Consolidating debt into a single loan that has a lower interest rate can be a powerful tool for getting out of debt. The question is, what is the right loan for you. Here’s the info to help you evaluate whether LendingClub debt consolidation is the right debt consolidation lender for you.
Who is LendingClub
First off, is LendingClub a legit company? Well, they currently have over $5 billion dollars lent out and spend nearly $200 million dollars in marketing annually. Yeah, they are a legitimate company. Government regulators monitor any financial services company of that size pretty closely.
LendingClub debt consolidation loans
LendingClub offers personal loans, including debt consolidation loans, from $1,000 to $40,000. They really are designed to help you solve immediate emergencies as well as consolidating larger debts.
Their loans have terms from 3 years to 5 years. Most lenders reserve the longer term lengths for the higher loan amounts. You certainly wouldn’t want to spend 5 years paying back a $2000 loan. Truth be told, you wouldn’t want to even spend three years paying off a $2,000 loan.
Cost of a Lending Club debt consolidation loan
The APR on a LendingClub personal loan ranges from 6% to 36%. Usually, smaller loan amounts will have higher APRs. This is because it is difficult for a lending company to cover their fixed costs on smaller loans. You especially want to avoid the higher APRs when you are borrowing more than $10,000. But their rates are pretty standard for loans like this.
In addition to the interest rate, LendingClub will charge an origination fee when you take the loan. The fee will range between 3 and 8% of the size of the loan and it will come out of the proceeds of the loan. So, if the fee was 5% and the loan was $10,000, you would receive $9,500, but would need to repay the full $10,000. This is also pretty standard for lending companies.
Getting approved by LendingClub
From their public documents, the average FICO score for people that LendingClub approves is “well above 700.” That suggests that if your credit score is below 680, you might have a tough time getting approved. The average income of LendingClub borrowers is also above $100,000. Being slightly below these points doesn’t mean you can’t be approved, but the further off you are, the less likely it would be. Like all lenders, the only way to know for sure if you would be approved is to apply.
The good news is that there is no prepayment penalty, so you can pay your loan off early. If your bank account doesn’t have enough money to cover a payment, they will charge you a non-sufficient funds (NSF) fee. And if you are late with a payment past the 15-day grace period, you will be charged a late fee.
Is LendingClub good for debt consolidation?
If you are using LendingClub for debt consolidation, you have the option to have the company pay off your credit cards and other debts directly. You can connect up to 12 different creditors.
If you are approved for a personal loan that’s bigger than the debts you are consolidating, the extra money will be deposited into your bank account. Of course, you don’t have to take the extra money. If you do receive it, go ahead and give it back with a payment to principal. Lowering the amount owed early in the life of the loan will save you a lot of money in interest over the life of the loan.
And remember, extra payments are the key to getting out of debt. Pay extra to principle whenever you can.
Before you consolidate your debt with LendingClub
Before you accept a LendingClub loan, you want to make sure that debt consolidation is the right thing for your particular situation. The first thing you want to do is to make sure that the LendingClub loan would have a significantly lower interest rate than the debts you are consolidating. If there are any debts that are lower, you should not consolidate those loans. Another good rule of thumb is that you should avoid consolidating any loans that you are within 12 months of paying off.
The other thing you should do before you take a LendingClub loan is shop around. Apply to at least three or four places before you accept a loan. You owe it to yourself to get the best deal you can. The Yukon Project has tried to make that easy on you. If you visit our loans page, you can apply to up to 40 lenders with a single application. You can compare their offers and pick the one that is best for you. All with only a soft credit inquiry until you pick a lender and take a loan.