Lending Club Scam 2013 Report
Lending Club is not a scam, why not?
Lending Club registers the offering of its Notes with the Securities and Exchange Commission and files reports with the SEC. You can review Lending Clubs SEC reports at www.sec.gov. They are also partnered with WebBank, a state-chartered, FDIC-insured Industrial Bank from Utah to originate the loans.
But is Lending Club safe to invest in? Check the table below.
Before applying for any loan check your credit score for free. I use Credit Karma.
Lending Club vs Prosper chart
|Minimum FICO score||660||640|
|Minimum Loan available||$1000||$2000|
|Maximum Loan available||$35000||$25000|
|Average Investor Returns||8.89%||9.28%|
|Lowest Borrower APR||6.78%||6.38%|
|Highest Borrower APR||27.99%||35.84%|
|Loan Lengths||3 or 5 year||1,3, or 5 year|
|My Recommendation||4.5 Stars||5 Stars|
The two companies are very close in ease of use, site layout, and fees. I recommend Prosper because of its lower rates for safe borrowers, but larger returns for investors from allowing higher risk borrowers that Lending Club would reject.
Peer to Peer lending model
When you deposit money into a bank, that money technically becomes the property of the bank – to do with as it wishes. You receive a statement that details how much money the bank owes you. The bank makes money by using your deposit to finance loans. The difference between the interest rate they give you, and the rate they loan it out is their spread. With peer to peer lending, investors can become their own bank of sorts, and borrowers can save a few percentage points on a loan.
Not too long ago you could at least keep up with inflation by storing your money in a savings account. Not these days. Banks are paying way less than 1%, with most around .1%, not enough to keep up with inflation that is officially between 2-3% and, I believe, much higher unofficially. By cutting out the banks and using peer-to-peer lending you could possibly earn a return of around 10% with low risk.