Personal Loans

Can You Refinance A Lending Club Loan

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 11 minute read

LendingClub is widely recognized as the leading P2P (peer-to-peer) lender in the industry. LendingClub, a forerunner in the collaborative economy, has funded tens of billions of dollars in loans to borrowers. With the shift from a P2P model to a more conventional lending structure, it shows no signs of slowing down.

Consider LendingClub if you need a personal loan and your credit score is over 600 on the Fair Isaac Corporation scale. A great approach to get funding for your new or expanding business is through LendingClub, which also creates loans for small business owners and solopreneurs. Vehicle refinancing loans are another service provided.

Those with a history of bankruptcy or badly damaged credit shouldn’t apply to LendingClub. Learn more about how to apply for a loan on LendingClub, the benefits, and drawbacks of using LendingClub, and if the platform is right for you.

Options for LendingClub Loans

LendingClub’s three main loan options are as follows:

  • Unsecured personal loans for general (but not unrestricted) use
  • Unsecured small-business loans
  • Auto refinancing loans

Following this, we will briefly discuss a fourth loan option called the Patient Solutions loan.

1. LendingClub’s Personal Loans

Loan amounts from LendingClub range from $1,000 to $40,000. You will neither receive the whole amount you requested, nor the maximum loanable amount. Instead, the size of your loan is determined by your borrower profile, which includes information about you and your finances used in the underwriting process.

It is possible to apply for a loan as a pair on LendingClub and for co-borrowers to co-sign on applications. All of the loan payments must be made by the co-borrowers.

Rates and Regular Fees

Personal loans through LendingClub always have periods of at least three years or 36 months. The borrower profile and loan term will determine the exact amount of the origination charge. The loan’s principal is reduced by the origination charge before financing.

Therefore, if you are granted a loan of $10,000 but must pay a 3% origination fee, you will receive $9,700. The interest rate is fixed for the duration of the loan and is currently between 11% and 36% APR (annual percentage rate), though this may change at any time based on market conditions.

There are no penalties for paying off your LendingClub loan early, either in the form of additional principal payments or by paying off the loan in full before the due date. If you pay your loan back more than 15 days late, LendingClub will charge you a late payment fee in addition to the origination fee.

Using LendingClub to Secure a Second Loan

LendingClub may approve you for a second personal loan before you’ve paid off your first, depending on your profile as a borrower. LendingClub may use the current loan’s status and payment history in any underwriting process, and you are not guaranteed the same rates and terms on future loans.

Acceptable Uses for Personal Loans from LendingClub

Your personal loan from LendingClub can be used for:

  • Debt consolidation
  • Paying off high-interest credit card debt
  • Funding major projects or purchases, such as home improvements or a new car
  • Paying major bills, such as medical or car repair bills
  • Covering tax expenses (instead of paying taxes with a credit card)
  • Financing discretionary expenses, such as an international vacation or wedding

LendingClub prohibits the following uses for its personal loans:

  • Anything related to post-secondary education, including refinancing existing student loans or taking out new student loans to cover tuition and expenses
  • Financing investment activity, including purchasing cryptocurrencies like Bitcoin
  • Financing gambling activity
  • Any activities deemed illegal by state or federal law

2. LendingClub’s Commercial Loans

A business can get a loan from LendingClub for $5,000 and up to $500,000. You are free to use the funds from these loans for any legitimate company purpose.

There is no guarantee that commercial borrowers will be approved for the entire amount of funding they request. The actual amount you can borrow is based on your credit history and other factors. All business borrowers must meet LendingClub’s basic requirements. 

There is a need for them to:

  • Have at least $50,000 in annual sales
  • Have been in business for at least 12 months
  • Have ownership of at least 20% of the company
  • Have no recent bankruptcies and no tax liens

LendingClub is different from other lenders in that it does not do substantial due research on its business customers or demand extensive documentation. LendingClub does not require a business plan or estimates from you, and neither does it send employees or appraisers to your location. Loan amounts below $100k don’t necessitate collateral.

Rates and Regular Fees

The loan periods for businesses at LendingClub can be anywhere from twelve months (one year) to five years (five years) (60 months). Different from personal loans, the origination fees on business loans are higher. To pay for them, the principal of the loan is reduced. 

Interest rates are now between 5% and 36% APR and are fixed for the duration of the loan though they may fluctuate with market conditions.

You can pay off your loan in full at any moment without incurring any costs because of prepayment because it is not something LendingClub does. Late payment fees are the most common type of non-origination charge. When receiving payments via regular mail, LendingClub reserves the right to charge a fee to cover the cost of processing checks.

3. LendingClub’s Auto Refinancing Loans

When it comes to auto refinancing, LendingClub offers loans with sums between $5,000 and $55,000. Your loan must be used for the purpose of paying off an existing loan on a vehicle that:

  • Is for personal use only
  • Is classified as a passenger automobile (in other words, cars, and light trucks)
  • Is less than 10 years old
  • Has less than 120,000 miles on the original odometer

In order to qualify for refinancing, a loan must meet the following criteria:

  • Have an outstanding balance of $5,000 to $55,000
  • Be at least 1 month old
  • Have at least 24 months remaining in the term

Some older vehicle models may be ineligible for refinancing because they are no longer manufactured. Confirm with LendingClub whether your car qualifies.

Rates and Regular Fees

LendingClub offers auto refinancing loans with maturities between 24 and 84 months. On these loans, LendingClub does not impose any origination fees. Interest rates are now between 4% and 25% APR and are fixed for the duration of the loan but they are subject to alter with market conditions.

The same lack of prepayment costs that applies to all loans at LendingClub also applies to refinancing your car. Late payment fees are the most common type of non-origination fee. 

Title transfer costs, for example, are not levied by LendingClub but by a third party when you transfer the title of your vehicle from your previous lender to LendingClub.

4. LendingClub Loans for Patient Solutions

LendingClub also offers a fourth loan option, the Patient Solutions Loan, but its details aren’t addressed in this article because they differ from the other three. 

Patient Solutions loans involve doctors and hospitals more directly, and the procedure typically cannot begin until you have a designated doctor and a bill for services rendered or the expectation of such a bill.

In any case, if you need a personal loan to pay for medical expenditures, you might look at LendingClub’s Patient Solutions product.

LendingClub Loan Application

The steps involved in requesting a loan are outlined below.

Understanding Your Loan Rate

The first thing you should do before applying for a loan on LendingClub is to see what interest rate you qualify for. Each of the three primary loans follows the same basic procedure.

Enter your required funding amount and loan purpose (if asked), along with your income, address, date of birth, and any other identifying information requested, to get started. If you’re applying for a loan for your company, you’ll also need to provide some background details.

Then, LendingClub will conduct a mild credit draw to evaluate your rating. This won’t hurt your credit score unless you decide to apply for credit afterward.

Assessment and Acceptance of a Loan Offer

LendingClub then does a quick credit check and gives you an instant decision after receiving this information. In the event that your application is not accepted, you will be given specific feedback regarding why. If you’re allowed to continue, you’ll be able to choose from at least one loan offer.

There are two main types of personal loans the one with the lowest payment over the longest period of time, and the other with the best rate over the shortest period of time. Loan amounts, monthly payments, interest rates, annual percentage rates (APRs), and origination fees are all laid out in detail for you in each offer.

You may be able to borrow more than you first sought; in my case, I was able to increase the principal on a personal loan I requested from $10,000 to $16,000. Renting vs. owning, employment details, banking info, and a Social Security or EIN (for businesses) number are all required if you want to move forward.

To apply for a loan with LendingClub, you must first examine the Truth-in-Lending disclosure statement and provide your permission for a hard credit pull (credit check), which will allow LendingClub to access your credit record from one of the three major credit agencies. There may be a short-term impact on your credit score as a result of this.

During the underwriting process, LendingClub checks all the details you’ve provided. Keep an eye on your phone and email until your loan is fully funded, as you may be asked for extra information or paperwork.

How to Fund Your Loan

LendingClub’s unique funding procedure may add extra time to the time it takes to get a loan started. In short, your loan cannot originate unless it is funded by LendingClub investors, which is a topic we cover in further detail in our dedicated LendingClub review.

In the extremely unlikely case that your loan doesn’t receive enough investor interest, you will be given the choice to either accept partial funding or rescind your application and try again.

The funding procedure can take up to seven business days, according to LendingClub, because the company relies on third-party investors over whom it has no say. 

If enough people are interested in your business or personal loan, which is usually the case, you will get the money sent into your account of choice. Any origination cost will be subtracted from the total amount funded.

Auto refinancing loans are funded in a slightly different way than traditional bank loans because the money goes to your existing auto lender rather than your bank account. 

While the loan servicing change is taking place, which can take up to two weeks according to LendingClub, you should continue making payments to your former lender as usual. Once LendingClub takes over the loan’s service, all overpayments will be refunded.

Making Loan Repayments

Starting 30 days after your loan is authorized in full or in part, you will make consistent monthly payments at the agreed-upon amount and due date. Contact LendingClub if you’d like to adjust your payment due date.

LendingClub may charge a fee for processing payments made by automatic debit (autopay), manual electronic transfers, over-the-phone payments using a credit or debit card, and mailed checks. Principal and interest, both of which are based on the outstanding loan balance, must be paid back.

After 15 days have passed, payments are considered late. Your loan can be paid off early or additional principal payments made without incurring any fees.

Benefits of Obtaining a Loan Through LendingClub

  1. Zero Prepayment Charges. On personal, business, or auto refinancing loans, LendingClub does not impose prepayment penalties. That’s excellent news for borrowers whose financial situations allow them to pay off their debt entirely or even expedite planned payments.
  2. Loans for Auto Refinancing Have No Origination Fees. Origination fees on loans for auto refinancing are waived by LendingClub. Your auto refinancing loan’s only cost will be regular, fixed interest if you make on-time payments and stay away from mailed checks, which could result in payment processing fees.
  3. Excellent Borrowing Power. Compared to some online-only competitors, LendingClub offers higher borrowing limits. You are permitted to take out loans of up to $40,000 for general personal purposes, $500,000 for business purposes, and $55,000 to refinance an existing auto loan. Of course, you are not entitled to these maximums, but it is convenient to have the choice to stretch if your borrower profile permits.
  4. Various Credit Products Unsecured personal loans, business loans, auto refinancing loans, and medical provider loans are just a few of the distinctive credit products offered by LendingClub. These loans operate differently from the other three. That is a significant edge over leaner competitors that often just provide unsecured personal loans.
  5. Numerous Acceptable Loan Uses With the exception of investing in yourself and paying for your education, you can use a personal loan for almost any legal expense, while a business loan can be used for just about any legal expense pertaining to your company. This isn’t the case with lenders that focus more intently on niche markets like debt consolidation or student financing.
  6. Personal loans with low minimum APRs. Personal loans from LendingClub have low minimum APRs, which are at least a few percentage points lower than the standard APRs of most credit cards. When looking for low-cost unsecured loans with good credit and a low debt-to-income ratio, start with LendingClub.
  7. Co-signed loans are accepted. On its unsecured personal loans, LendingClub accepts co-signers. This is a blessing for young people and couples with credit that isn’t perfectly matched, as well as for those whose parents are ready to take the risk of co-signing for them.
  8. Two Personal Loans Can Be Obtained at Once. Up to two personal loans may be made at once with LendingClub. So long as you’ve managed to keep your first loan in good standing and your borrower profile hasn’t declined, you can apply for a second personal loan before paying off your first. One loan per borrower is strictly enforced by some lenders who exclusively lend online.

Drawbacks of Using LendingClub for a Loan

  1. Possible Exorbitant Loan Origination Fees for Both Consumers and Businesses. The maximum origination fees for a personal loan through LendingClub are 6%, and the maximum for a corporate loan is 7.99%. Even if borrowers are able to acquire low-interest rates, this may be unfeasible for them to proceed with the loan.
  2. Rates for other types of loans, such as those taken out by businesses, could be more expensive than credit card interest. You can get a loan from LendingClub with interest rates anywhere from 10% to 30%. However, if your credit is less than ideal, you should expect to spend closer to the upper end of this range. APRs for personal and small company credit cards, on the other hand, rarely exceed 25%, and frequently fall below 15% for applicants who demonstrate responsible financial behavior.
  3. Possible Risk of Only Partial Funding for Approved Loans. When it comes to the actual funding of loans, LendingClub does not have complete autonomy like many other online-only lenders. Partial funding at the outset can cause issues for your financing plan if your loan application does not receive enough attention from investors.
  4. The Time It Takes To Receive Funding Is Greater Than That Of Some Rivals. The funding time at LendingClub is about seven business days. That’s a lot longer than the time frame offered by some of our solely online rivals, some of which simply offer money the following working day.
  5. Investments and Education Expenses Are Not Eligible for a Personal Loan. Unsecured personal loan money can’t be used for anything related to schooling, including paying off or consolidating existing student loans. Personal loan money can’t be used for investments, including bitcoin. If either of these limitations is unacceptable, you should seek funding elsewhere.

Bottom Line

LendingClub wasn’t the first company to offer personal loans, but it’s still a frontrunner in the industry. It joins other ridesharing applications like Uber and Lyft, whose shared goal of efficient local transportation has already upended the taxi sector and, in some locations, rendered it inoperable; it could soon pose the same danger to public transit.

Whether or if LendingClub will cause as much of a ruckus in the financial sector as its ridesharing competitors remain to be seen. It appears that traditional banks are beginning to recognize the long-term threat posed by upstarts like LendingClub. 

Although I wouldn’t put money on LendingClub and similar businesses, I also wouldn’t bet against them. To pass the time, why not look at your current interest rate? It’s possible that what you find out will come as a pleasant surprise.

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