Borrowing from Lending Club just got cheaper
From Lending Club:
“We have reduced our interest rate for borrower loans by 50 basis points, effectively decreasing a borrower’s interest rate by 0.5%.“
What does this mean for you? Simple… when you borrow from Lending Club your interest rate will be approximately 0.5% lower than it would have before. This is great news for those who were on the fence about borrowing from Lending Club.
We borrowed from Lending Club
In case you were unaware, we consolidated our high interest debt with a Lending Club loan and will save over $500 because of it.
Here are the loans and their respective rates that we consolidated with LC:
- Auto Loan – Capital One @ 10.5%
- Credit Card 1 – JP Morgan Chase @ 14%
- Credit Card 2 – Capital One @ 16.25%
- Credit Card 3 – Citigroup @ 19%
The resulting loan we were able to secure through Lending Club was for $11,000 at 9.23%.
I am almost never a proponent of borrowing money, but if you can consolidate your high interest debt and save money then you would be a fool not to.
Follow these debt consolidation rules…
If borrowing from Lending Club to consolidate debt sounds like a good idea for your situation MAKE SURE you follow these rules of debt consolidation and repayment:
- Have a game plan to repay the debt.
- Do not take on more debt.
- You have not paid off the debt until you actually pay off the debt.
- You can consolidate at a lower rate than all existing loans.
- Always speed up debt repayment.
Here is a more detailed look at these debt consolidation rules.
If these five rules sound doable and you can save money by consolidating… then go for it. I did and I have no complaints.
I just became a borrower with Lending club and I am so happy. After 12 hours, 10% of our loan is already funded. I love seeing what cities people come from and where they work. They are trusting me with their investments. AND they get my interest money, not Mr bank.
It is a great option if your credit isn’t ruined by debt (luckily, we survived).
I agree Ted. You mention how individual investors will now receive your interest payments instead of “Mr. Bank.” That was also one of the motivating factors for me to choose peer to peer lending. In a way we are “sticking to the man”, and this is especially attractive now that “the man” has been able to get the government to bail them out of their bad business decisions using our taxpayer dollars. *sigh*
So you have had a good experience with Lending Club? I have read so many blog articles on why not to be a lender with Lending Club, but have not heard much on the borrower side. What type of repayment schedule do they give you? Also, does this affect your credit score negatively or positively?
The standard repayment period with Lending Club is 3 years, but the borrower can prepay the loan at any time with no penalty.
For example, on the 8th of every month my automatic loan payment (based on the 3 year repayment plan) is sent to Lending Club. Then at the end of the month I always send an extra payment to them manually. My loan was issued as $11,000 in 8/2009 and the balance is currently around $4,200 because I have prepaid so aggressively (and hope to have it paid off by 3/2010.)
The borrowers credit score could go up or down based on WAY too many other factors, but in my case my credit score change was negligible although I’m sure it will raise with time since my DTI continues to improve.
It actually doesn’t affect my credit- and it will increase it as I am transferring CC debt over and then paying it off faster than I would have with the higher interest rate.
Awesome Matt and repaying it so well- I am hoping to do it that fast as well. 2 years is my goal.
What Ted mentions about repaying CC debt and what I mention about DTI are ultimately the same thing.
Wow, I think you got a great rate and great deal! I am sure you will have it paid off quickly. 🙂
Great for borrowers! Not so good for investors like me. 🙁
True that IJ, true that. Oh well, borrowers probably need the break more than investors anyway… and investors are still earning great returns – everybody wins. 🙂
I’ve never heard of Lending Club. I took a look at the website and it’ a great concept. I must say that I like it. I don’t have any loans outstanding, but it’s great to know about the options that are available if ever needed.
Lower rates is bad news for lenders. Any idea why they decided to do this?
I have contacted Lending Club to inquire as to why but have not yet heard back. My assumption is it’s an attempt to secure more borrowers.
Simple supply and demand. They have also upped their affiliate fee for new loans. Still stinks for us who are lenders as I consider their loans riskier than other types of bonds (if you consider it in that class)
The unofficial word from Lending Club is that they “observed that defaults continue to trend lower, which gave us the opportunity to decrease rates to borrowers while preserving investors’ net returns (rate – defaults&fees). Also, lower interest rates help attract higher quality borrowers, leading to less defaults, so it is a virtuous circle.”
Great concept in a competitive market. We need more of these schemes all around the world to help keep the big financial institutions honest.
I have read rumours on forums that the lending club is coming down under to Australia. This will definitely help struggling families with their loans with lower interest rates.