A simple question with a complex multi-part answer.
Question 1: Your interest rate will be dependent upon the evaluation of a number of factors, including your FICO score (a minimum of 6660 is required), a debt-income ratio (excluding mortgages) of less than 40%, an acceptable debt-to-income ratio and a credit report reflecting as least two revolving accounts currently open, five or fewer inquiries within the last six months and a minimum credit history of 36 months.
The results are plugged into LendingClub's credit-scoring algorithm, which scores and grades your request, and assigns an appropriate lending rate.
| | | | | LC Score
|
| Base Risk Grade
|
| Interest Rate
| 1
|
| A1
|
| 6.03
| 2
|
| A2
|
| 6.49
| 3
|
| A3
|
| 6.99
| 4
|
| A4
|
| 7.49
| 5
|
| A5
|
| 8.19
| 6
|
| B1
|
| 8.67
| 7
|
| B2
|
| 9.49
| 8
|
| B3
|
| 10.49
| 9
|
| B4
|
| 11.44
| 10
|
| B5
|
| 11.99
| 11
|
| C1
|
| 12.39
| 12
|
| C2
|
| 12.99
| 13
|
| C3
|
| 13.66
| 14
|
| C4
|
| 14.31
| 15
|
| C5
|
| 14.99
| 16
|
| D1
|
| 15.59
| 17
|
| D2
|
| 15.99
| 18
|
| D3
|
| 16.49
| 19
|
| D4
|
| 17.14
| 20
|
| D5
|
| 17.86
| 21
|
| E1
|
| 18.54
| 22
|
| E2
|
| 19.24
| 23
|
| E3
|
| 19.99
| 24
|
| E4
|
| 20.99
| 25
|
| E5
|
| 21.99
|
Question 2: LendingClub generates revenue from four sources; origination fees, transactions fees, service fees and management fees. The bulk of their revenue comes from the origination fees, which appear to average about 4% of the balances of the loans originated. For the nine months ended September 30, the company generated $133,835,000 from origination fees, $6,301,000 from transaction fees and $4,163,000 from servicing fees.
It is important to note that the company does not generate any income from the interest being charged on the loans (which goes entirely to the lenders) and that the company is not taking any credit risk.
The company describes its revenue sources as follows:
The transaction fees we receive from issuing banks in connection with our marketplace’s role in enabling loan originations range from 1% to 6% of the initial principal amount of the loan as of September 30, 2014. In addition, for education and patient finance loans, transaction fees may exceed 6% as they include fees earned from issuing banks and service providers. Servicing fees paid to us vary based on investment channel. Note investors pay us a servicing fee equal to 1% of each payment amount received from the borrower; whole loan purchasers pay a monthly servicing fee up to 1.3% per annum on the month-end principal balance of loans serviced; and certificate holders generally pay a monthly management fee typically ranging from 0.7% to 1.2% per annum of the month-end balance of assets under management.
Question 3: The loans do not require any collateral.
Questions 4 and 5: You remain on the hook for the unpaid portion of the loan. Approximately 99% of payments are made through ACH withdrawals. They are not big on checks. If you default on the loan, they turn the dogs loose on you. From the S-1:
If a loan needs more intensive collection focus, whether internal or external, we may charge investors an additional fee to compensate for the costs of this collection activity. This fee varies, with a maximum of up to 35% of the amount recovered. There is no fee charged if there is no recovery, and the fee cannot exceed the proceeds collected. For loans that are ultimately charged-off, we may sell the account to a third party. All proceeds received on this sale are subject to the standard servicing fee, and the net balance goes to investors.
Question 6: Yes, if your documentation passes muster. |
