I would like to take a solid look at some of the issues that people are having about Lending Club and about peer-to-peer lending in general. And hopefully I can put some of them to rest.
Denied Loan Applications
While the credit requirements are more lenient than what you will find in most commercial banks, there are some people who won’t be able to qualify. This is usually because there are too many negative claims on their credit report, which resulted in a lower score than their required minimum (a FICO score of 660 or above). If this is the case, you might consider looking at Prosper, which has lower credit requirements than Lending Club (they only require a minimum FICO score of 640).
It’s always a good idea to keep a close eye on your credit rating, as a bad score can come back to haunt you at any time. In fact, you are entitled to one free copy of your credit report every calendar year.
High Interest Rates
A bad credit score can follow you everywhere, and it can hinder your ability to buy a house or a car. It can even limit your ability to rent a property. On that note, the same thing can happen when you want to take out a personal financial loan as it can be a factor in getting your loan approved. Even if you are able to qualify for a loan, the interest rate might be too high. This can result in higher monthly payments. So, even if you’re able to get the money, you have to ask yourself if it’s worth it to do so. Otherwise, you can put yourself more in the hole than you might be already.
High Monthly Payments
As I said before, a higher interest rate will result in a higher monthly fee. So, even if you’re able to qualify for that amount, it might not be advisable to borrow that much. If the interest rate is high enough, you could end up paying up to $1000 or more a month.
The smart thing to do if you’re faced with this situation is to avoid borrowing more money than what you actually need. This will keep your monthly payments down to a minimum, which can keep you from defaulting on the loan.
While peer-to-peer lending is available in most parts of the US, there are five states that have made it illegal to participate in the program. These are:
- North Dakota
Not surprisingly, there isn’t much I can say about this issue, as there is nothing that can be done to change the laws in your area. If you live in any of these states, you will not be able to take out a peer-to-peer loan.
Peer-to-peer lending scams are not uncommon, but there are still plenty of legitimate lenders out there. As long as you, as a borrower, are able to recognize the warning signs, you should be okay. Of course, the first thing to remember is to use some common sense, and you should trust your instinct if an offer seems “too good to be true.”
Many of them make inflated promises, such as instant approval or lower-than-average interest rates. In other words, they will tell you what you want to hear in an attempt to lure you into their scam. They will ask for money up front, which no legitimate lender will ever do. So never be afraid to ask questions as this will prove helpful in weeding out peer-to-peer lending scammers.
It’s clear there are some complaints and negative sides to Lending Club, but I don’t know of a company that doesn’t. When I look at it against the grand scheme of things, the good definitely outweighs the bad. And it’s always advisable for the customer to use good judgment whenever he or she is looking for a peer-to-peer loan. As long as you keep certain things in mind, you should be able to find a good lender who will give you the money you need at an interest rate you can afford.