Lending Club Waives Fees on Large Loans
Lending Club explained the move on its website, “Larger loans need to attract investments more quickly than small loans in order to fund in the time available. So for a limited time, Lending Club is waiving the 1% service fee2 on all new investments made in loans of $20,000 or more – for the entire lifetime of that loan. Terms and conditions apply.”
The company also noted that larger loans tend to perform slightly better than smaller loans on its platform. Lending Club stated that notes above $20,000 have returned a net annualized return of 10.5%, whereas loans between $15,000 and $20,000 have yielded a NAR of 9.97%. Loans between $10,000 and $15,000 have yielded a NAR of 8.92%. Loans between $5,000 and $10,000 have yielded a NAR of 8.13% and loans smaller than $5,000 have yielded a NAR of 7.44%.
By waiving the service fee that investors pay to Lending Club, investors will see an improved net annualized return of 0.42% and 0.75% depending on the loan’s term and the interest rate of the loan. Lending Club noted, “an investor with a projected return of 8.52% with the service fee would have a projected return of 8.96% without the service fee – an overall increase in the projected return on this loan of almost 5%.”
Lending Club is likely dropping its service fee on a test basis to increase investor demand in larger notes. Because borrowers with larger loan sizes have much larger payments, investors tend to see them as riskier investment options.
Here’s the fine-print associated with the offer:
Lending Club will waive the 1% service fee for the lifetime of the loan on investments made no earlier than December 29, 2011 and made in loans greater than or equal to $20,000. Lending Club reserves the right to change or discontinue this offer at anytime, any change or discontinuation would only affect loans issued after the effective date of the change or discontinuation. This offer only applies to investments made in loans that meet the criteria of the offer at the time of issuance. The offer only applies to standard borrower payments during the original term of the loan, either 36 months or 60 months depending on the term of the loan. The offer only applies to regular payments made on the loan and does not apply to recovery and collection fees or the like. Lending Club will credit your account for any fees incurred within 60 days of payment, if any.