LendingClub is a platform for peer to peer lending that was created in 2006. It is one of the leading companies that facilitates transactions between individual borrowers and investors. As one of the first organizations ever to register as a specialized peer to peer lending company, and having facilitated billions of dollars in loans, they are clearly one of the very best. While many people who want to get a personal loan go through the traditional route like a bank, those looking for an easy process often prefer peer to peer lending.
What is peer to peer lending?
Peer to peer lending is when an individual seeking a personal loan is matched with an individual willing to invest in these types of loans. Thus, the transaction occurs between two people, usually facilitated by an online platform like LendingClub. The process is fairly simple for those who want to borrow money. They fill out an online application and provide some personal information. With Lending Club investing, individuals have the complete freedom to decide how much they want to invest in each loan and for all loans. However, it is worth mentioning that investors will need at least $1000 in order to be able to invest.
Is it safe?
The way peer to peer lending works is that identities remain anonymous. The borrower would not know of the investors or how much each investor has contributed to make up their loan. Similarly, the investor does not get the name of the borrower – just information that is necessary like credit score and history. LendingClub promises to protect the personal information of both borrowers and investors.
What are the benefits?
Peer to peer lending can have significant benefits for those who want to borrow or invest quickly. They include:
1. Reasonable Interest Rates
As a peer to peer borrower, you will notice that interest rates can be lower than those offered by banks – especially if you have a good credit score. This can be attributed to the fact that very little overhead costs have to be covered since the investment is coming from an investor directly. For investors, the interest they receive is higher than that paid by banks or similar investments.
2. Time Efficient
Going through the traditional route for a loan can be somewhat of a hassle. You have to apply for the loans, give intensive amounts of information, wait for an approval and the like. With peer to peer lending, the process is as simple as it can be. Once you have uploaded your information, you are likely to get your loan much more quickly. Investors can set up an account very quickly, transfer funds from their bank account and begin investing in just a couple of days.
3. Fluctuating credit score owners can secure a loan as well
Peer to peer lending is one of the very few ways through which people who have inconsistencies in their credit score can obtain a loan. All they have to do is to ensure that their current score is average and they will be able to get an approval by investors who are willing to take the risk. However, it is important to note that the worse your credit score is, the more likely it is that loans will be more expensive for you in the longer run due to high interest rates compensating for the increased risk or default. But the higher interest rate helps ensure that investors will fund the loan.
All in all, peer to peer lending has provided a unique and valuable platform that is transforming the personal loan industry while providing a great investment opportunity to small investors.