Have you ever wondered how you can diversify your portfolio without learning all the tricks in the market?
If you answered yes, then perhaps the Lending Club is the solution to your problems, which is why in today’s post we will dig deep and ultimately answer the question:
Is the Lending Club a scam or can you really make quick cash by investing? 💭
Here’s the reality – most of us have been obsessive of the idea of investing even when we were young.
When I was a kid, I vividly remember lending some of my hard-earned money to my cousin to help start her small-time bracelet business. 📿
During that time, elastic bracelets were the thing, and my cousin happened to be a very gifted craftsman.
However, she was experiencing a minor issue. 😟
She didn’t have enough resources to purchase the threads and the assortment of beads. Recognizing her passion and ability to succeed at that time, I decided to fund her entire operation.
Our deal was simple – she will run the business and do all the hard work while waiting for my payday every other week.
And can you guess what happened? 😃
My investment paid off tremendously.
I made enough money to get back my capital in the second week and continued to earn throughout the rest of the semester.
If you assess my situation, you’ll realize that I didn’t have the time or passion for learning how to make my bracelets, let alone worry about how to market them.
All I did was invest and let my money work for me. But the real question is – could there be a similar opportunity in the adult world?
Well, we may have one which goes by the name Lending Club. ✓
This lending company targets two types of people:
- those in need of financial backup ✓
- those willing to chip in and invest. ✓
Just like how I assessed my cousin’s earning potential, aspiring investors can review whether or not they will fund a specific loan applicant. On a more technical note, this is classified as a consumer credit asset.
What do I mean by consumer credit, you ask? Well, not businesses who are looking for angel investors, okay?
These applicants are looking for loans for various reasons such as refinancing their credit cards or cars, funding a vacation to Hawaii, or even covering for medical expenses.
What is even more interesting about this program is that this type of investment is one of a kind, mostly because it allows people to borrow money for unconventional expenses.
You see, if you go to a bank and ask for a loan because you need to cover for your relocation expenses, I bet that %99 of the banks will instantly deny your request.
As we all know, the loans given by banks are usually related to start-up businesses, purchases of cars and homes, but they are not loans for vague expenses such as:
“I want to renovate my house because I think that…” 🏡 🖌️
However, your chances of getting such a credit approved will drastically increase with a company like the Lending Club.
So, whether you’re looking at this as an investor or as someone in need of a loan, tighten your belt as I present to you my honest Lending Club review that will ultimately identify whether this company is a total scam or not.
Please know that I am in no way shape or form connected to the company or any of its employees in the spirit of transparency.
In this sense, you can rest assured knowing that this article will only contain the truth and nothing but the truth.
Lending Club Review: What is it all About?
If there is one brand name that clearly states what it does, its gotta be the Lending Club, right? You already have a clear picture of what the company’s service is all about from the name itself.
It is a club of investors that provide lending options to those interested in borrowing some cash. It was founded in 2007 and was considered a game-changer in the field of the lending business.
Technically it follows a peer-to-peer system where the matching of investors and borrowers is purely done online.
What does this mean?
It means that the loans suggested to me by the Lending Club may not be the same as the ones offered to my friend’s if I were to be an investor.
This is because the funding types can vary depending on my credit score and my resources.
Based on Investopedia’s lending business compilation, it can be noted that it remains one of the top-performing peer-to-peer (P2P) lending networks that averages 10.68% to 35.89% interest.
Their business operations are backed by five major principles which are:
- Keep the employees safe ✓
- Preserve liquidity ✓
- Protect investor returns ✓
- Support their members (they are rolling out payment deferral plans) ✓
- Stay on track for the Radius Acquisition ✓
There are four major stakeholders in the Lending Club, including self-directed investors, borrowers, institutional investors, and banks.
And based on their recent reports, what keeps the company afloat are the banks (68%), followed by self-directed investors (17%), managed accounts (10%), and the Lending Club inventory (5%).
“Hold up. What is that thing you mentioned about managed accounts?” 💬
Oh let me simplify that. You see, when you sign up for the company as an investor, you get to choose what type of investment service you want.
If you feel like you want to be the captain of your funding journey, you will be called a self-directed investor.
At the same time, if you see yourself as a funder who’s not interested in managing his own investments, you can take advantage of the “manage account” service.
However, please note that your minimum investment will significantly increase if you decide to go down this path.
What’s my take on this? 🤔
You see, I have analyzed their social media platforms, and it indeed seems like the Lending Club is one of the biggest recognized companies with a substantial online presence.
On Facebook, they boast around 45k followers and have around 492 members on their Financial Health Club.
Their Facebook engagement is actually at par with other reputable companies as reflected by the number of fresh posts and their involvement with some of their followers.
On Twitter, they have around 27.7k followers, but they seem to interact less on this channel. Based on their recent posts, it mainly houses excerpts of their blog posts which is probably why fewer people interact with them.
Surprisingly, they also have an Instagram account with about 1.3k followers. For a company related to finance, that number is already reliable since you cannot really expect them to post many photos. 🤳
Now let’s talk legitimacy. 🙂
What sets this company apart is that it’s publicly traded in the American market under the code LC. Based on their historical data, the stock itself is a bit on the red as reflected by its one-year loss of about 60.90%. 📉
As an investor, it would be wise not to invest in it yet since it is experiencing substantial uptrend spikes today.
As of writing, the Lending Club Corporation is legitimate as reflected by its very recent SEC filings. It also enjoys a 3.66 rating under the BBB with about 423 complaints as of writing.
However, not all things are looking sparkly for our company! 🤐 🛑
After some digging, I found out that it has an on-going case with the Federal Trade Commission due to deceptive allegations.
Apparently, the Lending Club have misled some of its consumers by promising “no hidden fees” when in truth, the company deducts more than a hundred (to even thousands) of dollars in up-front fees.
After reading the press release, I find it weird that the company recognizes that its hidden fees are a significant problem for their customers.
Now, what exactly are they doing about this one? As of writing, the case is still being processed, so for that reason, I wouldn’t want to recommend the Lending Club to you here today.
The company may sound promising, but I cannot really trust them until this case gets closed. 😐
How Exactly Does Lending Club Work?
For borrowers (minimum of $1000; maximum of $40,000)
Imagine this scenario – you need a thousand dollar loan to renovate your home, and in that case, investors can chip in and lend you a minimum of $25 each.
Once the fund is ready, the parties (you and the rest of the investors) will agree on an interest rate and specific terms.
After 4 to 5 days, the money will be deposited into your account, and once that is done, you’ll start paying a fixed term for each upcoming month. (three of five-year loans are available)
Now for the interest rate – Lending Club is the one who will compute this based on the applicant’s credit standing. The company considers at least six factors for the computation:
- Your payment history (you’ll need to provide it when signing-up) ✓
- Age and type of credit ✓
- Percentage of credit limit used ✓
- Total balances from outstanding loans ✓
- Recent credit behavior ✓
- And your available credit ✓
Whatever the computed rate for your loan might be, know that it will be a fixed one, and it will last until the end of the three or five loan scheme.
Does that sound like a good deal to you, and want to try it out? 😊
Well, setting up your personal account is relatively easy. ✅
All you have to do is visit their website and tell them a few things about yourself and your current financial status. If you are someone who has a trail of ill-credit scores, your chances of getting a loan may be slim. 👎
So, let’s say that you were finally able to renovate your home but suddenly realized that the due date was nearly two weeks ago.
In that case, you’ll get penalized, and you’ll have to pay an additional 5% of your unpaid payment.
Personally, this is what I like about the company. 👍
They have a strict policy in filtering loan applicants. If the company is a scam, I indeed bet that they will instantly approve applicants and get their earnings to originate the loan.
And if you do a quick search on Google, you might find out that a few unlucky ones posted rants saying that the company is a scam for not approving their loan.
How Does Lending Club Work For investors?
While it is true that the minimum funding for a loan is $25, that doesn’t mean that it’s also the minimum investment for setting up your account.
The signup procedure is similar to the one of a borrower. You will be asked questions regarding your credit standing, income streams, net worth, and investment choices.
To start investing in a taxable account, you will need to invest at least $1000. Want a tax free solution? Well, you can also open an individual retirement account for a minimum of $5,500.
So, that’s pretty much it. After successfully creating your online account and verifying your credit status, you can finally start securing your investments.
But, as I always remind my readers time and time again, all investments have some risks. Allow me to share some of the possible dangers you might face as a Lending Club investor:
- Call Risk – so this happens when the loan you funded was paid in full even before the term ends. For instance, you sponsored a three-year loan, but the borrower was able to pay it all in two. That means you will lose a full year of possible return.
- Inflation Risk – just like with banks, the rates may be enough for this year, but in two to four months, that same rate may be a bit too low.
- FDIC Risk – while it may be a useful tool for diversification for short-term investments, it is not suitable for long-term investors since this investment is not insured by FDIC, government agencies, or banks.
So, are you wondering if you can make money with Lending Club? 💸
Yes, you can! As long as you select to fund those with higher rates.
But here is one reality – since the Lending Club has been around for a long time, you might have to act quickly in choosing your investments since you are practically battling against many other investors.
Is the Lending Club a Scam?
To be honest, I find the whole operation entirely lawful. Still, given my discoveries about the FTC allegations regarding misleading fees, I would not want to recommend this to you at all.
I will follow closely what the resolution will be, but in the meantime, I’d like to encourage you to stay away from it. ❌ ❌ ❌
Maybe What You Need Is Not A Loan…
More often than not, we apply for loans thinking that they are the easiest way to get some cash. However, this approach is not suitable for the long run, and that’s why I’ll be sharing a better alternative to profit online.
The alternative that I’ll be speaking of may require a small upfront investment and a lot of hard work initially, but devote yourself, and I promise that you’ll enjoy the benefits as many others have done before you.
The alternative I’m talking about comes in the form of an online income opportunity. It represents a business model that makes it possible for you to earn commissions by promoting other people’s products or services.
I’m not sure if you’ve heard of it before, but the business model I’m referring to goes by the name of affiliate marketing and is, without a doubt, one of the best ways that you can start earning online.
Not only is it the best, but it’s also one of the most common ways that people make a living on the internet, and there are some good reasons behind that. 🤩
It’s very beginner-friendly, doesn’t require substantial upfront investments, becomes passive with time, and’s easily scalable once you get through the initial growth stage. (which I’ll be teaching you how to do)
However, please don’t get confused and let me burst your bubble! 🪡🎈
Just because it’s suitable for beginners doesn’t mean it’s easy.
Affiliate marketing is indeed one of the best income opportunities available online, but as with any other business, it requires a lot of persistence, tenaciousness, and a lot of hard work.
You see, the blog you’re currently on is a perfect example of what a successful affiliate marketing business should look like.
Please don’t get me wrong, since I’m not trying to brag about how great my site is. Instead, I’m trying to point out that something as simple as this can help you finance the life that you want to live, as it does for me.
As mentioned earlier, many affiliates share their success stories on any given day, and I’ll even include a list of some of my favorite ones.
All of them owe their successful outcomes to the same platform that gave me all the tools, support, and pieces of training to thrive and break new grounds in this deranged online world.
The platform I’m speaking of goes by the name of Wealthy Affiliate. It represents an educational platform geared toward teaching newcomers like yourself all the affiliate marketing industry’s ins-and-outs.
“But why are you telling me all of this?” 💬
Because I would love nothing more than to personally welcome you inside and mentor you until you surpass the ‘one thousand dollars a month’ in passive income mark.
I’m willing to give out my best pointers and help you launch your very first successful affiliate marketing business, as long as you promise that you won’t waste my time by now dedicating yourself fully.
Wealthy Affiliate is indeed a legitimate learning platform, but it won’t do all the hard work for you. With its profound knowledge base, it’s genuinely one of a kind, and the freemium membership model just confirms that.
It’s the only platform that allows you to create a forever free starter account that enables you to partake in the course’s first nine lessons.
That should give you plenty of time to decide whether affiliate marketing is something you would want to invest yourself in or if you should continue your search somewhere else.
As I end my Lending Club review, I hope that I was able to help you in forming your decision on whether this company is a scam and if you should pursue subscribing as an investor or as a borrower under it.
If you liked this post, it would mean a lot to me if you can show your appreciation by sharing it on some of your social media channels to help my advocacy in exposing the truth about online opportunities.
Stuck With a Particular Service or Product?
Are you having second thoughts on whether you should subscribe or purchase a particular online money-making opportunity? Allow me to analyse it for you and give my most honest opinion about it in an instant.
Just drop the name below, and I’m on it. 👍
Stumbled upon this article, interesting read! I’ve never heard about the Lending Club.
10.68% to 35.89% interest rate is pretty high. It’s wonder people are on board with this idea. Looks like it’s pretty legitimate but as all investment platforms, risks are always involved. Your article is a good review for those considering, you covered good grounds to understand what Lending Club does.
I’m on another investment platform myself and I’m just thinking, things are easily within reach – as long as you are willing to do your due diligence. What a time to live in!
Thanks for this awesome review!
Hey, Sam. I’m glad you liked my review!
The times we live in are indeed wondrous, and I don’t mean that from an investing perspective only!
A fantastically informative and honest review, as I always expect from you anyway.
Funnily enough, this was the type of investment model that I was looking into early last year.
I have previously looked into angel investing as well.
Admittedly, I’ve not heard of The Lending Club, but the clue is in the name, as you quite rightly point out.
I think the overall business model sounds promising. As long as there are certain protections in place for both investors and borrowers, it could certainly be a viable business proposition.
However, the same as you, the non-disclosure of specific fees and an on-going case with the FTC make me very wary.
I’m also not too sure what to think about the loss of potential earnings if a borrower decides to repay their loan early.
Through standard (bank) lending criteria, early repayment is often looked at in a couple of different ways.
Firstly, it’s good that the loan has been repaid and removed as debt for the company.
However, it also means a loss of potential earnings from additional interest charges.
I guess this works out exactly the same with the Lending Club too.
I think I’m with you on this one, Gorjan – while the Lending Club does sound like a potentially great way to invest, I think they need to get their house in order, and we need to see what the outcome of the FTC review is as well.
But, great information here as always, Gorjan, much appreciated.
The loss of potential earning is something that bothers me a lot. It’d be a bummer to invest a certain sum and see the borrower pay it back in less than what was agreed. It’d be hard to calculate your profits if that happens regularly, making the Lending Club an unsustainable opportunity.
Anyways, thanks for stopping by, Partha! Your thoughts are always appreciated.
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