Financial institutions are being affected by many things these days. The increased government regulation on the amount of money they have to have available and current economic conditions have caused them to tighten their standards. This tightening is leaving both individuals and businesses looking for new way to borrow money. It is also giving birth to new types of loans. So, what is Lending Club and how does it work?
Lending Club is one of the businesses that came into being in response to the need for non-traditional loans. It joined the likes of business like GoFundMe. They are not a traditional financial institution. They are a “credit marketplace”. This is much like a marketplace for any individual service. People and businesses that are needing to borrow money go on there and provide information about their need. Then people and businesses that are willing to loan money can provide the needing funds.
Their Market Benefit
This business provides more benefits then just going around a traditional financial institution. They also utilize technology to keep costs low. The do have a main office where they maintain the site. But, they don’t have an office that anyone walks into. This means that they operate with less staff than other businesses. They also use a proprietary system to make connections between lenders and borrowers easy. By keeping their costs down, they are able to pass this on to the borrowers. On average, you will pay about 33% less than other types of loans.
Benefits for Borrowers & Lenders
There are many benefits to this system for both borrowers and lenders.
They offer a variety of loans. This website doesn’t put many restrictions on what the loans can be for. It is basically limited by what investors are willing to invest in. The most common uses are for basic needs such as debt consolidation and to pay off high interest credit cards.
For borrowers, they make it easy. They use a simple online application that is much smaller than the books that financial institutions require. There are no hidden fees or prepayment penalties. You are free to repay the loan faster than the agreed upon terms which saves you money.
For lenders, they offer great returns. Lenders are able to fund loans from borrowers that are between grades A and C in risk. These are very high quality loans. They also can get returns from between 5.23 and 8.82%. It also gives them monthly cash flow. This creates a high quality investment option in a time where many traditional investment options are providing very low returns.
Lending Club is a newer company. But, they are built on sound principles that were created to fill the need for non-traditional loans. It is a great place for people and businesses to find loan options that might not otherwise be available to them with an easy application process. For investors, they are able to connect with high quality borrowers, get a monthly income, and receive higher interest rates then other investment options. You know understand better what is Lending Club and how it works.