Lending Club Investor Review: My Experience After Five Years

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Lending Club is a peer to peer lending company that offers loans online. Unlike a traditional bank, Lending Club connects borrowers who need a loan to investors like you who have extra cash to lend. You earn interest on the money you lend out.




  • Good way to diversify
  • $25 minimum investment
  • Average returns between 5.06% and 8.74%




  • Risk of losing your investment
  • Inconsistent earnings



About five years ago, I started becoming interested in investing, building a portfolio and earning passive income. Lending Club was the first investing account I created outside of stock investing.

Lending Club can be risky, but it’s a good way to diversify and is fun to use. I want to share my experience (and returns) with you.

I have actually been seeing higher returns with other investing platforms, but I believe in diversification and consistent growth so I continue to invest with Lending Club.

Disclaimer: I actually invest with Lending Club and I like it so much that I am now an affiliate. If you sign up for Lending Club through one of the links I may be compensated a small referral fee at absolutely no cost to you.

What is Lending Club


There are many investing options out there, but Lending Club has been one of the most successful and trusted. Lending Club has transformed traditional bank loans through their peer-to-peer lending platform. P2P lending connects investors like you and me to borrowers looking for loans.

If you aren’t familiar with Peer to Peer, it’s a way to connect borrowers and lenders without a bank. A regular person like you can either borrow or lend using P2P.

For example, if you need a $1000 loan, 39 people along with myself will lend you $25, and you will pay us back with interest. We keep our loans small in case you end up not being able to pay us back.

The average returns for Lending Club investors are between 5.06% and 8.74%. Impressive, right?

However, there are more risks with Lending Club investments than you might have investing in certificates of deposit.

I don’t have experience from the borrower side, but Lending Club offers many different loans, including personal, medical, and business. Typical Lending Club borrowers have strong credit scores, lengthy credit history (average 17 years) and the average income is about $79,000.

Lending Club is the largest online lender for personal loans in the United States. Since the company was founded in 2007 they have handled more then $35.9 billion in loans.  



How to Invest With With Lending Club


In order to starting earning money with Lending Club, you must make an initial investment of $1,000. However, you don’t have to invest all of that into loan notes at once. The minimum amount you’re required to put into any particular note is $25. It’s a good idea to diversify your money into different loans in order to minimize your exposure to risk.

There are two ways to start putting your money to work on the platform. With Manual Investing you can browse through all the available loans and hand select each one you want to invest in. This takes quite a bit of time though. You can also choose to use Automated Investing, which lets you set your investment criteria and then automatically invests your money for you.

I choose to reinvest the loans that are paid back to me and the interest I earn on them, but you can also choose to have the money put back into your bank account.  

You can also automatically put your Lending Club savings into a Lending Club self-directed IRA. This requires an initial deposit of $5,500. You can choose between a Traditional IRA and a Roth IRA.

Unlike investing in a certificate of deposit, Lending Club notes represent a loan. The loan will be repaid to you over the term of the loan, including both interest and principal. Once the loan is repaid, you will need to reinvest the capital into another loan.  


Lending Club Loan Types

Lending Club loans have fixed rates, and are either 36 months or 60 months. Over 80% of the loans are taken out by borrowers looking to refinance an existing loan or pay off credit cards.

Loans are evaluated based on credit scores, credit history, credit activity, and debt to income ratio.

Based on these evaluations, each loan is then assigned a loan grade. Grades range from “A” (the highest grade) to “G” (the lowest grade.) Higher graded loans have lower rates. The rates fluctuate over time.

Beyond loan grades, each loan gets assigned a numerical rank between 1 and 5. The sub-grades are based on additional factors such as the size and length of the loan.



Lending Club collects a 1% service fee each time a payment is received on a loan.

The Risks

Since investments you make through Lending Club are not bank assets, they are not insured by the FDIC. If a loan goes into default, you will lose your investment.

Any missed payments by borrowers result in you not getting your repayment on that loan for that month. Lending Club does have a protocol for collecting late payments, but there is always some risk of default.

For late payments of at least 16 days, you will pay a collection fee of 18%. If litigation is required for the loan, you will pay 30% towards attorney fees.

If Lending Club can’t get payment on the loan for 150 days, it will be charged off. In this circumstance, the remaining principal balance of the note will be deducted from the investor’s account balance. If funds are paid at a later time, the money will be returned to the investor.

One way to reduce your risk is through your loan requirement settings. You can choose to only invest in loans with borrowers who have a certain credit score, or who have a solid employment record.


 The Returns


After five years of investing, my adjusted annualized net return is 3.20%. When I first started using Lending Club my returns were much higher at over 7%, but I’ve watched them go down over time. This is partly because I changed my investing allocation towards more conservative, less risky loans. Lending Club has also changed over the years so returns are lower than they used to be. Below I’ll show you my current loan allocation:


lending club allocation

I’m actually going to do an experiment and adjust my loan allocations towards higher risk, higher return loans. I know that other investors are seeing higher portfolio returns so I’ll keep you posted on how this goes.

I’ll show you exactly what I’m changing my portfolio allocation to look like. I’m moving more towards C and D loans (they actually don’t give you the option of choosing E, F, or G loans) and I’m choosing to go with only 60 month loans because they have historically higher returns. This should increase my returns by at least 1%, as you can see the historical average is 6.97%.

lending club

Despite the risks and my currently low returns, I like having my money diversified away from the stock market, and I’ve seen consistent growth in my account year after year, unlike the stressful fluctuations of stocks. I love the concept of P2P lending as well, and it’s fun!

Investor performance using Lending Club varies widely. You could potentially earn more then 15%, or you could actually lose money. I first decided to invest with Lending Club because it looked like I could earn around 10% or 11% on my money, but the reality has been less than that. However, 3-7% is still pretty solid.

The best strategy for investing with Lending Club is diversification. Put small amounts of your money into many different types of loans.


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