I‘ve been writing about Lending Club for quite some time now, but usually from the viewpoint of an investor. I’ve invested in 100+ loans over the last two years, and thus far I’ve been extremely happy with the experience. I’ve been pretty careful about the loans that I invest in, and I think because I’ve been so careful, I haven’t yet had any of my loans default.
One thing I have neglected to write about much in regards to Lending Club is how you can also use the service as a borrower, and now it may be more manageable as they’ve added a 5 year term loan for borrowers.
Using Lending Club As A Borrower
I’m never the one to suggest that people take on new debt. I’m a huge advocate of saving up and paying cash for the things you buy, and I think I’m actually allergic to creating new debt.
I do understand however, that sometimes people make poor decisions, or have created debt before they started being more careful about their finances. In instances where people have a variety of high interest debt, I actually think it’s a good idea to consolidate those debts into a lower rate, and cut the amount of interest you’re paying, while you pay the debt off.
Debt consolidation has gotten a bad name in recent years, and most likely deservedly so as there are a million debt consolidation companies out there who are fly by night operations, not doing anything for you that you couldn’t have done yourself (and charging you an arm and a leg to do it!) A good number of them are actually crooked (be careful!)
So what’s the key to having debt consolidation be a good thing for you? You need to remember these things:
- Debt consolidation doesn’t remove or fix the problem. When you consolidate your debts all you’re doing is moving the debt around, and you should be paying less interest. Don’t get a false sense of security just because you’ve consolidated your debt and have one payment. Remember it still needs to be paid off, and you have to stop incurring new debt!
- If you’re not careful debt consolidation could mean you’ll pay MORE in interest. Remember to make sure that you only consolidate your debts that carry a higher interest rate than your Lending Club loan, otherwise you could end up paying more than you would have otherwise. It can be tempting to consolidate everything so that you just have one easy payment, instead of several smaller ones – but don’t do it! Only consolidate higher interest debts.
- Debt consolidation can mean you’ll be in debt longer. Be aware that consolidating could mean that you’ll be in debt for a longer period of time. Try to make sure you pay off your debts as fast as possible!
- Only consolidate your debt if you’ve got a plan in place. While consolidating your debts can be a good idea, if you don’t have a plan in place to pay off your debts in a timely manner, you’ll be doomed to failure.
There have been a lot of folks who have used Lending Club in order to help them consolidate higher interest credit card debt, home equity loans and other high interest debt. Just remember, it can be used as a helpful tool, but if you don’t use it correct, it can become a curse as well.
Make a plan, be careful about what debts you consolidate and start paying your loan off as fast as possible!
Have you used Lending Club to consolidate your debt? Were you happy with the experience? Tell us how it worked for you!