Showing Your Financial Sense

I spent some time this morning at Lending Club, a peer-to-peer lending site that offers borrowers and lenders a chance to work outside the traditional banking system.  I’ve been dabbling in some small lending there for a few years, having fallen upon an offer for $50 for signing up.  I haven’t made much money, but I’ve not lost money and I’ve learned a lot through the process.

As I went through today’s loan applications, the same type of questions kept popping up in my mind:

Why do you need to borrow $2,000 when you state your income is $8,000 per month?

Wouldn’t you rather wait for your vacation so you can pay cash?  And do you really want to be making loan payments on a vacation for 36 (or 60!) months?

You don’t know the interest rates on your credit cards?  Why not?  Can you not look them up?  UGH!

Why are you asking for only $5,000 for debt consolidation when you show that you have $50,000 in debt?

When you say the reason that you want a loan is to “pay off debt,” you do understand that this loan is just different debt, right?  You won’t be out of debt.

Now, there is not necessarily anything wrong with any of these situations.  However, as a potential lender, I want to feel like I am loaning money to someone who has a decent grasp of financial issues.  A lot of these loan applicants aren’t showing their financial sense in their applications, and I’m left wondering if it just isn’t a good application, or if they really don’t have a good idea what is going on.

I’ve done OK with Lending Club, and I can see how it would be a decent way to earn higher than average interest rates.  The only failures I’ve had were a  few speculative notes that I bought on the trading market and I knew were likely to fail.  Any experiences with Lending Club as a lender?  What do you think?

I’ve not borrowed with Lending Club, though I am tempted just to see what happens.  Have any of you borrowed from Lending Club?  How was the process for you?  Did you feel that you had a chance to present yourself in a positive light?

Share your experiences, folks…we’re all learning.

 

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Mat

    I took out a loan on lendingclub.com about a year ago, and everything has gone very smoothly. Presenting myself on the loan application and ultimately receiving the loan were not too difficult (I have a FICO of 770). I made it very clear to potential investors what the money was going to be used for (buy property), so the process was easy and quick. The payments are automatically deducted from my checking account on the due date, so my investors do not have to worry.

    Unless I find out the identities of my investors so I can deal with them directly, I’ll use lendingclub.com again for future loans. Their fees aren’t too bad.