Categories: Personal Finance

Lending Club Loans to Avoid

Each week I peruse Lending Club for high quality loans that fit my loan selection criteria. I apply my filters and start looking at each loan to determine whether they should be added to my portfolio. Some make it, some don’t. There are several red flags that tell me that I should stay far away. Some have to do with the lender’s profile, others with the lender’s credit history, and others with the loan description or user answers.

Not Enough Income

If a lender doesn’t have an income of at least $3,000 a month, I tend to stay away unless the loan is for a small amount. At that income level, it’s harder to deal with unexpected expenses, and I don’t want to lend to someone who is going to prioritize their car needing a new transmission over my loan.

Bad Credit History

I already filter out for delinquencies, but another think to look out for is a high credit utilization rate. If someone is using 80% of their available credit, it could mean that Lending Club is being used as a last resort because they are unable to attain credit elsewhere. I don’t want to loan to people who are trying to get by. I want to loan to people who are trying to improve their financial situation or who are using their loans wisely.

Bad Answers

Sometimes, people give away more information in the answers than they need to. They ramble on, and while more information is certainly good for investors, it hurts individual borrowers. For example, I have seen answers from people who admit to having declared bankruptcy a few years earlier. Why in the world would I want to lend to someone who has a blatant history of not paying back his debts? Another example comes from someone who is responding to a question about why they carry a large revolving credit card balance. He volunteered the information about having an existing Lending Club loan, which to me indicates that he is having trouble keeping up with his payments. I stayed far away from it, but as you can see, 364 other people invested in the loan for a total of $15,000. We try to earn superior returns by choosing high quality loans. Borrowers can use this information to improve their chances of being fully funded for loan.

Sweating the Big Stuff

Recent Posts

The Best Books on Getting Out of Debt

Debt can be a heavy burden, but with the right knowledge and tools, you can…

10 months ago

Does Debt Consolidation Affect Getting Mortgage?

Does Debt Consolidation Affect Getting a Mortgage Most of us don’t realize that so many…

10 months ago

5 Signs You Are Buying Too Much House

For anyone working through their career, one of the main objectives is to build or…

11 months ago

Why adjustable rate mortgages are risky

Rising interest rates and home prices are making adjustable rate mortgages (ARMs) more attractive to…

2 years ago

What the Fed interest rates may mean for you

In light of the increasing cost of living and rising inflation, the Federal Reserve raised…

2 years ago

How Savvy Savers Adjust for Inflation

The economy feels like a little bit of a roller-coaster these days, with the one-two…

2 years ago