Lending Club Review

By: Cooper Haywood
Last Updated: April 02, 2020
Advertiser Disclosure

Lending Club


Lending Club is the largest peer-to-peer lending marketplace in the United States and a pioneer in the industry. Historically, Lending Club has offered the strongest net returns on loans to higher risk borrowers, but the weakest net returns on loans to lower risk borrowers. Lending Club also has a healthy secondary market to sell notes before they mature, but at a hefty 1% fee.

Quick Facts

Total Loans Funded
$26.6 Billion
Year Founded

Return Per Loan Grade

Loan performance last updated April 2nd, 2020

Loan GradeDefault RateInterest RateNet Return
Disclaimer: Past performance is not indicative of future results.

Expert Walkthrough

When we hear about Lending Club, it’s often from the viewpoint of borrowers looking to receive personal loans. However, not everyone who uses Lending Club is looking for a loan. The beauty of P2P lending is that you can earn use Lending Club investing as a source for returns.

How to Invest with Lending Club

Lending Club is a peer-to-peer (P2P) lending platform. Borrowers ask for a specific amount of money, and individuals can choose whether or not to lend to them in small amounts.

When you get involved with Lending Club investing, the most basic level is as someone who funds others’ loans. You purchase notes in increments of $25, and as the borrower repays the loan, you receive a portion of the payments, including interest. If you have $25 available to invest in one note, you can get started by browsing the available notes and creating your own portfolio, based on how much money you have available.

I started investing with Lending Club years ago when $50 was offered to me to try it out by investing in two notes. Since then, I’ve added money to the account and invested in scores of notes. Every time I have enough money in my account to purchase another note, I receive a notification from Lending Club. So far, Lending Club investing has been a good way for me to build a small-scale emergency fund and enjoy fairly regular returns.

Lending Club investor reviews also take into account some of the other options available to investors. It’s possible to open an IRA account with Lending Club and keep your notes in a tax-advantaged account, which can be useful since interest earnings from loans are taxed as regular income, instead of enjoying the favorable taxation associated with long-term capital gains or dividends. The IRA account comes with a $100 annual fee, but you don’t need to pay it if you start with $5,000 and maintain that balance for a year. After the first year, you need to maintain an account balance of $10,000 to avoid the fee.

You can also set up an automated portfolio that chooses notes on your behalf, based on your target returns. In order to prevent idle cash sitting in your account, the money is also reinvested, based on your loan portfolio. However, you need a $2,500 minimum account value in order to enroll in Lending Club’s Automated Investing service.

Lending Club Returns

Your returns with Lending Club investing depend on the notes you invest in. My annualized returns are right around 4.45%. This isn’t spectacular when compared to some of my stock returns, but it’s better than what Treasuries and many other bonds have been returning during the last few years, and it’s much better than cash. Part of the reason that my Lending Club returns are on the modest side is that I stick to “less risky” notes, lending to people with credit rated “A” and “B.”

Lending Club rates its borrowers to give you an idea of the risk of default. Someone with a rating of “D” or “E” might have to pay a higher interest rate (offering you better returns), but s/he also has a greater risk of default. When someone defaults on a note, you lose your money. That’s the main risk associated with Lending Club investing: you need to be aware that you could lose your money if a borrower doesn’t repay the loan.

However, because Lending Club uses a rigorous process to screen borrowers and rate them, even the lower-rated borrowers are likely to repay their loans. But the risk is still there, and you need to be aware of it.

You can boost your Lending Club returns by signing up for Automated Investing, and choosing a portfolio that carries medium or high risk. Your money will be invested in diverse notes that reflect your goals. It prevents down time for your money, allowing it to keep working for you more efficiently. It’s also possible to filter your options with Automated Investing so that you do maintain a degree of control over the process.

Is Lending Club a Good Investment?

Like any investment, P2P lending comes with risks. Lending Club returns can potentially beat stock market returns, and even when you employ a low-risk strategy, it’s often possible to see returns that beat bonds. Once borrowers begin repaying their loans, you’ll start to see regular income, which you can reinvest or spend. Lending Club notes are unsecured so there is always risk of default - however when you look at historical returns, this default rate should already be factored in. Be wary of Lending Club reviews where the reviewer has only been investing for a few months - you only really know your true returns once you factor in defaults.

Lending Club is a legitimate company offering legitimate investment services. It is properly registered and insured with appropriate agencies in the United States, although the company isn’t allowed to operate in all 50 states.

P2P lending can be a good way to diversify your investment portfolio away from “traditional” assets that are often correlated. However, it’s important to do your due diligence before putting your money into Lending Club. While Lending Club can work well for many people, it’s not for everyone. You need to decide for yourself whether or not Lending Club is a good investment.

About the Author

Cooper is a former equity research professional/finance analyst who holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business. He left the investment banking world in 2015 to become a full-time investor. He contributed to InvestmentZen as an financial product analyst from 2016-2017.

Lending Club Reviews


Reading the details of hundreds of available loans could easily become a full-time job. So, Lending Club provides loan filters where investors can choose to look at only those loans that are of interest. There are over 30 different criteria to choose from – typical filters are interest rates (presented as loan grades), loan terms (36 or 60 month loans), loan purpose, length of employment, loan size and credit score. By utilizing these filters investors can create a more manageable list of loans to consider.


I’ve had as many A and B loans default as Es, Fs, and Gs. Banks spend millions of dollars on entire departments of people to predict who will pay them back and who won’t. Without that luxury, the best strategy a Lending Club investor has is diversification: Keep your investments small and diversify across loan type, interest rate, credit rating, even geography.


The most common reason that new investors experience poor or negative returns at Lending Club is because they do not diversify in enough loans. If you want to begin investing, you should seriously consider spreading your cash across 200+ equally-weighted notes. Since the minimum loan portion at Lending Club is $25, this means every investor should be starting with $5,000 (200 x $25 = $5,000).

InvestorJunkie 2019-12-08

With Lending Club you can get a higher rate of return (over 9.6%) than many other traditional fixed-income investments. Compared to other types of investments, you have some ability to manage risk. It’s similar in class to bonds but is more like if you owned a bank and were the loan officer. You determine which loans you want to approve and which ones to pass on.