Lending Club Loans: Lending Club Reduces Rates on Unsecured Peer-to-Peer Loans

Lending Club announced that the company is lowering interest rates on its peer-to-peer loan opportunities for borrowers by 0.50%.

In a short statement made by the company, Lending Club said commented that “We have reduced our interest rate for borrower loans by 50 basis points, effectively decreasing a borrower’s interest rate by 0.5%.”

Borrowers with “A1” credit ratings can now receive loans with interest rates as low as 6.39% from Lending Club. The new maximum interest rate that Lending Club charges borrowers with “F5” credit ratings is now 19.79%

The change will come as welcome news to borrowers that are considering taking out an unsecured loan. Lending Club and Prosper Marketplace were already offering relatively competitive rates compared other options available for borrowers looking to take-out an unsecured loan. Conversely, lenders will receive slightly lower interest rates from funding loans that are issued under the new rates.

The move comes as members of Lending Club’s leadership team have commented that Lending Club’s marketplace is currently “borrower constricted”, meaning that there’s plenty of money from lenders to fund peer-to-peer loans, but not enough borrowers looking to take out those loans.  Lending Club does have significantly higher loan demand than it funds, but the company turns down many potential borrowers that are believed to be too-high of a credit risk under Lending Club’s underwriting model.

Lending Club’s likely motive for the lowering of rates is to even out the demand between its borrowers and lenders. Lowering interest rates is an obvious way to make using Lending Club’s peer-to-peer loan marketplace more attractive for borrowers and less attractive for lenders.