LendingClub is a US peer-to-peer lending company headquartered in San
Francisco, California, and has helped over 2.5 million customers simplify their
finances in the last 10 years. LendingClub improves the loan process for
borrows by offering a fast and easy online application. For investors, the
company offers historical returns of 3 – 8% and anyone can invest with as
little as $1000 [1].
Because LendingClub relies heavily on technology to evaluate their
borrowers, getting an accurate risk analysis for each applicant requires
systems which can quickly assess the
applications, and upon approval, offer these loans to interested investors at a
given interest rate. Of the $7.9 billion dollars loaned in 2018, $233 million
was written off as defaulted loans. While this may seem insignificant at 2.9%,
this does represent risks and losses which investors and the company would
prefer to avoid. In order to mitigate risk, lending companies traditionally
apply a fitting interest rate to each loan. For example, loans for a home or a
car may have lower interest rates because the risk is reduced due to directly
related collateral. In another example, someone with a poor credit history or
having declared bankruptcy may have a higher interest rate due to the inherent
risk of history repeating. read more
