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What to Expect When Applying for a Personal Loan at Lending Club

by Peter Renton on September 23, 2011

Earlier this week I reviewed the process for applying for a loan on Prosper. Today we will look at Lending Club where I applied for a $2,500 loan last week.

The borrowing process, detailed in the video below, was again a smooth and simple experience. But I encountered one major challenge. Lending Club rejected me outright for a loan. When I called and questioned them on this they said that I had too much debt for someone with my income. As I explained in the previous post, I have very little income outside investment income and I do carry a mortgage. So, despite my 815 Transunion credit score I received an “Adverse Action Notice” email giving me the bad news.

A P2P Loan at a 6.03% Rate

Luckily I had a plan B. I really wanted to understand and review the borrowing process at both Prosper and Lending Club so I applied for a loan in my wife’s name. Wouldn’t you know it, she was approved for a loan with an A1 grade and a rate of 6.03%. What was curious is that she had less than half my income (and it is pretty much all investment income – my wife is a part time yoga teacher and a stay at home mom) but no debt whatsoever. The home mortgage is in my name and so, despite a low income, her debt-to-income ratio was just 2.96%. Obviously this number is very important to Lending Club.

The biggest difference between the loan on Prosper (at 31.99%) and the one on Lending Club (6.03%) is the speed at which my loan funded. On Prosper it was less than 24 hours but on Lending Club it took five days. Despite that big difference in funding the money from Lending Club was in my account very quickly – just eight days (six business days) after my application was filled out.

Get Your Interest Rate Quickly

Like Prosper, Lending Club was able to quote an interest rate very quickly. Just two screen and five minutes into the process and I had my interest rate. They also gave me the option to increase of decrease my loan amounts and provided the corresponding monthly payments.

Here is the timeline for my loan application at Lending Club:

Tue 9/13 – Applied for a loan on
Wed 9/14 – Loan is active on the platform for investors
Thu 9/15 – Lending Club called to verify personal details
Mon 9/19 – Loan fully funded by investors
Tue 9/20 – Loan issued
Wed 9/21 – Money appeared in my bank account

The underwriting algorithm remain a bit of a mystery to me. Obviously the amount of home debt is very important and the amount of income you have less so. But beyond that I really cannot come to any logical conclusions about why I was rejected and my wife obtained a A1 loan.

Regardless of my personal experience the process for obtaining a loan was quick and easy. The total amount of time needed including the phone call was less than 15 minutes. Lending Club kept me informed throughout the process and the money was in my account before they promised.


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{ 21 comments… read them below or add one }

Marc September 23, 2011 at 12:57 pm

Very interesting to see the getting a loan process. Thanks so much.


Peter Renton September 23, 2011 at 1:19 pm

Thanks Marc. I didn’t know about your blog, I am glad you linked to it. I am now a subscriber.


Vicente September 23, 2011 at 6:20 pm

Hi, thanks thats very usefull, do you have the same examples in order to understand the lenders process.


Peter Renton September 24, 2011 at 6:27 am

Vicente, That is a good point. I should go through the investor account setup process as well. I will get onto that in the next couple of weeks. If you want an idea of the Lending Club process, I did a video about setting up a Lending Club IRA several months ago. I think the process is still very similar (if not the same) today.


Marc September 29, 2011 at 8:22 am

Thanks Peter for the link to the LC IRA. I’m pondering that. It would be nice to pull my current IRA out of it’s 1% to 9% or ever 20%.


Peter Renton September 29, 2011 at 10:00 am

@Marc, If at all possible it is best to keep your p2p lending investments inside an IRA. Taxes will eat into your returns in a regular account so I always recommend people invest in Lending Club through the IRA option.


Glenn September 29, 2011 at 10:18 am

It sounds like Prosper gave you a loan at 31.99% and Lending Club would not issue you a loan. Lending Club gave your wife a rate of 6.03%. I would be curious, if your wife applied on Prosper, what would her rate be as compared with Lending Club.


Peter Renton September 29, 2011 at 10:36 am

@Glenn, You know I was curious about that myself. So I went ahead and applied for a loan in her name just now. Her rate was 31.99%. Isn’t that interesting….The only thing that would have changed is that she would have another inquiry on her account because of the Lending Club loan. As Jim Catlin said in our conversation, the self-employed are considered very risky at Prosper and are therefore given much higher rates.


CA-Lender September 29, 2011 at 1:05 pm


Back in April, I did the same thing you did—I applied for a loan at Prosper to see their process.

Here is my loan:

Notice my high credit score and income, but I too received a 31.99% rate due to being “self-employed”. I know that both LC and Prosper are still constantly tweaking their algorithm, I think still have a ways to go in getting a large enough sample size to more accurately reflect an appropriate interest rate on loans.

One item that totally skews the DTI ratio and utilization rates are home equity lines, which Prosper (as do credit reporting bureaus) lumps into total (credit card) debt, so a borrower with $1000 in credit card debt and a $100,000 HELOC, would show up with $101,000 in debt, and a very high DTI ratios and utilization rate.


Peter Renton September 29, 2011 at 2:34 pm

@CA-Lender, Thanks for sharing and I am sorry I missed out on that loan. It looks like for the self-employed Prosper doesn’t use DTI although who knows if that is really true in practice. The trouble with being self-employed is that it covers such a wide variety of people – everyone from yoga teachers, to millionaire entrepreneurs to professional poker players…..

I imagine there is a good percentage of people in this category that have very sporadic income and are not a good credit risk. We both get lumped in with them.


CA-Lender September 29, 2011 at 2:54 pm


You didn’t miss out much on my loan (it funded in 36 minutes), I tested several processes (minimum payments, large payments, etc) and paid it off in 2 or 3 months.

I may take out another one in the next few months, to test out a few more items. Only thing stopping me right now is the large origination fee (4%, I believe). I’m just waiting for some promo email, like “come get another loan, we’ll waive the origination fee” or something similar.

FYI—for those interested in borrowing, but hesitate due to the steep origination fee, in the past, if you began the loan process, but don’t complete it, Prosper would send you an email offering a $50 bonus to complete the loan (on a $2000 loan, that covers a large chunk of the origination fee). I’m not sure if they still do that, but I assume they do.

I’ll update if I have any further info.


Peter Renton September 30, 2011 at 11:11 am

@CA-Lender, I actually have a half-finished loan out there right now on Prosper but I haven’t seen any discounted offers yet on origination.

BTW, good catch this morning on this loan – it funded in 3 minutes!


CA-Lender September 30, 2011 at 11:38 am


Maybe they stopped offering the discount?

As for this note, I figure that with WB making his moves at 9AM & 5PM, if I want to invest, I just log in during those times :

The good thing about this note funding in 3 minutes, is it was Aberdeen that completed it, not worth-blanket.

It can be a bit worrisome when one lender funds 25% of all notes. What happeneds to Prosper if WB decides that his $150M can do better elsewhere???


Peter Renton October 1, 2011 at 6:37 am

@CA-Lender, I completely agree that Prosper is relying too much on worth-blanket2 right now. I would much prefer to see their percentage at under 10% of all loans. According to what was said in June, they have made a $150 million commitment and they are less than 5% of the way there. This means that for the next two years we may well see investments of close to $2 million a month. So, I hope the volume can keep increasing so this percentage keeps getting reduced.


Craig November 14, 2011 at 12:40 am


They did the same thing to me!! 775 score, gross income $200k+ with less than 35% debt with my house!

I was floored! And I already have a loan with them for over 18 months, never paid a second late.

Bye Bye Lending Crap! Never again will I waste my time!


Craig November 14, 2011 at 12:43 am

Oh and yes I proudly own my on business for 6 years now.


Peter Renton November 14, 2011 at 11:09 am

@Craig, While I am not surprised you were turned down due to your self-employed status, I am very surprised that Lending Club turned you down when you already have an existing loan with a good payment record. I believe that the risk management models at Lending Club penalize self-employed people far too much. It is very annoying for those of us on the receiving end of their strict policies.


zman April 21, 2012 at 10:18 pm

I had aloan 100% funded, provided LC tax returns, 1099′s and 4508 and got an email that they were unable to verify income for self employed, try back in 8 weeks. credit score is 764, loan rate was 7.9%.

how can I make sure they destroy my information completely?


Peter Renton April 23, 2012 at 12:52 am

@Zman, Lending Club are very diligent when it comes to the information on their borrowers, but I am not aware of any avenue that will guarantee your information is completely destroyed. Have you asked them what their policies are around this?


john639 May 29, 2012 at 11:37 am

Thanks for a great article. I’m curious, do you have to justify the reason for a loan, for example, do you have to prove you want a loan for say a home improvement etc?



Peter Renton May 29, 2012 at 2:53 pm

@John639, No. You do not have to justify the reason for the loan but you do have to provide a title. However, the more complete information you provide you more likely investors will be interested in you.


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