Peer-to-peer lending companies have been operating in the United States for about three years now. Companies such as Prosper.com and Lending Club are providing loans funded by individuals as an alternative to borrowing from banks in hopes of providing investors better rates of return on their money and by giving borrowers better terms and interest rates on the loans that they take out than they would be able to get from banks.
From a borrowing perspective, getting a loan from Lending Club is a lot like getting a loan from a bank. You start by filling out a loan application online and then Lending Club will instantly review your credit and tell you what interest rate that they are willing to provide you a loan for. After receiving an offer from Lending Club, you then provide some additional information about your employment situation and the purpose of your loan.
After you complete your loan application, your loan will go into a 14 day funding process where potential investors can opt to partially fund your loan. They will also have the opportunity to ask you questions about your financial situation and about the purpose of the loan to determine whether or not they want to invest.
30 days after receiving your principal balance via electronic transfer, your first payment will be due. Lending Club collects payments via ACH electronic transfer. Lending Club will then take your payment out of your account on the same date each month via electronic transfer for a total of 36 months until your loan is fully repaid.
The process of getting a loan on Lending Club is fairly straight forward. You fill out an application process, and instead of convincing a bank that you are credit worthy, you are convincing individual investors that you are credit worthy.
