Lending Club

Lending Club is a social lending network that allows investors with funds to loan money to borrowers for up to 3 years. This is a great opportunity for lenders who aren't finding good returns at their banks as well as borrowers who are having a hard time getting banks to let loose of their funds. It is similar to Prosper.com however, the two social lending networks vary in a few prominent ways:

Lending Club only accepts 14% of borrowers as it doesn't approve those who have delinquencies, bankruptcies, a number of outstanding credit obligations, or a credit rating below 640 - Prosper.com does. Lending Club makes assessing a borrower's ranking easy by rating them anywhere from A1 to G5 on their rates and fee's table. These ratings help you understand the risk level involved in loaning to particular borrowers and by having so many levels you can easily build a very specific lending portfolio.

Rates for lenders start at a tempting 7.37% for great borrower credit scores and can be as high as 20.11% for very risky borrowers. Much like Prosper.com, Lending Club has a tool that allows you to create a portfolio based upon estimated returns and risk, as well as pre-sort borrowers based upon their credit score and DTI ratio. For these tools and the services provided, Lending Club charges borrowers a 1% service charge which is directly comparable to Prosper.com's fees.

Lending Club differs from Prosper in that if a loan is not fully funded for a borrower, they can opt to take partial payment of the loan which ensures that the lender's money is invested quickly; Prosper cancels the loan and permits the borrow to re-list. Both lending networks do all the work for you including employing collections agencies - Lending Club's agency charges 30 -35% of recovered funds, however it boasts a low 3% default rate.

Another great feature of Lending Club  for investors is that if you've tied up your funds and find that you need them at a later date, you can trade your notes for cash to other lenders. You can also buy notes from other lenders on their secondary social lending market, something Prosper is currently trying to establish.

You can read my review of Prosper.com here.