Lending Club: Killing Two Birds With One Stone

You know the old saying, “Kill two birds with one stone”? Renaud Laplanche, co-founder and CEO of Lending Club, could write a book on that. As a site for both investors and borrowers, Lending Club was designed to give interested parties an alternative to traditional banks. “Instead of borrowers paying 18% on their credit cards, and investors or depositors earning 1 or 2% on Citi C, Lending Club offers the opportunity for borrowers to pay 13% or 14% interest rate, and for investors to earn, on average over three years, about 9.5%,” he said,” Laplanche told Benzinga during a recent interview. Laplanche said that he first came up with the idea for Lending Club after opening a credit card statement. “If I'm paying 18%, that means someone on the other side is earning 18%,” he said. “That's a very good investment opportunity in a very low-interest rate type of environment. That's really where I started the idea and that's what Lending Club is all about – cutting down on intermediary costs, on banking costs.” More specifically, Lending Club was created as a platform for originating loans to prime consumers online, and allows investors invest in the loans directly at the time of origination. “It really has created the shortest possible path between the source of capital, individual investors, and the use of capital to individual people and small businesses,” Laplanche revealed. “As you know, when you create a shorter path you create some savings.” If you're applying for a loan, Laplanche said that you will instantly receive a response, including your qualifying interest rate. After that, your loan goes up on Lending Club for one to two weeks, allowing investors to take a look at it. On the flip side, if you want to invest in loans, “You transfer money from your bank account to your Lending Club account,” Laplanche said, adding that you'll create a portfolio of loans from prime consumers – those who qualify for a Lending Club loan, which is typically the top 10% of applicants by credit score. “So it's a prime pool of consumers you're investing in and you're able to diversify your investments across different borrowers and invest as little as $25 into each loan,” Laplanche said, “so that even with a $2,500 investment, you can already invest in 100 different loans.” To hear more from Lending Club's co-founder and CEO – including his goal of making the industry more transparent and consumer-friendly – don't miss Benzinga's full interview.