LendingClub Review: Another Peer to Peer Lending Marketplace

LendingClub is another player in the growing peer to peer lending marketplace and one that I signed up with despite my reservations with the whole peer to peer lending craze. I was tempted because online savings account interest rates have fallen sharply lately because the Fed lowered the target funds rate so quickly and because they have a signup bonus with very easy requirements. (If you get referred to LendingClub and become a borrower or lender, you get $25. If you deposit $1,000 and start lending, that bonus increases to $50; both referrer and referee get the same bonus)

Account Signup

The signup process was easy and I had an account up and running within minutes. Setting up my account so I could begin lending was also trivial, a four step process of entering my personal information, bank information, and some association information (school I went to, employer, etc. but these were optional). The account process proceeds with the typical bank account verification process of small deposits.

Default Rates

It appears that LendingClub’s default rate and other lending stats are rosier than the likes of Prosper and others, but that could be because they are much newer to the game. Techcrunch did a brief writeup on LendingClub and noted the same thing about the default rates, expecting them to rest close to what Prosper was seeing. Ultimately it appears that both should have similar statistics with regard to late payments, defaults, and other lending related statistics. If you think LendingClub borrowers are on the whole “better” than Prosper, I would take a step back and re-evaluate because they will be roughly the same.

Tax Headaches

I don’t know how LendingTree sends out tax forms but it sounds like dealing with taxes from Prosper loans is a huuuuuge pain.

Next Steps

I had talked about opening up a Prosper account and I went through the motions of opening a LendingClub account, but I’m not sure if I’m ready to lend any money (or do I want to deal with handling the taxes, considering I’d be lending so little). I went through Moolanomy’s affiliate link to he was able to score a $25 for the trouble (I did too), so all was not lost. It’s interesting they would pay out commissions even if you don’t actually lend any money (if you verify a bank account, they pay out a commission) but I’m not complaining.