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LendingClub Pros and Cons for credit card debt consolidation

Welcome to The Yukon Project. We’ve analyzed millions of credit reports, hundreds of thousands of people’s financial data, and designed programs to help people improve their financial lives. Today we’re going to take an objective look at the pros and cons of using LendingClub to consolidate your credit card balances. Let’s start with the positives.

People with fair credit can qualify for a Lending Club credit card debt consolidation loan

One of the best things about LendingClub is that they will lend to people with fair credit. That means that their minimum credit score for approval is 600. LendingClub could be a good option if your credit score is in the 600s. 

When it comes to credit card debt consolidation loans, I think it is definitely a pro that they will pay your credit cards off for you instead of just sending you the money and letting you do it. This is definitely convenient, but there’s another reason why I think it’s important. It shows that they are accounting for the fact that this loan will replace other debts. That should make it is easier to clear their debt-to-income threshold. In short, it should be easier to be approved compared to a lender that does not offer direct pay off, especially if you have substantial credit card debt.

LendingClub’s Credit Card Debt Consolidation loans are unsecured

That means that you won’t need to put up collateral in order to be approved. Not only does this simplify the process, it also means that you won’t risk losing your asset if you run into trouble repaying the loan. 

Now let’s take a look at a few of the potential downsides of using LendingClub. 

Lending Club’s credit card debt consolidation loan APRs range from 9.57% and 35.99%

The low end of that range is fairly competitive, but you’re not likely to get that rate unless you have very good credit. On the high end, 35.99% is a fairly high interest rate. If you are offered a rate on the higher end of that spectrum, you might want to think twice about whether consolidating makes sense. A good rule of thumb is to only consolidate if you can lower your interest rate by at least 2-3 percentage points compared to your current credit cards.

LendingClub charges an origination fee

Another potential downside is that LendingClub also charges an origination fee that ranges from 3% to 8%. It’s important to understand that the origination fee comes out of the loan proceeds. So if you borrow $10,000 with a 5% origination fee, you’ll only receive $9,500 but you’ll have to pay back the full $10,000. You also don’t get the origination fee back if you pay off the loan early. So while LendingClub’s APRs can look attractive, make sure to factor in the impact of the origination fee, especially if you plan to pay off the loan early. 

LendingClub will lend up to $40,0000 for card debt consolidation

Another limitation is that the highest amount LendingClub will lend for debt consolidation is $40,000. If you have more credit card debt than that to consolidate, you may need to find another lender. If you do have that much credit card debt, it would probably be worthwhile for you to consult with a certified debt counselor. They can better explain your options. 

Lastly, LendingClub does not accept cosigners on their debt consolidation loans. A cosigner is someone who will be responsible to repay the loan if you fail to. Adding a cosigner to your loan increases the chances of being approved, getting a good interest rate, and being approved for a larger loan amount. So not having this option does limit your ability to improve your application.

The most important thing you can do when considering credit card debt consolidation is to shop around! Compare offers from multiple lenders to get the best rate. At The Yukon Project, we make this easy. If you visit our marketplace page, you can apply to any one of our featured lenders and we’ll check your rate with dozens of other lenders behind the scenes. This uses a soft credit pull so it won’t impact your credit score. We’ll then show you all your personalized offers so you can choose the best deal. Head over there after watching this to see what you qualify for.

Stop paying the high interest rates from carrying a monthly balance on your credit card!

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Jonathan Walker