Lending Club Review – Shopping For Loans at Lending Club

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Lending Club is the “Amazon of Person to Person Lending” sites. Why is that? Well, partially because last week I referred to Prosper as the Ebay of Lending. The other reason I refer to Lending Club as the Amazon of P2P Loans is because of their lending process. Making loans through Lending Club is set…

Lending Club is the “Amazon of Person to Person Lending” sites. Why is that? Well, partially because last week I referred to Prosper as the Ebay of Lending. The other reason I refer to Lending Club as the Amazon of P2P Loans is because of their lending process. Making loans through Lending Club is set up like an on-line store – you find a loan and you “buy it.”

To fund a loan, you first select the loan you wish to fund. Then click the loan button and it updates your portfolio (just like your shopping cart). When you review your portfolio, you have the option to Start Over (empty cart), Add More Loans (continue shopping), or Check Out (check out). OK, I bet you didn’t need that last one! As long as you are familiar with on-line shopping, you can use Lending Club to make loans. Now let’s look at the details.

There are two methods for making loans with Lending Club:

  1. Individual loans selected by the lender.
  2. Lendingmatch™, Lending Club’s target portfolio composition.

1. Individual loans selected by the lender. I chose to make loans with Lending Club using this method because there is more long term flexibility in selecting my own loan and the minimum loan is only $25. It is very easy to fund a loan at $25, in fact, if you use this link to sign up, Lending Club will give you your first $25 that you can use to fund a loan.

2. Lendingmatch™, Lending Club’s target portfolio composition. This method preselects the loan allocation for the lender based upon their selected risk level. There are 9 risk levels lenders can choose, each with an interest rate corresponding to the level of risk. This method is good because it allows lenders to select a target and forget it. However, there is a $500 minimum to lend with this method. I chose not to lend using this method because my current Lending Club portfolio is $100. I hope to grow that over time, but as for now, I chose individual loans.

Making a Loan with Lending Club

I made three loans with Lending Club, each at $25. The blended return rate for those loans is 9.70%, which certainly isn’t the highest possible rate, but is still a nice return on investment if everything goes to plan. The loans I funded had a high rating and have a good chance of being paid in full.

As mentioned above, making a loan with Lending Club is much like making an on-line purchase. The first thing you do is select an individual loan or portfolio plan, then click the “Loan” button. It will take you to a screen that displays the loan in your portfolio. My first impression was that there was no confirmation page, but in fact, there are two more steps to go before the loan is official. The first is to click the “Check Out” button, then you need to confirm the loan once you check out. Much like shopping with Amazon, you can’t “accidentally” fund a loan. You must consciously select the loan to make it happen.

My Impression of Lending Club

I think Lending Club is providing a good service to lenders and borrowers alike. Borrowers have the opportunity to get a better interest rate on loans, and lenders have the opportunity to “be the bank,” and earn more interest on their money than it would earn in a regular bank account or CD.

The lending process is easy to understand, secure, and offers a good reward for the risk you take. I currently have $100 in my account and plan on growing that as time and moey allow.

Try it out at virtually no risk!

If P2P lending intrigues you, now is a great time to try it out with little to no risk on your end.

You can even set up a Lending Club as a Roth IRA, and save on taxes down the road.

New Lender Referral Bonus from Lending Club. Lending Club is currently offering new lenders a Sign Up Bonus for creating a new investor account. All you need to do is register your account and make your first deposit and you will receive the $25 bonus. You must use this special link to receive the bonus money: Lending Club new lender bonus.

Prosper is also giving new lenders $25 to sign up, but you have to fund a loan before you get the bonus, and the minimum loan is $50. So, it will only cost $25 to try the lending process. Prosper also has a referral program, so you can again refer people and make money. Keep in mind the bonus is not paid unless the person you refer either makes a loan or borrows money.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Amanda says

    I’ve got a loan ‘in funding’ with lending club right now. Now that my credit score has improved a bit I can get a better rate with them plus they charge a smaller closing fee. As a die hard Prosper fan I was pretty surprised at that…

  2. Ryan says


    I read about your experience on your site. I’m happy that it has worked well for you! I really think P2P lending is fantastic for borrowers! There is no risk on their end and they can get much better deals than they could from a bank. Thanks for sharing!

  3. Ryan says

    There are a few key differences between LC and Prosper, and until you try out each service, you won’t know which one you prefer. I think there are currently more lending options w/ Prosper, but Lending Club had higher rated loans. There are a few other differences, but those are the key ones right now.

    IMO, both are viable options, and it doesn’t hurt to try out either one.

  4. Mark @ TheLocoMono says

    What I find interesting about the rise of P2P programs is this question, why lend in more than 1 P2P program?

    I can understand the goal of learning but in the end, it is still an income generator so there is financial incentive as a lender. I have been using Prosper for about a year now and reading all these Lending Club articles so it is interesting to read the different views.

    Right now, I am basically entering Round 2 with a few loans being funded last year now arriving in their 2nd year and a few loans funded this year in Round 1 so I am learning something for sure. Exactly what, I am still learning. 😉

  5. Blaine Moore says

    I’ve been lending on Prosper for a couple years now. I have 2 loans that were paid off early, 1 that defaulted, and the rest are all current (although some have had a late payment or two.) My estimated APR is ~19% and I invest in quite a few “riskier” loans (B/C/D credit grades)

    I haven’t been putting new money in for a while, but have been reinvesting my returns. So far, a pretty positive experience. The loan that defaulted was halfway through payment so I didn’t lose as much as I could have; just didn’t make anything off of that one loan.

  6. Ryan says

    That’s a very good success rate, Blaine. I only invested in the A grade loans because I wanted to try it out, and to be honest, I’m happy to make double or triple what I would make in the current rates for CDs.

    I think I will reinvest my funds as well, but I haven’t added new capital in some time. So far the experiment has gone well. 🙂

  7. No Debt Plan says

    I started with Lending Club when they were giving away money to try out the service. I’ve got two loans out, each 9.76%, and they are both being paid back to me on time. I’ve earned a whopping 40 cents in interest in two months. Nice. 🙂

  8. Christine says

    I think you brought it up in a previous post, but I just wanted to mention Kiva.org. I consider it more of a microfinance/charity organization because you don’t get a return, but it does use a P2P model.

    It’s low-risk and often guarantees a feel-good result, if not a financial return.

  9. Ryan says

    Hi Christine,

    I haven’t used Kiva.org, but based on everything I’ve read, it seems just like you described it. It wouldn’t hurt me to look into lending some money out with Kiva.org. The feel good aspect is just as important as the monetary aspect.

    Thanks for bringing that to everyone’s attention. 🙂

  10. Peer Lending Enthusiast - DebtKid says

    Ryan, nice overview. I agree that P2P lending has huge growth opportunities ahead, assuming some hurdles can be overcome.

    Right now peer lending is still very niche. Even with more and more publicity in the past 12 months, both Lending Club and Prosper are no where near household names. In time though, I think they very well could be. The potential is definitely there.

    Kiva is great. I’d love to someday be able to justify “investing” there.

  11. deepali says

    I actually posted about Kiva last week (my first loan was paid back!). It’s a pretty cool feeling. I admit I haven’t been keeping track of my Lending Club or Prosper accounts, mostly because they are long-term loans. But I also got the LC sign-up bonus, so as soon as that is paid back, I’ll send it over to Kiva. 🙂

  12. Brett @ Personal Loan Portfolio says

    Great summary. I have been thinking about investing on Kiva.org too. I wish that they would offer a “ZERO return” option. Hmm, I’ll have to explain my thoughts on that in a future blog post…

  13. Dividend Growth Investor says

    I have loans on Prosper and Lending Club, but nothing big. I read somewhere that the default rate is ticking up at Prosper. Even though the return is higher than say CD’s, at least my CD is guaranteed to not lose value..

  14. Imani says

    Hey, Ryan…

    This seems almost too good to be true and you know what “they” say about that.

    Let me see if I understand correctly, I get $25 to sign up as a lender and can use that to sponsor a loan and then get interest on that amount as the loan is paid off by the borrower?


  15. Ryan says

    Imani: That is correct. Lending Club makes money by processing loans, which are 100% funded by lenders, not by Lending Club. There are more people wanting to borrow than there are lenders, so Lending Club is looking for more people to lend. To introduce more people to P2P lending, they are offering a $25 bonus to sign up. You could consider it an advertising expense on their end.

    Before signing up for a Lending Club account, here are some articles to help you understand a little more about what P2P lending is and how it works:

    The short and easy answer is that with P2P lending, you act as the bank and make loans to people who meet certain standards. Lending Club facilitates the loan and takes a percentage. The process is safe and legal, but the loans are not guaranteed, meaning you could possibly lose some or all of your investment, so I would only recommend investing money that you don’t need right away. Keep in mind that a standard loan is 3 years, so your money may be tied up for some time.

    I have an account with Lending Club and so far, I have received good returns on my investment (approximately 10%). That’s pretty encouraging!

  16. Nataraj says

    When we lend money, how is interest paid back? I’m looking out to get paid monthly interval. Wondering if there is any option?

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