not comfortable enough yet to invest. My threshold is $10,000. Once I feel comfortable enough to invest at least 10K, I’ll bother, but otherwise, I’ll just watch and observe. Let me know when you get there!

    I read another review which suggested Lending Club, but the blogger only had $50 bucks with them! haha

    • says

      Hey FS, thanks for the comment. I plan on putting my money where my mouth is and really showing examples in my personal life. I see this no different than one of the stocks/mutual funds I invest in, as we’ve seen what people thought was safe company to invest in (GM) was not.

      I see too many blogs that are pumping products that are just a glorified ad for the product.

    • Cindy Biter says

      Wow! I just learned of Lending Club today, but I’m very disappointed that I can’t invest since I live in Texas. Are there any other sites similar to this that don’t carry the geographical restrictions? I really want to do this.

      • says

        The two majors are Lending Club and Prosper. For states currently allowed for either check out:


        With Lending Club it is currently possible to invest in TX but only in the secondary market.

        Lending Club is expected to go public this year, and if they do it will open them to be available in all 50 states.

    • Pasquale says

      A little too risky for me. I thought of transfering my IRA to the Lending Club for investing but wanted to start small first. I invested$1,000 investment about one year ago. The investment is spread over ten grade A notes. So far two of the notes have been charged off and I am left with a -3.94% return to date. Not happy, and will keep my IRA in a safer place. I learned my lesson.

      • deereed33 says

        I will say that it’s not good to invest it that way. Instead of 10 notes you should’ve had 40 at $25 a piece. If one charged off then you lose $25 instead of $100. They actually recommend that you not do that.

    • says

      I have had relative success using lending club over the last 2 year+. i recently added another $13,000 to my current $10,000; however, i notice it is now taking forever to get good loans. this is due in part to the big players snatching up loans in seconds. So i decided to have my own auto-piloted robot pick and purchase notes for me in seconds too to compete with them.

  2. TheLittleVC says

    Great write-up on LC. I’ve been a lender since October 2007 and haven’t really looked back except modifying my strategy on the new, tradeable notes vs the legacy notes (non-tradeable). Currently earning 5.69% on my legacy notes and 10.16% on the newer notes (purchased starting Oct 09). Keep up the good work and definitely keep us all posted on your success with LC!

  3. says

    @TheLittleVC: Thanks I will be posting updates via the blog, and going into more details of my investment strategy. I’ve seen results of some LC members in the 15% range with over one year vested! Even with 5+% return you are still beating current CD rates. Best of luck.

  4. Larry F. says

    Nice review, altough I'm not aware of any annual fees for investors or lenders. Lending Club simply taxes income (interest + principal) at 1%. So, if your Note pays $1.86/month, Lending Club charges your account $0.02. Also, they've lowered their minimum investment for Self-Directed IRAs to $10,000 with no fees. However, you can have a lower amount and pay $100 annually.

    • says

      Hi Larry F. thanks for visiting. From Lending Club's web site:


      "The service charge paid by lenders is one percent (1%) of all amounts paid by the borrowers to Lending Club. The 1% service charge impacts the lenders' annual returns by less than 1% because it is not an annual charge."

      So you are correct in your statement.

  5. jclimber says

    I'm in Texas and not eligible. But even so, I don't see why people with good enough credit to pay the loan back and pass your filters would just not get a loan from a bank (or use a short term zero percent credit card)?

  6. says

    This was a great review. I just realized that New Mexico is not on the list of states for Lenders Club. It is not for Prosper either. Do you know why?

  7. Marion says

    How are the investor's paid? Yearly? It would seem a monumental task to pay all the investors monthly? Thanks

  8. Daved says

    I used prosper.com starting about 3 years ago… About the worst time to get in. Many loans defaulted. All in all though I broke even. They since dropped my state, so I can’t get back in now.

    The only thing in your article I don’t trust from your article is the rate of return. what you need to look at is projected effective rate. Effective in that it looks at what you’ll be making with the money not doing anything, after it’s paid back, and projected, guessing which % of the loans will default. ericscc.com calculated that for me.

    • says

      Hi David,

      You are correct about how Lending Club calculates return and aware of this. NAR != APR and is slightly lower. For sake of simplify and comparison of others I display NAR. My APR is approx 1% lower.

      This web site discusses in slightly more detail at fivecentnickel.com – Lending Club Update – April 2010 Performance.

  9. Satisfied Investor says

    I have been an investor with Lending Club for only 2 months, and already have earned more in interest than banks, cd’s, and bonds have paid me all year.

    The banks hurt us all this past 1 to 2 years with the bailouts, etc. They continue to increase people’s charge card rates while paying nothing in interest.

    LC levels the playing field.

    One question: Why are we limited to investing up to 10% of our net worth? I believe in diversification, but don’t like others telling me “how much”.

    • says

      Hi Satisfied Investor. The 10% NW is a SEC requirement, not Lending Club. In addition, while you shouldn’t invest more than 10% of your net worth in theory no one would stop you unless you flat out told Lending Club your total net worth. With that said, I still wouldn’t invest more than that amount myself. Peer to peer lending, while so far is promising, is still an new type of investment. Based upon stats it is closer to junk bond investing, than corporate bonds. That’s not to say you can’t generate good and reliable income from junk bonds. IMHO both require a much more savvy investor than an index based “set it and forget” type.

  10. Satisfied Investor says

    I’m not a fan of the new pre-selected questions for investors to select for questions of the borrowers. Yes, I know that it is about PII and security. I thought, however, that we are lending to adults. These are people capable of determining for themselves what they should or should not divulge for their own privacy. The problem with the pre-determined questions is that they don’t cover all of the situations.

  11. Rick says

    How are losses treated for tax purposes? Do you take short-term or long-term capital losses or do you use some other method?

    • says

      Hi Rick good question. I know Lending Club profit is taxed as ordinary income. I don’t know if you can take any tax losses.

      I don’t know you will have to ask Lending Club about that question. If you get an answer please post back.

      More than likely they will refer you to speak with an accountant.

  12. Starting Low...Staring Slow says

    Well, VERY good review. I must say, since peer to peer lending is new, I have started low and started slow. Call me a chicken!!!! I have been putting $25/week into the account. Once I start seeing things getting paid then I will boost up the monies. I only have $200 in the account…and I use it as blow/play money so I don’t really care about one default. Once I am comfortable with the system and my picks, I will pour real money into it. Until then, as my name denotes, I am starting low and starting slow!!!! LOL!!!!

  13. Dan says

    I opened an IRA prime account (minimum investment $20K) in August of 2011. My default rate has been about 3% which is what lending club claims. Net interest rate is over 11%. I initially let LC take control of the account as I opted for the “C” grade. After 6 months, I decided to take control using filters of my choice and am reinvesting EVERY penny that comes in. I currently have over 1,000 borrowers paying me on average about a buck per month. As I buy more notes (lend more money), every month, I receive MORE $ every month which allows me to lend (buy more notes) and it grows even more quickly. Pretty darn exciting. By the way, I opened this account by transferring the $20k from one of my existing IRA accounts. Obviously, I am very confident with Lending Club, their board of directors and because it’s a growing company. The market isnt paying squat right now as are CDs. Might as well stick your cash underneath your mattress. LOL

  14. StandardRaiser says

    Okay Investor Junkie, question for you. Is the net interest rate the lending club annualized rate or is that factoring in the principal repaid per payment?

    • says


      Lending Clubs NAR != APR. Possible defaults and cash not invested is not part of this calculation. A quick estimate of your ROI is usually 2% below NAR. For an accurate estimate of ROI there are a few online sites like Nickel Steamroller:


      Hope this helps.

      • StandardRaiser says

        Okay, I am still not sure the numbers are making sense to me…even with that tool (though it is pretty cool I must say). Here is the math:

        1) Account Total: $403.40
        2) Deposits: $390.77
        3) Interest $10.39
        4) Fees: $0.38
        5) Time in market: 6 months

        So, basic math would tell me that the annualized interest rate should be…
        ((10.39/390.77)/6)*12 = 5.32%

        However, Lending Club says I have 12.81%NAR and the tool said I have 12%. Can you help explain? I am confused.

        • says

          Your formula isn’t correct.


          Also, where is the amount deposited initially (your principal)? $390.77? You deposited an odd amount? That seems atypical.

          I’m lazy manually working out formulas like that. I would use the built into Excel forumla to calculate this.

          • StandardRaiser says

            Yeah, the $390.77 was done over time. It is weird because as I got interest, I would add enough to bring it up to $25 for me to do another loan. I am with you on the complicated formulas, but I guess I am just saying if I had a CD with $100 principal and at the end of the year I had $110 I would assume it was a 10% APR CD. I do the same thing with stocks and mutual funds. With that understanding, I would think if I have $400 and my APR is 10% then at the end of the year I should have $440. Granted, I know that I have to factor in principal being paid back, but I can only base the true investment potency on the interest I receive at the end of the year.

            Am I off?

            • says

              There are a few discussions about this on the net. I couldn’t find one for you as I don’t have them bookmarked. Five Cent Nickel blog I believe had a discussion about it. Nickel Steam Roller is I believe the most accurate, because it takes into account the time you started investing the notes.

              Principal payback, reinvestment, and late payers all affect your net return. Even Excel’s spreadsheet is not completely accurate if you take the summed data.

  15. WiseMoolaWarrior says

    Hi I have been investing Slowly into lending club and Prosper. I am still not sure what to think of things. I am adverting (according to Lending Club ) a little over a 14% return. I invest mostly in A and B and once in a while if I see a “C” that I think looks strong I will invest in it. I started off with only a few hundred dollars I now have close to $600.00 in Lending Club and about $200.00 in Prosper. I have about 32 notes between both clubs. Both clubs have one note in default right now. I started October 2011 investing with both of them. That puts me about 8 months in. From some other articles I read It seems they say if a loan is going to go south it will usually do it about 9 months. I am rounding that corner now

    I was wondering have you all noticed the default rate to decrease after the loan has made it past the first year? Most are saying they average about a 9% return is that including your default rates in there. I found it odd that I have 2 notes in default and my annual rate of return has not dropped.


    • says

      Hi WiseMoolaWarrior,

      You are really asking two questions:
      – Defaults usually max at the 1/2 way mark or around 18 months if doing a 36 month note.
      – I can’t speak for your defaults. If they are truly defaulted (which is the financial stage) then it should decrease your return since you have small amount of notes. Statistically you need at least 500-600 before one default will not decrease your returns. In fact, Lending Club recommends 800+ notes.

  16. BIG BALLIN says

    Since defaults on these loans generally occur at the halfway mark, has anyone considered selling their loans around the 6 month to 1 year mark? Although a 1% sellers fee would have to be paid on the principal sold, it surely seems that this risk mitigation technique could boost investment performance by several percent especially on the riskier E, F, and G type loans.

    • says

      Hi BIG BALLIN,

      That certainly is an investment strategy, and could do ok. Though you assume you will get market value for your note. So it’s possible even more than a 1% haircut.

      I don’t know if anyone specifically implemented the way you describe.

      • #GAINS says

        Can you provide more insight on investing with the lower rated borrowers. LC limits discussion and returns to A-C.

  17. Nick says


    I am considering of investing some money in peer to peer lending but had a question. In 3 years you said you turned your initial 1000.00 into 10,000 dollars. When you received your payments every months did you reinvest into new notes? Does that help build capital quicker?

    Thank you

    • says

      Hi, Nick yes I did reinvest all of my profits. If you see above you will note I had $1,646.50 in interest. In my quarterly updates I do mention when I add additional money as well.

      Hope this helps.

  18. Nick says

    Thanks Larry for the quick response. I didn’t see your quartley reports, could you direct me to them? I would like to somewhat mimic what you have done here.

    Thank you in advance


  19. Mike Z says

    How do you invest using Paypal? It would be awesome to use the Fidelity 2% cash back card and do like a monthly recurring transfer. I can’t see on my LC how to add funds via Paypal.

  20. Kurt says

    Do you have a preference/range you like to stick to for total loan amount? I didn’t see this in your post. Thanks!

    If using the guidelines above (min credit score, employment history, debt:income, purpose, etc) returns all B notes in a search, which do you think is the safest filter(s) to open up?

    • says

      Hi Kurt,

      No to your first question. It’s more the question, do they have the income to pay it back?

      To answer your second question: Reviewed by Lending Club and Verified Income. The rest from my research shows statistical significance.

  21. Terry M. says

    I am considering investing some money hopefully making extra cash for my daughter’s college.
    Once you have selected your portfolio how often do you have to check your investments.?
    Do you get notify right away, like emails on defaults one?

  22. Rog says

    “Interest Rate – Loans D through G only. I used to look at higher quality loans with lower returns, but in my opinion, the risks didn’t justify the returns”

    This seems silly, if the higher loans are getting about 10%, how is this a bad thing?

  23. Rog says

    Comparable short term investments dont even come close. CD’s and Money Market accounts for less than 1%? So please, explain how we should not aim for a 10% return.

    • says

      HI Rog,
      It depends upon what is considered risky to you. It is a fixed rate of return that’s possibility lower than inflation, or earn much higher than inflation with a chance of a return lower than inflation?

  24. Preston Hatch says

    Hi Larry – I have a question that I cannot seem to get an answer to and I’m hoping you can help. I began investment in Lending Club two months ago. All of my notes are $25 over a 36 month period. As such, my monthly loan payments are well below $1 on each note. I’ve noticed that the servicing fee is always $.01 (due to rounding even if the monthly payments was say $.75), which equates to a much higher servicing fee rate than the 1% stated by Lending Club. How does this work out so that it is truly a 1% servicing fee?
    Much appreciated,

    • says

      Hi Preston, this is a good question. I’ve reached out for Peter Renton of LendAcademy and see he has any details on this subject. I believe he’s answered this question before.

    • says

      Preston – The way Lending Club handles this is to charge a penny throughout the life of the loan, and to perform an “adjustment” at the end of the loan’s payment period. This means the final holder of a 36-month note will get the benefit of this fee adjustment. Peter at Lend Academy has a great post detailing the actual effects of the service fees, and further down in the comments is the confirmation of the refund of overcharged service fees: http://www.lendacademy.com/an-in-depth-look-at-investor-service-fees/

      Again I would note that you must be the final holder of the note to receive this refund.

  25. says

    That is exactly right. If the payment happens to be $0.51 then you will be charged a $0.01 service fee which is far greater than 1% as you point out. But whenever the final payment is made on the note you will see a credit that corresponds to all the overcharges so you will be made whole as long as you have not sold the note.

  26. Preston Hatch says

    Thanks for the quick response guys; I really appreciate it. This makes sense to me now. There is definately an incentive to hold the loans to maturity otherwise you end up paying quite a bit more than a 1% servicing fee. I’ve been impressed with everything about Lendin Club, except I have not been able to figure out the servicing fee arrangement until now. Perhaps Lending Club should do a beter job explaining how that works on their webpage. Thanks again!

  27. Preston Hatch says

    Hi Larry,
    I have another question I have been looking for an answer to. Maybe you can help.
    When browsing notes, there are an awful lot of notes where the employer is listed as N/A, however they show a monthly salary. I’ve been hesitant to invest in those notes for obvious reasons, but then got to thinking that LC would not possibly issue a loan to an unemployed person. Right?? Is it safe to invest in those notes and assume the LC will reject the loan if they are unemployed? Do you know if LC is following up on those that list N/A for employment?

    • says

      Hi Preston,
      I tend to not invest in those notes as well. Basically it’s undocumented income. It can be someone who’s self employed, or gets paid off the books, someone who’s “unemployed”, or someone not wanting to document their employeer (not sure why they would want to do this).

  28. Dano says

    Lending Club verifies the borrower’s data on only 60 percent of the loans. Oddly enough, there’s no difference in the default rate between verified and unverified loans. Nickel Steamroller has great “backtesting” tools that let you find out what sorts of loans are most likely to default. Backtesting showed that some of my assumptions were wrong. For example, I found out that smaller loans (under $10,000) default more than larger loans.

  29. Jay Dee says

    My complaint is they hold my money forever. The notes will show current, but it takes at least 10 days after payment date to receive the money, then when reinvesting it in new notes, it takes another 20-30 days before a note is issued. Meaning for every payment you receive back and try to reinvest I loose a months interest. That happens every month. Over a course of a year I end up loosing a years interest on a months payments. If a notes is refused then you loose another month of interest on it, because it will take another 20-30 days to get a note issued. With the fees they charge this process should be quicker.

  30. Cheryl says

    Great review! I’d like to ask you or the masses if they have experienced the following: I’ve passively been with lending club for a year or so and every other month or so I would go invest in a bunch of notes – over the last few months though, I have noticed a dramatic decrease in the number of “Approved” status loans – I have always only invested in Approved ones and always had a bunch to choose from. Now when I do the filtering, I never see anymore than a couple available and I find it strange because I haven’t seen it go back up to what the numbers used to be. Does anyone see this as a problem or do you think they just changed the way they evaluate what loans they pick up?


  31. Wole says

    Nice review.
    I think the biggest issue I have with lending club right now is that I think some of the investors should be examined for brain issues. Which you investors you ask? Thanks for asking, I’ll tell you.
    Investors who try to sell loans the hold with astronomically ridiculous mark ups. I mean, trying to sell a loan of $3.00 with two payments of 2.80 principal and .20 interest left for 7.50…so a %250 mack up.
    So, my questions are;
    1) Are these investors really math stupid?
    2) Are these investors really greedy stupid?
    3) or does anyone actually buy these notes for some reason that I am to stupid to comprehend?

    • says

      In an open market no one prevents you from doing stupid things on either side of the transaction. No idea which of the three (or perhaps a combination of the three) individuals are when they do this. It certainly doesn’t mean you (or anyone else) has to buy them.

    • says

      Hi Will,

      At the moment, no. They do offer a $100 bonus and must deposit $10K or more.


  32. Gary says

    I’ve been with LC for over a year, running about an 8% return, about $10K invested. Has anyone noticed that there just aren’t many loans to pick from lately? Even running no filters there seems to be only a handful.

    Too many lenders, not enough borrowers?

  33. James says

    I’ve been investing on LC for a few years with average results. One thing that baffles me is that over 60% of my Charged Off notes come from the B level of credit worthiness. About 10% come from A class, and the last 30% come from the C or lower classes. Granted, I am invested in about 3X more B class loans than C and lower, but it makes me wonder about the comparable default rates. I’m also surprised that borrowers with good credit would fail so often. Makes me want to put all my eggs in the high rate, bad credit notes.

  34. Hayley says

    Do you know if it’s still an option to fund your investment account through paypal? I can’t find the option to do so on my Lending Account page.

  35. David says

    Is there a way for an individual with a net worth over $250,000 who lives in Kentucky to invest in Lending Club? If not, what if such a person invested anyway?

    • says

      Kentucky you can already invest in Lending Club. Though if you are under the minimum requirements of being an accredited investor I don’t believe there is any formal test by Lending Club and is by honor.

  36. Tom says

    I have a question – are there any penalties for investing with LC if one doesn’t meet the threshold of making 70,000 annually? What could happen if somebody did this?

    • says


      You as an investor must self-police yourself. I don’t believe Lending Club does any specific checking of your income. Though IMHO just because you might be able to get away it, doesn’t mean you should. If you are making less than $70k/year IMHO Lending Club isn’t really suited for low income/net worth individuals as it can be too risky.

  37. James says

    Nice post
    My question in your experience or research what is the total default rate on loans at LC. For example if you would invest in 800 which is typical default rate

  38. David says

    I am 23 and I have been investing in Lending Club and Prosper for the past 6 years. I currently have about $20,000 invested. I just want to point out that you guys missed some major points when looking for possible loans. An individuals revolving credit balance and revolving line utilization are both key to getting the whole person concept and understanding whether or not they will repay their debt. If a person is taking out a $15,000 loan but has a debt of $18,000, why should i trust that they will have the financial stability to repay their loan off? We have to remember that they are being charged interest on their loan. Assuming a 16.5% interest loan, they will pay just over $7,000 in interest over the lifetime of their loan on top of what they already owe. Though the value of the dollar decreases with time, that is still a heavy amount to pay. My portfolio is yielding about 12% adjusted net annualized return. I think your post is a great starting place, but for the seasoned investor, you should do more than scratch the surface.

  39. Andrew says

    I should point out that between May 2009 and Nov 2014 the S&P 500 had an ROI of 16% –

    • says

      I’m not sure how this relates to Lending Club? Lending Club notes are fixed income assets, not equities. If anything, you should be comparing returns to fixed income like junk bonds.