LendingClub: Research Indicates Consumers Pay Personal Loans Before Credit Cards, Reports that Repayment Rates are High

LendingClub (NYSE:LC), a top marketplace lender serving consumers, says two recent studies indicate that personal loan payments take priority over paying off credit cards. Of course, this is good news for LendingClub – a long time advocate of cheaper personal loans versus expensive credit card debt. LendingClub has criticized expensive credit debt in the past as a big problem for consumers stuck in a debt trap.

The key takeaways of the studies are:

  • Despite their overall high levels of income ($90,000 average) and healthy credit profile (700 average), financial stress affected the day to day lives of 77% of members before taking a personal loan with LendingClub.
  • In addition, 89% say personal loans helped them get closer to their financial goals.
  • And, 90% of members surveyed say LendingClub has helped them save money on their existing debt, allowing them to start saving so they can live more comfortably, worry less, and pay bills regularly.

The previous data points were revealed on the same day that LendingClub provided a “September update” for investors showing that 98% of LendingClub borrowers are not actively enrolled in hardship plans due to COVID-19. LendingClub says that repayment rates remain high and delinquency rates are “lower than historical averages.” This is good news for the platform as it resets its lending services as the country turns the corner on the Coronavirus.

When the pandemic hit, LendingClub, like some other online lenders, instituted loan grace plans allowing borrowers to skip payments during a challenging time. Deferred payments appear to have paid off for LendingClub as newer vintages are said to be displaying higher credit quality and defaults remain low.

Arun Sikka, Vice President of Lending Risk and Returning Member Experience, says their members (borrowers) are working hard to reduce spending, accumulate savings and pay their bills.

“Our payment rates reflect the importance of the LendingClub personal loan to their financial goals and the ability of our platform to adapt to a rapidly changing environment while we support our members through this uncertain time. That deep member relationship coupled with the strength of our digital underwriting and servicing capabilities positions us to see strong growth again as the unemployment rate levels off, borrowers graduate to a normal payment schedule and liquidity returns to the capital markets.”

Ram Alagianambi, Head of Product, Membership and Repeats Lending at LendingClub, adds that financial health is important for their members and they are adding tools to help them better manage their finances:

“Credit Profile uses data to provide members with a guided experience of their financial lives, highlighting important credit decisioning and pricing factors like debt-to-income ratio, credit utilization and credit score. This level of clarity and insight into their financial habits has helped members better manage their immediate financial needs today while improving their credit for a better tomorrow. Our job is to make it easier for our members to progress on their financial journey.”

LendingClub is in the process of acquiring a digital bank – Radius Bank. Once regulators are satisfied with the deal, you can expect LendingClub to offer a full stack of banking services along with available credit, and investments, affiliated with LendingClub loans.

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