I was reading about LendingClub loans (I forget where, sorry) and I came across the following statement from Lending Club made to a lender on LC.
Our loans expire two weeks after posting. This expiration date is the borrowers actual payment date, however some loans will fund early. Here is an example; If a loan was set expire on January 15th and the it funds on January 6th, the first payment will be due February 15th. The payment date is set to one month from the expiration date, not the date of funding.
I was puzzled by something in this response so I asked Lending Club… “I’m wondering, in this example (loan funds 1/6, expiration date 1/15, 1st payment due 2/15) when does the borrower receive the money? Does the borrower get the money from a transfer initiated on 1/6, or after the expiration date passes? And how much interest is due for the 2/15?”
I received the following response from Rob Garcia the Director, Web Production for Lending Club…
- Funded amount is transferred to the borrower when the following conditions are true:
User gets fully funded OR borrower accepts partial funding up to 3 days after listing expires without full funding.
AND- Loan application is approved by our credit review team
Those 2 events are not directly related and do not impact the borrower’s payment date. All loan request listings expire exactly two weeks after posting on our site. This expiration date is the borrowers actual payment date (first payment is due on that date the following month). For instance, if the loan listing expires on April 15, the first payment is due on May 15. There is a chance the loan gets funded and money is transferred a few days earlier or later than the listing expiration date.
What this means is that if you get funded early and have all your documentation in order and into the Lending Club credit review team and they approve your listing you will get your money before your expiration date. YOU WILL RECIEVE A FEW DAYS OF FREE INTEREST. The converse is also true, if you are late with your documentation or otherwise held up in the credit review process, YOU WILL PAY A FEW DAYS OF EXTRA INTEREST without having the money.
So be prepared to document and get the documentation into Lending Club early. Everybody likes free money!
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3 comments ↓
“OR borrower accepts partial funding up to 3 days after listing expires without full funding.”
Borrowers at LC can get partial funding of their loans ?
@Chrisfs
Yes, I believe this is true. If an auction closes without 100% funding the borrower has the option to take out a loan for the amount funded.
I don’t see anything in that response from LC saying the borrower gets free interest. All I see is that the borrower gets the loan a few days longer than the 3 year-ammortization of the loan. I haven’t asked the question but it would seem to me the smart thing for LC to do would be to just charge interest from the date the borrower gets the funds and then the first payment has a bit more interest added than it normally would. I think a followup question might be in order.
FYI, I made a comment about this in the lendingclub board at prospers.org. I had asked a question similar to yours and got a similar response. I never followed up regarding how much interest was actually paid. You might want to ask frugalcouple since I know they got their funds early.
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