The idea behind Best Egg is that it’s a form of peer-to-peer lending where the company provides funding to individuals using money from large investors. The investors purchase whole loans in order to invest with Best Egg. So, loans from Best Egg are typically funded by investment managers, banks, and other financial institutions looking to provide wealth management for their clients.
|Rates (APR)||5.99% – 29.99%||6.95% – 35.89%|
|Loan Terms||3 – 5 years||3 – 5 years|
|Loan Amounts||$2,000 – $35,000||$1,000 – $40,000|
|Origination Fees||0.99% – 5.99%||1% – 6%|
LendingClub started as a small peer-to-peer investing platform where small business owners would request money, and investors would look over the proposals and decide which loans to fund. Since LendingClub is a fully online financial company, it can minimize operating costs and pass on the savings in the form of low-interest personal loans to clients.
Today, large institutional investors provide much of the funding for loans through LendingClub, but the company maintains its investment roots by allowing smaller, individual investors to purchase portions of loans as well.
Best Egg vs. LendingClub: Comparison
Costs and Fees
Personal loans from Best Egg can range in amounts from $2,000 to $35,000 with terms of either three or five years. Interest rates currently start as low as 5.99%, but can go as high as 29.99%. The interest rates are fixed for the term of the loan. There are no application fees, but some loans have origination fees that may vary from 0.99 to 5.99 percent of the loan amount. The origination fees are deducted from the amount disbursed to the borrower.
LendingClub loans range up to $40,000. There are no application fees, but LendingClub charges an origination fee that is dependent upon the borrower’s application information and credit rating. Origination fees can range from 1.00 to 6.00 percent of the loan amount. The loan origination fees are deducted from the loan proceeds disbursed at closing. LendingClub has a 25-point system that it uses to evaluate a borrower’s application to determine the interest rate offered, which can currently range from 6.95% to 35.89%. Loan terms can range from one to five years.
Established in 2014, Best Egg is a relatively new online lending platform. They have, however, quickly grown in size due to their efficient operations and low interest rates. Unlike LendingClub, Best Egg only allows investment funds to come from large, institutional investors that are willing to back a whole loan. Best Egg also encourages investments by accepting some of the loan risk along with the investor.
In exchange for absorbing some of the default risk from the borrower, Best Egg takes a larger share of the profits. The good thing about this business arrangement is that more companies are willing to provide loan financing at better loan terms. Loan approvals are also quick because the investment funds are already in place.
LendingClub provides a fast and efficient loan application process. Their loan terms and amounts are some of the most flexible in the online personal loan market, and borrowers may have the opportunity to choose from multiple offers. LendingClub points out that applying for a personal loan with them will not negatively impact your credit score. This is important for borrowers who may want to shop around with several online lending platforms to find the best rates and terms. Applicants can be assured that filling out LendingClub’s online application will not bring down their credit score and impact their ability to get approved elsewhere.
Although Best Egg advertises that it makes loans for as little as $2,000, some states may have higher minimum loan amounts. Personal loans for borrowers in Georgia must exceed $3,000. Loans in Ohio and Massachusetts must exceed $5,000. Funds are usually disbursed the next day, but it can sometimes take up to 3 days for borrowers to receive their funds.
LendingClub does not operate in Iowa, Idaho, North Dakota, Rhode Island, or Maine. Since investors backing the loans are competing for the borrower, an applicant may get multiple offers to choose from. Availability of funds is not arranged ahead of time, so the actual disbursement of funds can take some time. Most loans are processed and closed within one week, but in some cases it can take up to 45 days.
Author: Jeff Gitlen
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