Lending Club Complaints: 6 Problems Borrowers Face

Lending-Club-Complaints-and-Problems

Lending Club is a peer to peer lending company that offers great loans with low interest rates. The loans are funded by people all over the country. In this way, Lending Club does a great job at connecting people who need a loan to people who have extra money to lend. However, not everybody has a good experience. There are a few problems that borrowers face year after year.

Note: I took a loan out with Lending Club myself, and wrote about the experience in my review of Lending Club loan post.

Six Complaints Borrowers Have When Applying for a Loan

Today we are going to explore six problems that borrowers can have at Lending Club. If we are aware of these risks, our process of getting a loan can be much smoother.

Complaint #1: Some loan applications are denied

One of the main complaints borrowers have with Lending Club is getting approved for a loan. Lending Club’s application process can be quite strict. Not only do they prefer a good salary and job, but your credit score has to be 640 to even be considered for a peer to peer loan.

Prosper MarketplaceSolution: A different company called Prosper is an option. Similar to Lending Club, Prosper allows peer to peer loans for credit scores as low as 640. Many people have been approved for a loan through them although they were already denied at Lending Club.  You can read about the difference between Lending Club and Prosper here, but they basically offer the same loan service.

Check your rate @ Prosper (won’t hurt your credit score)

Complaint #2: Interest rates can be really high

up arrowsSometimes when people get a loan at Lending Club, they realize their interest rates are somewhat high. This is important to discuss. Say you need a loan for $10,000 and you get approved for a great interest rate of 7%. You would pay $1,150 in interest on a three year loan. However, if your interest rate had a higher rate like 14%, you would pay $2,300 in interest over three years. A good interest rate can save you thousands of dollars!

Solution: here are four ways you can lower your interest rate:

  1. Improve your credit score: go to AnnualCreditReport.com and make sure your report is free from errors.
  2. Only apply for as much as you need: people who apply for the maximum loan amount typically pay the very highest in loan payments.
  3. Take out a 36-month (3 year) loan: many people want a 60-month (5 year) loan, but this makes their interest rate higher.
  4. Do not shop around for credit: each time you apply for credit your score goes down.

You can read more about this in my Interest Rates & Fees at Lending Club post.

Complaint #3: Loan payments can be expensive

Some borrowers have a difficult time paying off Lending Club loans because they cannot afford the payments. Many of these loans are for amounts as high as $35,000, which has payments of around $1000 per month. Obviously many of us cannot afford such a high loan payment.

Solution: Only borrow as much as you need. Only borrow the minimum amount. The more you borrow, the higher your loan payments will be. If you need $10,000 to pay off your credit cards, do not get a loan for $20,000. Take out the exact amount you need and you will be more able to make your monthly payments.

Complaint #4: Lending Club calls too much

cellphoneOften a borrower will miss a payment. When this happens, Lending Club notifies them about it, usually over email or with a telephone call. If they do not make a payment, Lending Club will send the loan into collections. At this point, people will be assigned to contact the borrower and remind them of their payments. As a result, borrowers can sometimes get annoyed by the emails and phone calls they receive.

Solution: Make your payments on time. If a payment fails, make sure you fix things. The longer you wait the more likely your account will go into collections, which will involve even more phone calls than before. If you are unable to make payments, set up a payment plan with Lending Club so that you can get back on track.

Complaint #5: Loans are unavailable in my state

The following states do not allow loans through Lending Club: Iowa, Idaho, Maine, North Dakota, and Nebraska. If you live in one of these states, it can be frustrating that you cannot get a loan.

Lending Club Borrower States

 

Solution: Apply for a loan through Prosper. They allow loans in a few states that Lending Club does not.

Complaint #6: Is Lending Club a scam? Is it safe?

Lending Club in the PressFinally, one of the main questions people have with Lending Club is whether or not they are a legit company. Is Lending Club a scam or not? How can you be sure?

Solution: Read my article 6 Ways Lending Club is Legit and Safe. Basically, Lending Club has hundreds of stories in the press (New York Times, Wall Street Journal, etc) that say how good of a company they are. They have a solid rating from the Better Business Beauru (BBB) as well as many security features to their site.

Conclusion: Lending Club is a Great Option

While some people who get a loan through Lending Club have problems, most borrowers have no complaints. Most borrowers from Lending Club are satisfied with the lower payments that Lending Club offers, especially compared to their credit cards. If we follow some basic rules, Lending Club can be a great way to get a loan.

Check your rate at Lending Club (won’t hurt your credit score)

[image credit: FutUndBeidl "Arrows Showing Up"/ Moyan Brenn "Phone"CC-BY 2.0]

Comments

  1. Larry says

    You do not explain why a payment would fail, is it because that the borrower has insufficient funds to cover the payment?

    • says

      Hi Larry. There are many reasons a payment can fail. Often it is from not having enough money in the bank, but sometimes the borrower has simply changed banks and needs to update Lending Club with the right account numbers.

  2. T.L. says

    Personally I think the Lending Club’s credit criteria may be a bit stringent. We submitted a request and was immediately denied due to the fact that our credit score was 753, we owed too much money on our cards (all of our cards combined is 25% of usage) and so on. Interesting, because my daughter got approved with lower income, lower credit score and owing more. We were trying to consolidate to one payment so that we can eventually get everything paid off and retire.

  3. KRJ says

    I have a loan through Lending Club right now. They got me out of a high rate credit card, I am making the same monthly payments, but will have it paid off in three years. My only complaint with them through this whole process is that it takes slightly more than a full business week for my payment to be deducted from my bank and post to my LC account. Other than that, I’m very happy thus far.

  4. shawna says

    I’ve completed almost everything and so far everything has been very easy, which kind of gives me a reason to pause. It concerns me about providing my bank account information. Has anyone had anything negative happen with their checking account and/or savings when going through this process.

  5. Melba Sales says

    Question? If I am denied credit, won’t I need to change banks so they can’t come back on my information and use it. Have people had this problem previously> please reply. I can’t afford to lose my SS check.

  6. Jenni says

    I applied through Lending Club recently to help me pay off high interest credit cards. I was a little nervous because my credit isn’t that great, but not terrible either. I always pay my bills on time, but found myself barely getting by. I applied for just money enough to pay off all my credit cards; I’m literally saving $386.00 a month, not counting the money I’ll be saving in interest! The process for applying was very easy, actually it’s effortless. Needless to say, I’m one happy girl with a lot less worry.
    The Lending Club is totally worth a try!

  7. JW says

    I went through the whole online application process for a 20k debt consolidation loan, provided most of my financial info, and on the last page, under terms and conditions, I see that Lending Club charges a $1000 fee for this loan. I think Lending Club should have disclosed this in the beginning of the process.

    • Jack says

      They claim that a rate quote will not affect your credit score and has not shown up as an inquiry on mine (so far..) But then they don’t ask for your Social Security Number or tax ID. I don’t know what credit database they access based on a person’s name, address, DOB and phone number. To get a FICO score, you need a SSN. So, Lending Club’s ability to discern a person’s creditworthiness is quite mysterious.

    • says

      Becky,
      Checking your rate with Lending Club does not make a hard inquiry on your credit history. However, if you accept the rate and Lending Club issues the loan, they will make a hard inquiry that remains on your account for two years.
      Simon

  8. Angel Chavez says

    Hi Simon! I applied last January and all was easy. I got the money and paid off my bills. Set up Lending Club to take money every month from my checking account, no problem. But my question is why I still get mail from Lending Club to apply for a loan if I already did one. Thanks for your time.

  9. Sam Stone says

    I’ve taken out a Loan with Lending Club. My credit score is around 770. They employ a bait and switch tactic. They initially told me the origination fee was 1% with an interest rate of 5.9. They later came back and said they could give me a loan but it would be 7.9. Looking at the terms again, I noticed the origination fee had doubled to 2%.

    I’ve seen others with fees as high as 5%. This is actually a lot since they subtract it from the loan they gave you, so you already start out with less than what you needed.

    The peer to peer model gives us an crowd sourced way of funding which in theory sounds good but sometimes a credit union may be a better bet for those with good credit.

    • Sandy says

      Wow! Wonder what happened. As a borrower and lender through LC haven’t seen this before. I’d call Customer Support. They were really helpful when they goofed on my account, one time. Usually, they are ahead of the curve. I, too, have a fab credit score and credit union and shop between the two for loan needs.

    • says

      Hi Sam. I’ve taken out a Lending Club loan myself, and disagree with your experience. Furthermore, an origination fee of 5% and an unsecured personal loan of even 7.9% is lower than any bank can offer. Sorry, but it seems your complaints are unfounded.

  10. Nancy H says

    I applied for a loan with Prosper to consolidate debt. It was quickly funded 100%. I sent all documents requested, but five days later they cancelled it saying they couldn’t verify the stated income and to quickly reapply with the new income they adjusted in my account. My W-2 and paystubs back up my income — all I can think of is that they adjusted it due to the fact that I regularly work overtime. I have reapplied, am funded 100%, and am waiting for verification. Do they adjust for overtime, and since they readjusted my income after having all my documents, am I likely to get approved?

    • says

      Hi Nancy. The verification process is complex and proprietary, so I’m not sure anyone can really give you straight answers here. In my opinion, just submit what they ask for, be patient, and hope for the best.

  11. Nilki says

    If you are approved, is the interest rate set in stone? Can you negotiate it any? And, will it increase or decrease over the period of your loan? Thanks :)

    • zbot says

      I currently have a loan through Lending Club. It has been a GREAT experience. Automatic deductions from a secondary checking account take care of my payment. Pay extra each month and pay off the loan in less than the loan agreement. My 3 year loan will be paid off in 2.4 years……..saved on the interest with no penalty.

  12. Francene says

    Hi. My question is..

    Does it matter what bank account you use? Meaning.. I was hesitant to enter my bank information due to having been a victim of fraud in the past.. so I entered one of my bank accounts that I only use for bill paying (direct and automatic debits). Just incase this wasn’t legit.. I wouldn’t have to worry about my income being touched. Make sense or did I just totally confuse you?.. also.. do you know what the chances are of being approved for the loan if you received a “Pre-approval” letter in the mail?

  13. Rob Ryf says

    Just wanted to share with others that first I would call my credit card companies and ask if they will reduce your interest rate. In my case one dropped my rate to 9.99% for 6 months. Then we are going to review my account at that time to see if the rate can remain or change. The company that did not drop may rate I paid off and cut up the card. If they are keeping me at a higher rate why use them in the future when I can use a card with a lower rate?

  14. Angelica says

    I have received a Pre-Approval, and my question is about the interest. I know that some other companies charge the interest up front . For example they lend you 10,000 and they automatically add up the interest let’s say 2,000 up front. So the total you own them will be 12,000 even if you pay off the loan in less time, you will still pay them if full.
    Does Lending Club works the same way?

  15. Jeff says

    I took a loan from the lending club to consolidate some debt and finish up a garage I built at home. The interest rate was 15.89% for the initial loan. After 8 months of on time payments, they emailed me offering me a new loan at half the interest rate of the original loan. Compared to other places for personal loans, I think the lending club is great. The application process is fast and simple, the account is easy to access online and has all of the information I need. There were no surprises (higher APRs, hidden fee’s, penalties, etc)

  16. says

    my son is a (jr) in namesake, I applied through lc, but could not finish the process because my son lives at the same address. the online application kept pulling up his ssn, not mine. what can I do?

  17. Donna says

    I applied for loan 5 days ago through LC with a preapproval code I received in mail. I only have fair credit (649) and owe quite a bit on student loans. I was fuuly funded the next day and loan approved and issued today. I wasn’t expecting to get it. I am pleased how easy it was. Email and bank verification was all I needed.

  18. Sarah says

    I had a good experience with Lending Club. Applied last week on Monday, got approved and funded, loan was issued and in my bank account by Monday of this week. Got interest rate of 11.99 for 3 years, my credit score was 712.

  19. Charlie says

    Applied for a loan three days ago. Says it is fully funded but still under review. Does this take extra time or should I be concerned.

  20. Randy says

    Hi Simon,
    I just applied the loan yesterday, today I see the loan status 11% has funded, but I still have done the second req, and I don’t understand it, can you tell me what I need to do ;
    Verify Your Bank Account
    We have scheduled a small debit and credit amount (less than $1.00 each) that will appear in your Chase account within 4 business days of Aug 09, 2014. You can obtain the credit and debit amount by either logging in to your online banking account or by calling your telephone banking system.

    Once you have obtained the exact amount, come back and verify your account by entering the debit amount below.

    • Nolan says

      If you look at the recent activity on your Chase bank account (preferably by logging in on their website), you’ll see two debits or credits, each one between 1 cent and 99 cents. The Lending Club website wants you to enter those two amounts to prove you have access to the Chase bank account you used when you applied for a loan.

  21. Terry says

    I just applied for a loan to get rid of credit cards. In 2012 my wife got sick had to quit her job, and I had to stay home (my work involves travel) for 7 months to take care of her and keep the family running, so I ran up credit card debts. I had no credit cards debt 28 months ago, I ‘ll get back there and I’m hoping that this loan pulls all the credit card debt back into one payment where I can get rid of this credit card debt. Reading these other peoples thoughts and Simon’s comments has been reassuring and comforting. Borrowing money or even admitting you need it, is never easy. I’ll keep you posted on what happens.

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