Lending Club is not a true debt settlement company. What Lending Club does is act as a intermediary between investors and a person looking for a personal loan. In most cases this is better for the individual because it will go on your credit report as a personal loan and not as debt being written down with creditors which sometimes causes your credit score to drop.
How Lending Club works is a group of people lend money to some body looking for a loan. This can be any type of loan. As an example. Let’s say you were trying to consolidate $10k in credit card debt. The monthly payments are too high and the interest rates are over 20%. When you contact Lending Club you will write a posting about your self and what you intend to use the money for. You will have to list everything about yourself including your income, assets, and job history. You will want to be as thorough as possible. If you do not tell potential investors as much as they want to know you will more than likely not get the money you are looking for.
The investors are normal people looking for a great return on their money. Think of it as borrowing money from your neighbor instead of the bank or a credit card. This is a win-win situation for everybody because you are getting the money to help pay down your credit cards and the investor is making a fixed rate of return on their money. The loans are made to be paid back over a 3 year period. This is nice because you will know what your payment will be for the entire time. Lending Club can automatically deduct payments from your checking account if you want. Many of the loans are funded in less than a week and are automatically deposited into your checking account.
You will have to have good credit to be accepted in to Lending Club. The minimum credit score to be accepted is a 660. Anything lower and you will be denied. You cannot have any bankruptcies, foreclosures, current delinquencies, collections or open tax liens, a credit history of 12 months, no more than 10 credit inquiries in the last 6 months and at least 3 open accounts on your credit report. You will also have to have a debt to income ratio of less than 25% after you accept the loan. The largest loan that can be offered is up to $25,000. To get the loan you will need to have credit scores over 760.
The amount of interest you pay will be determined by what the investors are willing to risk on you. When you create your listing, Lending Club will determine what your interest rate will be by a format they have which looks at all of your qualifying factors. If you like the terms, the listing is created. If the loan is not funded you have the option to take half of the money at that interest rate. The rates you pay with Lending Club are going to be lower than your bank or a credit card. It does not cost anything to join. They take 1% off of the interest you are paying to the investors and keep that money.
If you default on a loan, Lending Club does work with collection agencies which will be contacting you. The loan does go on your credit report so if you do not pay your credit scores will drop and you will no longer be allowed to borrow or invest with Lending Club again. Many people borrow and invest with Lending Club. Its a great way to make some money helping people in need. With it costing nothing to join you might as well give it a try. Lending Club is perfect for someone looking for a quick and cheap way to consolidate their debts.