Lending Club, a company which offers a peer to peer lending marketplace to its customers, has reached a new monthly record in loan demand with applicants requesting to borrow more than $100,000,000 in personal loans during the month of March. Out of the loan requests, Lending Club funded $8.5 million funded in loans because it requires borrowers to meet certain requirements to demonstrate they are creditworthy.
The news comes as banks are increasingly cutting back borrowing on riskier types of loans such as student loans, credit cards, personal loans and other forms of unsecured loans. As the amount of money available to be lent out to consumers shrinks, borrowers are increasingly turning to alternative lending sources, such as friends and family and peer to peer lending services, to borrow money.
California-based Lending Club makes loans to borrowers at fixed interest rates based on their credit score over a three year term. Instead of getting their lending capital from traditional funding sources, they instead turn to individual investors to get capital to make their loans. Lending Club also allows investors to choose which loans they would like to fund (or partially fund), then receive a rate of return on their money. The idea is that borrowers are taking some of the risk that a bank normally would, but earn a much better interest rate as a result.
Lending Club also recently announced that their company has originated more than 10,000 loans, totaling more than $95,000,000. According to an article on Lending Club’s website, the average credit score of its borrowers is 716 and 60% of borrowers takeout loans on Lending Club to pay off credit cards or to consolidate other debts. Lending Club says that the average interest rate borrowers pay is currently 11.95%.
