Lending Club Review for Investors

Peer-to-peer lending has grown popular as a way to invest outside of the stock market. P2P lending allows ordinary people to lend other people money outside of a bank.

When the borrower makes payments on their loan, the lender makes money off of the interest. Pretty simple. But is it as foolproof as it sounds?

Lending Club Investing is a P2P platform that gives you the opportunity to invest in other people’s loans and make money off of the interest. If you are interested in diversifying your investments, P2P lending is a way to do it.

In this review, we’ll go over the investing experience through Lending Club.

What is Lending Club Investing?

Lending Club is a platform that allows you to lend people money who are looking for a personal loan outside of the bank. Historically, Lending Club claims that their investors earn 4% – 7% returns on all investments.

Investing in P2P lending gives you the opportunity to earn a higher rate of return than what is available through most traditional investments. It also gives borrowers the opportunity to qualify for loans that a traditional bank might outright reject. Because of this, P2P lending is riskier than traditional investing.

How To Invest In Lending Club

Well, you don’t go and pay for someone’s loan outright. Instead, you purchase small portions of the loan known as ‘notes.’ Each note is worth $25, which means you can spread a $1,000 investment across 40 different loans. You can decide on which loans you want to invest and earn money on the interest based on how much you invest in a particular loan.

Until a loan is funded in its entirety, Lending Club holds the money in escrow. Once the loan is fully funded, the money is transferred to the borrower, and the loan term begins. According to Lending Club’s data, nearly all loans are fully funded in 24 hours, and loan terms begin in about seven days.

What does this mean in terms of liquidity? You are expected to hold onto your notes until they mature, which can be as long as 36 months. However, Lending Club has a Note Trading Platform through Folio Investing that allows you to buy and sell Lending Club notes. This does not guarantee that other investors will purchase your notes at the same price that you paid for them, so you may take a loss if you want to liquidate before they mature.

P2P loans are also subject to prepayments or charge-offs. This is essentially when a borrower makes an extra payment or pays off their entire balance completely. When this happens, the revenue that is generated by their interest payments is lost. Depending on how much they pay off, you could also lose a portion of your investment.

It is also worth noting that P2P loans through Lending Club are unsecured, which means that there is nothing to secure the loan if the borrower defaults on their payments

Lending Club Investing Features

Lending Club’s automated investing feature lets you personalize the P2P lending experience.

Filtering Feature

Their filtering feature allows you to pre-select investments based on a borrower’s income, their job, their credit, and even the Lending Club grade. Manual investing can be pretty time-consuming, but this allows you to narrow down your selection into investments that you find promising.

If you choose to invest manually, Lending Club can help make it less tedious.

Grading System

Lending Club grades loans based on how risky an investment it is. A loan will receive a letter grade from A to G. An A-grade loan will have an interest rate as low as 6.16%, indicating a low-risk investment, and a G-grade loan will have an interest rate as high as 35.89% indicating a high risk.

Something to keep in mind is that it’s possible for anyone to default on a loan, even someone that is considered low risk. It’s never certain which borrowers are going to pay and which will default, but Lending Club’s grading system can help you wade through the various loan requests with some understanding of qualifiers.

Lending Club App

Lastly, Lending Club has a smartphone app, which can make it easy to check up on your investments.

The summary tab gives you all the basic information of your account, such as the total value and available cash. In the holdings tab, you can view information about your notes. The investment tab lets you see your automated and manual investments. You can make adjustments and invest in new loan opportunities through this page.

Overall, the smartphone app offers comparable functionality to both the desktop and mobile version

Lending Club Minimum Investments

There are minimum investment amounts that you must meet when beginning with Lending Club Investing:

Taxable Accounts

In order to begin using Lending Club, you are required to make an initial investment of at least $1,000 for all taxable accounts.

Individual Retirement Accounts – IRA

They now require a $5,500 minimum for an individual retirement account or IRA. It is worth noting that the IRS taxes all LendingClub income as regular income, so an IRA is favorable in this regard.

Lending Club Investing Fees

With every great lending platform comes a few fees that you must be aware of:

Annual Fee

There is an annual account fee of 1%, which can eat into your earnings. In your first year, Lending Club will pay this on your behalf if you maintain a minimum account balance of $5,000 for 12 months. After the first year, you must maintain an account balance of at least $10,000 to have the annual fee waived.

Fee for Loans Invested In

They will also charge you a 1% fee for every loan in which you invest. In addition to the effect of charge-offs and prepayments, this is removed automatically from the total interest of your portfolio. What you are left with is your Annualized Net Return or ANR.

Lending Club does not automatically reinvest your earnings. Whatever you earn from your investments will move to your account balance.

Lending Club will let you know if you have money sitting idle in your account, but it’s up to you to log in and reinvest it in new loans. This gives you the opportunity to screen your investments rather than leaving it up to an algorithm to determine good investments.

Getting Started

To start investing through Lending Club’s investing program is relatively straightforward.

The first step is to select the type of account that you would like to open. You can choose between an individual, general investment, retirement, or a corporate account. If you are opening an account on behalf of a minor, you can open a joint account, trust, or a custodial account.

You will also need to select your state. This is because Lending Club investment is not available in all 50 states. They will let you know at this step if Lending Club supports your state or not.

Finally, you will need to provide a series of personal information for tax reporting and fraud prevention including your name, address, birth date, email address, phone number, and Social Security number. If Lending Club’s system is unable to verify this information, you will need to upload a passport or government-issued ID.

Lending Club has some pretty rigid eligibility requirements, which means that it is not the best option for people that are investment novices. All investors must be at least 18 years or older and have a valid Social Security number.

They also require that all investors must qualify based on Financial Suitability. Lending Club defines Financial Suitability as:

Residents of California must have:

  • An annual gross income of at least $85,000 and a net worth of at least $85,000 (excluding home, furnishings, and automobile) or
  • A net worth of at least $200,000 (excluding home, furnishings, and automobile)
  • Invest no more than $2,500 in Notes if the investor does not meet the above criteria

Residents of states other than California:

  • An annual gross income of at least $70,000 and a net worth of at least $70,000 (excluding home, furnishings, and automobile) or
  • A net worth of at least $250,000 (excluding home, furnishings, and automobile)

The reason that these rigid requirements are in place is that P2P lending is considered much riskier than traditional investing.

Limiting who can invest in P2P loans protects both the borrowers and the investors.


Many people are curious if their investment is safe with Lending Club. The answer is yes.

Lending Club was the first peer-to-peer lending platform to register with the Securities and Exchange Commission (SEC.) This means that you are protected against any fraudulent or manipulative practices in the market if you invest through Lending Club.

Their site is also verified as secure by VeriSign, which is an industry leader in domain registry and online security.

Customer Support

Lending Club has a fantastic education center to field any questions you have about their platform and P2P investing in general.

Their colorful and interactive knowledge center can help you learn about the benefits of diversification and how to build your Lending Club portfolio.

Similar to their personal loans platform, Lending Club’s investing platform offers email and telephone support from their customer service team. If you have a question that cannot be answered by their knowledge center, Lending Club’s customer support team can advise and assist.

Pros and Cons

Check out some of the pros and cons of using Lending Club’s investing platform:


  • Potentially Higher Returns: As they say, high risk, high reward. That is definitely the case with P2P lending. When you remove the bank from the lending equation, you eliminate various costs that go with loan processing. This means that if the borrower makes all their payments on time, you can potentially earn much higher yields than with traditional investment avenues.
  • Filtering Options: Some people like to have more control when it comes to choosing their investments. If you would like to draw distinctive lines when it comes to no-go investments, Lending Club’s filtering tool can do that for you.
  • Automated Investing: Manual investing can be pretty time-consuming. If you are new to P2P lending or just want the program to take care of some of the legwork, Lending Club’s automated investing can help maximize your returns where they can.


  • Not Available in All States: Unfortunately, Lending Club does not cater to investors in all 50 states. If you are a resident of Pennsylvania, Ohio, North Carolina, or New Mexico, you are not eligible to invest with Lending Club.
  • Long-Term Investment: If you are looking for an investment opportunity that you can use as an emergency fund, this is not it. Lending Club makes it extremely difficult to liquidate your notes. You can use their Note Trading Platform, but there is always the chance that you will lose money brokering your notes that have not matured yet.
  • 1% Service Fee: Unfortunately, Lending Club’s annual service fee has the potential to diminish your earnings. You’ll need to look to other P2P lenders for better service fees.

Alternatives to Lending Club Investing

One of the most common expressions in investment is to never put all your eggs in one basket.

Diversifying your investments is one of the best ways to minimize loss and increase profit yields. If you are intrigued by Lending Club or fintech in general, be sure to check out these other P2P online lending platforms.


Of any other P2P site, Prosper is probably the most similar to Lending Club.

Prosper grades its investments based on risk and allows you to invest $25 at a time. Historically, investors have earned between 3.5% to 10.1% through Prosper. This is slightly better than Lending Club’s numbers, though it may be due to Prosper’s smaller membership rather than better investment opportunities.

Funding Circle

Funding Circle is a peer-to-peer lending platform that is specifically for small businesses seeking funding.

Unlike Lending Club, Funding Circle offers secured loans. This reduces the risk of sinking your investment if the borrower defaults.

Also, Funding Circle rigorously assesses each loan application to reduce the number of bad loans that go through their platform. This offers more peace of mind and less risk than investments through Lending Club.


Fundrise is a unique investment platform that is geared towards real estate investment.

Investors can pool money together to invest in real estate projects. Their minimum investment amount of $500 is half that of Lending Club.

Also, they have a 90 days money-back guarantee. This means that Fundrise will buy back your investment at full price if you are unhappy with the platform. This is a great option for people who are novice investors and would like to try a platform out first.

Is Lending Club a Good Investment?

Lending Club is one of the original peer-to-peer lending sites. When it comes to investing in P2P opportunities, Lending Club is one of the best options out there.

Peer-to-peer lending offers potentially higher returns than traditional forms of investing, such as certificates of deposit or US Treasury securities. However, P2P lending comes with a unique set of risks that can threaten your investment altogether.

For this reason, you should limit your P2P investments to less than half of your overall investments.

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  • Comment Author image blank
    I have been with Lending Club for over 4 years. It used to be much better. Lending club got rid of being able to buy and sell notes in a secondary market in August, 2020. So now you must hold all investments until they mature. It means your investment is not liquid at all. Additionally, I have trouble investing enough money in new notes, so the amount of cash I have sitting in Lending Club keeps adding up. I would not recommend investing in Lending Club at this time. T
  • Comment Author image blank
    I just got a notification from Lending Club that they are phasing out Notes investing by December to become a fintech bank.
  • Comment Author image blank
    I would like to know in very simple terms what the actual default rate is for all of the above P2P lending platforms are for each of the last 5 years. exp: Lending Club 2015-8% total default rate, Fundrise 2016 11% total default rate, etc , etc.