Lending Club - Personal Loans, Investing & Peer Lending Blog
LendingClub is America's largest online marketplace connecting borrowers and investors, facilitating personal loans, business loans, and financing news for elective medical procedures and K-12 education and tutoring.
LendingClub operates a credit marketplace where borrowers can access capital at competitive rates and investors can earn competitive returns. To maintain marketplace balance, we adapt and recalibrate often based on a changing macro environment, competitive insights, supply and demand dynamics, credit performance, investor feedback and more. Please see below for our quarterly update on the credit environment and platform performance.
Q1 2018 summary
During the first quarter of 2018, we continued to observe that credit performance across the industry is returning to long-term averages and interest rates are rising across fixed income assets.1 On the platform, we continue to see both of these trends in action: investors show higher demand for higher quality assets and are looking for higher interest rates overall.
In response to the changing environment and investor feedback, we are first and foremost increasing interest rates for grades A-C effective today (May 8). (As always, we will continue to monitor the interest rate environment to determine whether future increases are necessary.) We are also taking two additional steps effective today as part of our ongoing optimization of the platform: 1) eliminating some higher risk borrower populations primarily in grades D-E to match investor demand; and 2) capping loan sizes at the borrower’s requested amount in certain D and E loans.
Macroeconomic, credit & platform observations
LendingClub studies a diverse set of data points in managing the marketplace. We look at macroeconomic data, competitive indicators, marketplace supply and demand dynamics, credit performance, and investor feedback, among other factors. See below for an update on some of the many factors2 that influence returns on the LendingClub platform:
U.S. economic growth remains slow but steady, with annual GDP growth rate of 2.3% in the first quarter of 2018. A primary driver of GDP growth since the financial crisis has been a historically low unemployment rate, which is down to 3.9% as of April 2018 from its peak of 10% in 2009.
This quarter we continued to see a similar trend as we have for the past two years: credit performance across the industry is returning to long-term averages.1 From 2009 to 2014, credit supply was tight, so consumer loans experienced better-than-average loss rates. Since then, credit supply has increased, and the industry has seen a return to long-term average delinquency rates.
The overall interest rate environment is clearly shifting from historic lows. The Federal Reserve increased interest rates by 25 bps in March 2018 and is expecting two additional rate hikes this year. March’s increase brings the total number of increases over the last 12 months to four, as the bank has gradually unwound accommodative policies that helped heal the economy after the Great Recession a decade ago.
On the platform itself, we have observed the effect of these trends in action:
Across the credit industry we’ve seen a return to long term average loss levels—this trend has been echoed on the platform as well. We updated our credit model in fall 2017 in part to address changes in the credit environment and we continue to optimize the model regularly. It’s too early to make conclusions, but we’re seeing better borrower profiles at the portfolio level on the platform.
In part due to credit normalization, we are seeing higher investor demand for lower risk (i.e. higher quality) grades on LendingClub’s platform. We also see investors seeking higher interest rates given the increasing interest rate environment.
LendingClub makes ongoing enhancements to maintain a balanced marketplace where borrower supply meets investor demand. For investors, our aim is to deliver access to high-quality borrowers at a competitive yield.
This quarter we continue our ongoing platform enhancements by doing the following effective May 8, 2018:
Capping loan sizes at the borrower’s requested amount in certain D and E loans; and
Eliminating some higher risk borrower populations primarily in grades D-E to match investor demand.
Updated pricing & return forecast
Loss forecasts as of May 8, 2018 are marginally higher for the platform overall relative to last quarter. Projected weighted average return for the platform overall is substantially similar for new vintages. Updated forecasts also include the impact of interest rate and credit policy adjustments described above. Please see the summary table below.
Platform summary and projections as of May 8, 2018
As always, we will continue to keep our investors apprised of changes on the platform. Please feel free to reach out to email@example.com with any questions. We look forward to continuing to serve you as an investor for years to come.
Safe Harbor Statement
Some of the statements above are “forward-looking statements.” The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “predict,” “project,” “will,” “would” and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual performance of the overall platform has differed from projected performance in the past, and could differ in the future. Factors that could cause actual results to differ materially from those contemplated by these forward statements include: increases to unemployment rates, particularly if such increases are concentrated in populations with a greater propensity to take loans facilitated by our platform; changes to consumer credit behaviors; stagnation or reduction in the growth of the nation’s gross domestic product or uncertainties created by political changes associated with a change in presidential administrations, the Company’s ability to continue to attract and retain new and existing retail and institutional investors; competition; and demand for the types of loans facilitated by the Company and those factors set forth in the section titled “Risk Factors” in the Annual Report on Form 10-K, filed with the SEC. LendingClub may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. LendingClub does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
2 Investor returns are also impacted by other factors, such as prepayment rates, the size and diversity of a portfolio, the exposure to any single Note or loan, borrower or group of Notes, loans, or borrowers, as well as other externalities and macroeconomic conditions.
3 Interest rates are increasing by 0.10% for grade A, 0.15% for grade B, and 0.45% for grade C, respectively, based on the weighted average interest rates using the subgrade and maturity mix for issued loans in Q1 2018.
4 “Average Interest Rate” is based on weighted average interest rates using the subgrade and maturity mix for issued loans in March 2018.
5 “Projected Charge-Off Rate” also known as Expected Charge-Off Rate, is LendingClub’s projection of the aggregate dollar amount of loan principal charged-off, net of any amounts recovered and accounting for the impact of amounts prepaid, as an annualized percentage of the aggregate dollar amount of loan principal for all loans issued under the Prime Program after May 8, 2018. Projected Charge-Off Rate is not a promise of future results and may not accurately reflect actual charge-off or prepayment rates. Actual charge-off and prepayment rates experienced by any individual portfolio may be impacted by, among other things, the size and diversity of the portfolio, the exposure to any single loan, borrower or group of loans or borrowers, as well as macroeconomic conditions.
6 “Projected Return” is a measure of the estimated annualized return rate on invested principal (meaning for all funds then invested in Notes or loans) using an internal rate of return (IRR) methodology using a monthly term. Monthly cash flow projections are calculated as follows: the scheduled principal and interest payments based on the Interest Rate, minus the amount of such principal and interest payments lost due to the Expected Charge-Off Rate, minus Expected Fees. Monthly IRR figures are annualized by multiplying the monthly IRR figure by 12. Projected Returns are calculated based on grade and maturity mix described in the “Average Interest Rate” disclaimer above. Projected Return is not a promise of future results and may not accurately reflect actual returns. Actual returns experienced by any individual portfolio may be impacted by, among other things, the size and diversity of the portfolio, the exposure to any single Note or loan, borrower or group of Notes, loans or borrowers, as well as macroeconomic conditions. Individual results may vary and projections are subject to change. The information presented is not intended to be investment advice, guidance, or a guarantee of the performance of any Note or loan. Notes are offered by prospectus filed with the SEC and investors should review the risks and uncertainties described in the prospectus prior to investing. Actual results may vary.
“Interest Rate” is equal to the weighted average stated borrower interest rate for the loan grade or mix of loan grades (whichever is applicable) using the grade and maturity mix described in the “Average Interest Rate” disclaimer.
“Expected Charge-Off Rate” is defined above as “Projected Charge-Off Rate.”
“Expected Fees” for loan purchasers means the aggregate estimated impact of LendingClub’s servicing fee (1%), collection fee (18%), recovery fee (18%), and an administrative fee (0.10%).
“Expected Fees” for Note investors means the estimated impact of all applicable fees as well as the impact of interest not earned during the administrative holding period in the first month (2 business days). Applicable fees are LendingClub’s service fee and collections fee (if applicable). LendingClub charges an investor service fee of 1% of the amount of payments received within 15 days of the payment due date. The service fee is not an annual fee and may therefore reduce annual investor returns by more or less than 1%. We estimate the collection fee based on expected charge-off rates and the expected number of late payments that will be collected on past due loans with a given grade and term. For more detail on LendingClub fees for Note investors, please click here. Individual results may vary and projections can change. Past performance is no guarantee of future results.
The story behind STATE began all the way back in 2003. Kosta Giannoulias was looking for a place to get a bite to eat and watch the Chicago Bears kick off the season. He found a local bar but was crammed into a seat in the back corner with a poor view of the few televisions playing the game. He was also frustrated by the limited menu options that all fell into the “greasy bar food” category. From this disappointing experience, the concept of STATE was born – a modern public house with a large open floor plan, comfortable seating, and high-quality cuisine to appeal to even the pickiest of patrons.
In the initial years after the restaurant launched people kept asking Kosta “Is this a restaurant or a bar?” People couldn’t grasp the idea that you could combine both; that you could watch a sports game in a clean, family friendly establishment and order first-rate food. However, in subsequent years the concept exploded. So much so that in 2012, STATE was voted the 4th best sports establishment in the country by Huffington Post, ESPN magazine, and Yahoo! Sports. The sport bar/restaurant concept that Kosta had the vision to forsee had taken off.
STATE has become a staple in the Chicago food scene, growing from a small, 16-person operation to having 84 full-time employees. And this number can top 100 if it includes part-time employees hired during peak periods. Kosta has been happy with his success but he’s also thrilled to be able to provide these jobs to the local Chicago community. Dedicated to giving back, STATE helps to raise $100,000 for local charities every year.
The customer is the focus of everything STATE does, and Kosta is constantly working to improve his restaurant’s ambiance and experience. He’s installed over 130 flat-screen TVs and placed them strategically throughout the space to ensure his patrons never miss a moment watching their favorite Chicago sports team play. He also realized that while people love the food at STATE, they may not always be able to come in-person to eat. So, about a year ago STATE delved into online ordering and partnered with DoorDash. This was a huge boost to the business and online orders now make up almost a third of their sales. However, they realized they needed to expand their kitchen to keep up with the new demand. Kosta begin searching online for business financing options and found LendingClub.
The business loan offered through LendingClub provided a competitive rate with one, low monthly payment so as not to constrict cash flow. There is no prepayment penalty so borrowers have the option to pay the loan off early to save on interest expense. Kosta also found the process of applying for the loan simple and straightforward. He was assigned a dedicated Client Advisor who he would correspond with every time he called or emailed about his loan application. Within days of completing the online application, Kosta was approved for a business loan. He used the funds to expand STATE’s kitchen capacity and was able to fulfill all the new online orders.
Never one to be complacent, Kosta plans to keep moving STATE forward and has ambitious goals for the next five years. A savvy business owner, he plans to devote a large portion of the company’s budget to building the brand. In the next three years he plans to purchase the building his restaurant is situated in. Finally, with these milestones checked off, he’d like to open a similar restaurant and expand his business even further.
Kosta didn’t get to where he is without overcoming some bumps in the road. As we saw, one of his first challenges was getting financing. This seems to be a common pain point for many new businesses. Don’t be discouraged! LendingClub provides access to business loans for companies that have been in operation for at least a year. And if you’re working on a startup, we encourage you to apply for a personal loan through LendingClub for a business purpose.
Another major challenge for Kosta is keeping up with trends in marketing, especially social media. It’s a challenge he looks forward to overcoming and has a few tips to keep up with the ever-fluctuating social media landscape: be able to adapt quickly, be open to new ideas, and keep an ear to the ground. In today’s world, you can never afford to be out of the loop.
Kosta also has some advice for up and coming business owners. Don’t be afraid to seek guidance from others. Talk with as many people as you can; you don’t necessarily have to follow what they say but you owe it to yourself and your business to do the research. And you are going to face obstacles that you can’t plan for. For example, when a water heater unexpectedly broke down at STATE, Kosta had to act quickly to resolve the issue. Since he had his finances in order he was able to overcome this sudden hit to his cash flow.
As you’re just starting out, take the time to build your business right from the ground up. Think through your business plan, your growth strategy, and hire the right team. Building a strong foundation for your company from the start will help maximize your chance of success in the future. Finally, no matter how successful your company is always strive to do better for your customers. This type of thinking will help keep your company competitive and ensure long-term success.
About four years ago, Sean Davis was a successful regional sales manager at an innovative machinery company. A rising star at the company, he could have led a comfortable life working for someone else – but he had other plans. Sean had always admired entrepreneurs who step out on their own and build something themselves. He was also inspired by his father who was himself a small business owner. Willing to take risks to pursue his passion, Sean partnered with best friend Brendan Pettit to start their own business, Youphoria, selling premium outdoor and yoga products online. In January 2014, the company had its first full month of sales and in February 2014 Sean quit his job and became a full-time entrepreneur and has never looked back.
Not really motivated by money, Sean feels fulfilled by creating something that adds value to the world. He truly believes in the products that Youphoria sells and wants to improve the overall experience people get from being outdoors and from finding one’s inner balance through yoga. His company wants to bring a sense of Youphoria to its customers which they define as “a personal feeling or state of intense excitement or happiness.” It’s this innovative approach that has helped Youphoria build a loyal customer base as well as a respected brand.
Youphoria had previously used business funding from other lenders, however, the durations of these loans were very short, typically just six months. While this may fit the needs of some businesses, Sean felt that the high monthly payments were causing pressure on the company’s cash flow and restricting his ability to grow the business. That’s when he started looking for other options and found LendingClub. Originally skeptical of how quickly he would get funding, he was delighted when his business loan through LendingClub was issued in less than a week. Previously Youphoria was paying close to $30,000 in monthly loan payments but after a loan through LendingClub, they were able to reduce their monthly payments to just $6,500 a month easing the burden on their cash flow and allowing them to expand their business.
Improving the company’s operations allows Sean to focus his time on other efforts. Sean, Brendan, and the team at Youphoria are not just committed to building a great brand they also believe in doing good for others – part of finding the balance. Their business has already helped improve the lives of several people by providing employment and improving their quality of life. Sean strives to do this and more on a bigger scale. This is what excites Sean about being a small business owner. He loves the constant learning for himself but he also loves building a team, watching them grow professionally, and in turn seeing them fulfilled. He wants his company to be socially conscious and make a broader impact on the world. As part of this mission, Sean is getting to know a few nonprofit organizations and their management teams, ensuring that any funding provided by Youphoria is properly and efficiently allocated toward the nonprofit’s mission.
This is just the beginning for Youphoria. Sean has big plans to develop the company further: not just increasing revenue but solidifying a company culture where people feel empowered, developing even more employees, and creating a new “product line” based on experiences. He envisions hosting Youphoria branded events based on yoga as well as an element of community outreach. As Sean says, “If you’re not full, you can’t feed other people.” Again, it’s all about the balance…if you don’t have the balance within yourself then you can’t serve others at the optimal level.
Of course, Youphoria has also has had to weather a few storms just like all new businesses. However, these hard times can also be a great learning experience. When resources are strapped, get scrappy – learn how to streamline operations and be more efficient. As a business owner, you’ll be faced with some tough decisions, like when Sean decided to forgo a paycheck during his company’s first year of operation. Additionally, there will always be obstacles that you can’t foresee or control. Through it all, stay positive, be patient and use these challenges to become more resourceful and resilient.
Sean also advises new entrepreneurs to take a chance. Don’t just focus on mitigating risks otherwise you’ll never reach the real reward. Of course, don’t jump blindly into launching a business – do your homework first and listen to your instincts but be willing to take a calculated risk. Be realistic and optimistic at the same time – find the balance.
We are proud to support small business owners as they pursue their passion. If you’re a business owner looking for capital to invest in your business, we encourage you to consider a business loan through LendingClub. It takes just a few minutes to get a quote, there’s no cost, and no impact to your credit score to apply.
Following an investigation that began in May 2016, the U.S. Federal Trade Commission (FTC) brought an action against LendingClub earlier today alleging that we do not comply with the requirements of the FTC and Gramm-Leach-Bliley Acts.
We do not agree and are very disappointed that it was not possible to resolve this matter constructively with the agency’s current leadership.
LendingClub is committed to delivering a superior customer experience and appreciates and supports the important role the FTC plays in encouraging appropriate standards and best practices. However, LendingClub believes that the allegations in the FTC’s complaint are legally and factually unwarranted. In this forum we’d like to provide important facts missing from the FTC’s complaint.
Claim 1: Origination Fee Disclosures.
The FTC’s complaint alleges that LendingClub does not properly disclose the origination fees it charges to borrowers. We fundamentally disagree. Our disclosures are clear and transparent and are prominently disclosed throughout our website. For example, our “Rates and Fees” tab explains to borrowers exactly how their loan will work.
Rates & Fees page:
Scrolling further down:
In addition, our origination fee disclosures are repeated throughout the loan application process. Importantly, we use a government-approved form called the Truth in Lending Act Disclosure, which allows borrowers to know exactly how much their loan will cost them. A borrower cannot receive a LendingClub loan without reviewing and acknowledging this disclosure.
Very few of our 2 million plus borrowers are confused by or complain about the origination fee. We track all of our customer complaints as part of our ongoing process of transparency and continuous improvement. The percentage of borrowers who complain about the origination fee is just a fraction of one percent. As we drive for more transparency, LendingClub voluntarily registered in the CFPB’s public Consumer Complaint Database in 2015. Since then, with more than 2 million borrowers served, the CFPB has registered fewer than 15 complaints about LendingClub’s origination fees.
The fact that there are so few customers who are confused in any way about the origination fee is corroborated by the sterling customer reviews and ratings the company has received. LendingClub clearly would not be able to continue attracting repeat customer business and maintaining an “A+” rating from The Better Business Bureau if we were deceiving customers about the existence of origination fees.
We’re proud of our transparency. We keep our loan terms simple by only offering long-term installment loans with fixed rates, fixed payments (never balloon payments), and no prepayment penalties. We also co-founded the Marketplace Lending Association to set a high bar for transparency and responsibility, including capping APRs on loans to all borrowers just as Congress requires for military personnel.
Claim 2: Past Communications About Loans Being Fully Backed.
The FTC claims that LendingClub sent emails to potential borrowers indicating that their loans were fully backed and “on the way” when the internal process and vetting and funding the loans was not in fact complete. The emails at issue were sent in error and were used back in 2015 for only 88 days before LendingClub discovered and proactively corrected the error.
LendingClub’s standard email (shown below), which the company has used since the latter half of 2015, makes it clear to loan applicants that their loans are contingent on “more steps” that have not yet been completed.
This message is not sent to consumer borrowers until LendingClub is certain that there is an investor prepared to fully fund the loan, subject to the remaining “steps” that are clearly and prominently disclosed.
Claim 3: Unauthorized ACH Withdrawals.
The FTC claims that in “numerous instances” LendingClub has withdrawn money from consumer bank accounts without authorization. This simply is not true. We maintain safeguards to prevent erroneous ACH withdrawals. Our payment processing system automatically prevents withdrawals that exceed the loan outstanding balance. We even manually check all duplicate same-day withdrawals. Some overpayments have occurred in cases where customer have made two redundant payments, for instance, sending a check when an ACH payment was already scheduled. From 2015 to 2017, LendingClub received fewer than three hundred complaints relating to double payments, post-payment withdrawals, or post-stop payment situations. During that time, we initiated 1.8 million loans and processed tens of millions of payments. We granted refunds where we made an error virtually every time. If a borrower had to pay additional costs, such as overdraft fees, LendingClub would typically reimburse those fees as well.
Claim 4: Consumer Privacy Notice.
The FTC’s complaint alleges that LendingClub failed to deliver required privacy notices to consumers or obtain related acknowledgements from consumers. The complaint refers to a historical practice which the company updated on its own initiative before the FTC initiated its inquiry.
Here is our current acknowledgement, which has been in place since late 2016:
Since we launched in 2007, we have empowered millions of borrowers to take control of their financial lives. Borrowers have been using our platform to refinance high-cost credit cards into responsible lower-rate, long-term installment loans that allows them to pay down debt, rather than be trapped by it. We also pioneered an industry that has now served millions of Americans, including establishing LendingClub’s online platform for retail and institutional investors that provides more loan level data transparency than any other in the nation.
Researchers at the Philadelphia and Chicago Federal Reserve Banks used our loan level data in 2017 and 2018 papers to find that we offer better prices than traditional lenders and are broadening financial services to underserved borrowers, especially in areas where traditional banks are closing branches.
Additionally, we are proud of the leadership role we played in creating the Small Business Borrowers’ Bill of Rights with the Aspen Institute and other leading nonprofits. We set the highest voluntary transparency standards for small business lending in the country. Our transparency includes clear disclosure of all upfront fees, including origination fees. We also disclose APRs upfront. As part of the effort, we also established a Responsible Business Lending Coalition made up of leading nonprofit lenders such as Accion and Opportunity Fund to help implement the Small Business Borrowers Bill of Rights and to also gain congressional approval for a Truth in Lending Act type disclosure for small business borrowers.
Our commitment to outstanding consumer service is reflected in every available objective metric.
We were awarded an “A+” rating by The Better Business Bureau, its highest-available rating
We consistently receive a Net Promoter Score, which measures a customer’s experience with a brand, in the high 70s. This significantly surpasses traditional financial institutions.
LendingClub Is one of the most highly rated, highly reviewed lenders with an average rating of 4.7 out of 5 stars across the top third-party review sites.
We don’t believe that the FTC’s allegations can be reconciled with our longstanding record of consumer satisfaction and we hope to resolve this litigation quickly. As one of the original fintech innovators, we understand and appreciate the importance of regulatory oversight as we use technology to improve consumers’ financial lives. A recent report to Congress by the Government Accountability Office outlined the regulatory challenges but did note “the number of consumer complaints against fintech activities appears modest compared to traditional providers.”1 We look forward to resolving this FTC claim quickly as we continue to use technology to help Americans on their journey to financial health. As our CEO, Scott Sanborn outlined at a recent industry conference, this is too important a mission for us to fail at delivering on it.
Guidant Financial teamed up with LendingClub to survey more than 2,600 current and aspiring small business owners nationwide in their State of Small Business survey.
Women business owners are on the rise in the United States, and we’ve narrowed down our results to reveal the top trends among female entrepreneurs and how they differ from their male counterparts. Find out who the women driving small business are, their hottest industries, and what’s holding them back.
We are proud to support women business owners as they pursue their passion.
If you’re a business owner looking for capital to invest in your business, we encourage you to consider a business loan through LendingClub. It takes just a few minutes to get a quote, there’s no cost, and no impact to your credit score to apply.
If you’re thinking about buying a car, you might be wondering if your current credit score will help you get a good deal—or maybe hold you back. We’ll cover the details here, including what is a good credit score to buy a car, and if you can get a car loan with no credit. Let’s start with a quick review of why your credit score matters.
Borrowing money: Why your credit score is important
When potential lenders need to assess how responsible and reliable you are as a borrower—in other words, how creditworthy you are—they often look at your credit score.
Your credit score is a three-digit number calculated based on the information in your credit report, which includes details about your past and present loans and payment history. There are several companies that offer credit score calculations—like FICO and VantageScore—and each company has several scoring models. As a result, you actually have multiple credit scores.
Your credit score is more than just a number—it can have a meaningful impact on your wallet. If you have a great credit score, lenders are more likely to offer you loans with favorable terms, like a lower interest rate, longer term, and/or larger amount.
What is a good credit score to buy a car?
As with many financial questions, there is no hard-and-fast answer, but there are several important points to consider:
Minimum credit score for car loan
Many lenders have a minimum credit score requirement. If your score is below the lender’s minimum requirement, you might need to explore other options (see below).
Average credit score for car loan
In 2016, Experian reported that buyers had an average VantageScore of 711 for new car loans and 649 for used car loans.
An improvement of 100 points in your credit score from 620 to 720 could vault you into the “excellent” category, saving you more than $2,000 in interest over the life of the loan. If you have a better credit score now than when you initially took out the loan, you might be able to save money by refinancing.
We’ve established that having a better credit score can help you secure more favorable loan terms—but what if you have no credit history at all, or a shaky one at best? You still might be able to finance a car by trying the following:
Making a bigger down payment
A bigger down payment means a smaller loan amount, which could increase your chances of getting approved.
Shop for a cheaper car
Another way to shrink the loan amount is to search for a car with a lower sticker price.
Get a co-signer
If someone with better credit is willing to help shoulder the responsibility, you might be able to qualify for a loan. Remember, though, your co-signer and their credit profile could be negatively impacted if you don’t make payments.
To learn more about buying and owning a car, stay tuned to the LendingClub blog. Curious if refinancing could be right for you? Check out our ultimate guide or get a LendingClub rate quote in just two minutes.
Board member, Patty McCord, joined us at LendingClub headquarters in San Francisco recently for an afternoon discussion with our Chief People Officer, Angela Loeffler, and Q&A session with LendingClub employees.
As the transformational Chief Talent Officer at Netflix for 14 years, Patty co-authored the Netflix Culture Deck – a notable HR document in Silicon Valley viewed more than 15 million times online. She is also the author of Powerful: Building a Culture of Freedom and Responsibility. Patty has spent the last six years advising companies on how to find their cultural heartbeat. She offered the audience of LendingClub employees and executives a unique perspective on where LendingClub stands today, the opportunity that lies ahead, and what we can learn from her experiences with Netflix and other companies.
Here are a few key takeaways from the conversation:
“Maybe there are no bad ideas, just bad timing.”
Ah-ha moments don’t always spring from successes, they often come from realizing that what you thought was a great idea was, in fact, a terrible one. Patty urged creating a culture of curiosity and trust by challenging assumptions, exploring new ideas, and asking tough questions. She also urged people to periodically revisit ideas to see whether the assumptions have changed.
“The more context and clarity you have, the better judgement calls you’ll make.”
Patty ranks good judgement high on her list of what to look for in new hires. The fact is that people need to be willing and able to make good judgment calls every day. That starts with encouraging people to learn and take in as much about the business as possible.
“People love to find problems, but problem solvers are the ones who are truly valuable.”
There is little benefit to identifying a problem if you are not willing to fix it or at least challenge the underlying assumptions that went into the decision that created the problem. Problem solvers act like owners and take accountability when they see something wrong.
“Culture is what you fall back on in challenging times.”
Every business will face challenging times. Culture is crucial to weathering the storm and making good judgement calls.
“The secret to great culture and great success is to focus on your customer.”
Great companies have a steadfast commitment to understand their customers and meet their needs. That common goal and focus brings people together to accomplish great things.
If you are interested in hearing more about Patty’s take on culture, you can purchase her book here.
This event is part of a new quarterly executive speaker series that features powerful players across various industries hosted by LendingClub executives. All LendingClub employees are invited and encouraged to attend. If you are interested in learning more about opportunities within LendingClub, please visit our Careers site. We would love to have you at our next event!
We all know there are things in life we have control over and things we don’t – like the weather, the stock market, or the sick kid at school that shared his cup with your kid. I’ve learned that it’s important to acknowledge what we do and don’t have control over in our lives.
Something that neither you nor I have a say in is when the Federal Reserve Board will raise interest rates. A little background: after the last major recession hit, the Fed (for short), which governs the U.S. central banking system, put interest rates near zero in an effort to stimulate the suffering economy and the collapsed housing market. Now that the economy is in better shape, the Fed has been slowly increasing rates since 2015. A lot is said about the downside of these rate increases but let’s take a moment to acknowledge the benefits – for example, higher returns for savers, more lending (albeit at higher rates), and a stronger dollar which, among other things, offers more buying power for those traveling outside the U.S. But if you’re like most Americans, an international trip probably isn’t in your budget right now, so let’s focus on the first two – saving and lending.
Here comes my plea to prioritize your effort to save more. No matter where we are in our financial journey, there is always room to improve our money habits. That said, 57 percent of Americans still have less than $1,000 saved. Does that describe you? That’s ok. You can always start small. I love the 52-week savings challenge because it systemizes your savings strategy. It’s not about putting unspent funds away at the end of the month; rather, it prioritizes the act of saving on a weekly basis. Also, take the time to research a savings account with an above average interest rate so you get the benefit of added savings as your money accumulates.
Now on to lending. In an environment where rates are steadily increasing, lenders are more likely to expand credit to their borrowers. For example, you may notice more credit card offers, or an increase in your credit limit for an existing card. But remember, credit card interest rates are variable. This means your credit card company can (and will) raise your rates in response to the Fed’s rate hike. By law, they are required to give you 45-days’ notice before the new rate goes into effect. Use that time wisely and consider consolidating your debt into a fixed-rate personal loan where you can lock in a low rate that will not change for the entirety of the life of the loan.
Let’s look at a common scenario and examine how the Fed’s rate hikes would impact someone with debt. Let’s call her Jane. Like a lot of Americans, Jane is carrying revolving debt on several credit cards. Paying them off is a goal but her monthly budget only allows for minimum payments and because of the Fed rate hike, her mountain of debt just got a little steeper.
See potential impact here:
To avoid the steep $1,200-dollar increase, when Jane hears about the rate hikes, she decides to take action. Instead of compounding more debt at a variable rate, she takes out a personal loan at a lower, fixed rate to consolidate that debt for a 5-year term. By doing so, she’s proactively getting off of that revolving debt cycle so she can focus on other financial priorities in her life. Her financial future just got a little brighter.
If your story sounds like Jane’s, now is the time to take action towards reducing your debt so you can save more towards your goals. It doesn’t have to happen all at once but the first step is getting off of that credit card hamster wheel.
Ask yourself, what can you do today to make your financial future a little brighter?
In 1986 Valerie McCloud started a small company, McCloud & Associates, that provided book-keeping and accounting services for local businesses in Greenville, North Carolina. 31 years later, her business has burgeoned into a community-oriented company serving both businesses and government agencies. The company now has multiple divisions and employs over 40 people.
Valerie spent a decade working in management at a communication company before taking the plunge to start her own business. However, she always had the mindset to go out on her own having been strongly influenced by her parents who were both entrepreneurs. Another major factor that influenced Valerie to start her own company was that she wanted to create and provide career opportunities to underemployed individuals in her community, she wanted to have a positive impact on people’s lives and encourage them to expand their minds—a commitment that continues to drive McCloud & Associates today.
Valerie used her expertise and experience in management early on to find and groom strong leaders to help oversee operations at McCloud & Associates. With this leadership in place, Valerie was able to direct her attention to researching new ways to develop and diversify the business. As Valerie’s company expanded into new territory, she ensured the business continued to support and strengthen the local community.
The foundation of McCloud & Associates is grounded in business management, accounting, training, and data processing, the subjects that Valerie had studied academically. In addition to providing business services in these fields, the company also created a proprietary training center to teach underemployed individuals marketable skills and help them find employment opportunities that pay more than minimum wage. From this base, the company has branched into related fields such as library science, medical transcription, record management, personal care, and supported employment services. Today, the company continues to diversify its operations.
As the company expanded into new fields, Valerie was able to leverage revenue from the more profitable divisions to help subsidize the community-oriented services. She developed a non-profit department that writes grants and supports the tutoring of four hundred students and their families. The Department has a success rate of 95% at helping at-risk students significantly increase their academic performance. The company focuses these efforts on the local at-risk population who may otherwise fall through the cracks without these opportunities. Additionally, the company supports people with disabilities by teaching them employment skills and helping place them with employment opportunities at local businesses. The company also provides ongoing support to these individuals for 90 days to ensure they are successful at their new jobs. Valerie estimates her business has directly helped over 400 people and their families. What’s really rewarding is when she sees people that her business has supported in the past rise up to become leaders in the community and making their own positive impact—creating a “virtuous cycle” in North Carolina.
It hasn’t been all roses though. Like all business owners, Valerie has faced her challenges. She believes the biggest obstacle she’s had to overcome is getting sufficient capital. Luckily, in today’s world there are alternative ways to access capital. Valerie recently obtained a term loan through LendingClub to further grow her business. She’s planning on using the funds to expand a new division around education and youth leadership.
Over the next five years, Valerie is aiming to take her already successful business to a higher level. She plans to continue to expand and share the mission of McCloud & Associates. Valerie’s passion is helping people and her company’s primary goal is to help others meet their goals, and thus improving their lives.
Her advice to new business owners follows these principles: You need to have a true passion for whatever you do. You’ll face challenges and obstacles and you’ll need to have the drive and strength to overcome them and to not give up. You can’t control everything that happens but you can control how you react to a situation. It’s critical to maintain a positive and professional attitude regardless of what you’re facing. Her final piece of advice for success is to find something that the world needs, something that you have the talent to fulfill, and build your business to provide that missing service.
“Should I sell my car to save money?” It’s a question you may have asked yourself once or twice. Maybe you’re wondering if you should sell your car to pay off debt. Or perhaps you’re making monthly payments on a pricey auto loan, and selling your car could free up cash for other things.
But will selling your car help you achieve your financial goals? It depends on your situation. Read on to find out what considerations should go into the decision to sell a car.
When to sell your car
If your goal is to save money and/or increase cash flow, there are three options you might consider when selling your car:
Sell your car and buy a less expensive one
Refinance your car loan
Sell your car and pocket the cash
Here are 5 steps to take that can help determine which option is right for you.
1. Calculate the true cost of ownership
Knowing your car’s true cost of ownership gives you a baseline for comparing your current car situation with other options. Cost of ownership takes into account how much it costs to own and operate your car each month or year. Be sure to include:
Payments of principal and interest (if you have an auto loan)
Licensing and registration fees
Maintenance and repair costs (more on that below)
Once you’ve done the math, you can more accurately assess how much you’ll save by selling your car. You can also compare the cost of owning your current car with that of a cheaper car.
2. Determine what your car is worth
Use online tools like Kelley Blue Book and TrueCar to research average selling prices and establish an approximate value for your car. Note that your car will likely be worthless as a dealership trade-in than if you sell it privately to another individual.
When it comes to depreciation, know where the sweet spot is. A new car’s value will be most heavily impacted by depreciation in the first year, then again in the fifth year and beyond. The low-depreciation years two through four might be a good time to sell and recoup as much value as possible.
3. Review your auto loan
If you financed your car, check the payoff amount. Owing significantly more than the car’s worth is known as being “under water” or “upside-down” on the loan, and it can complicate the decision to sell. advises people in this situation to “drive through” the loan: Keep making payments until you own the car outright, or you owe less than the car is worth.
If your goal is to save money on interest or lower your monthly payments (or both), auto refinancing might be an attractive alternative to selling your car. Refinancing can make sense if interest rates have declined, your credit score has improved or you didn’t get a great rate the first time around (which is common for people who financed their car at the dealership).1
4. Know your car’s maintenance outlook
Looming maintenance needs can impact the price your car fetches. Though the exact timing depends on the car, major maintenance hurdles are typically around 30,000, 60,000 and 100,000 miles. If your car is coming up on a big milestone, its value will dip, says U.S. News & World Report.
Maintenance costs also influence the “fix it or sell it” debate. At what point is it best to just sell and move on? Dave Ramsey focuses on whether the repair will add value. Say your car is worth $5,000 if you don’t fix it, and worth $6,000 if you do. If the repair costs $2,000, it’s probably a bad idea—after all, you only gain $1,000 in value. You could be better off selling the car as-is for $5,000, adding in the $2,000 you planned to spend on repairs, and buying another car for $7,000.
5. Consider your lifestyle
Thinking about giving up your car altogether? While slashing all car-related costs can be tempting, mull over your current commute and study the other available options like public transportation and car-sharing services. Consider whether owning a car—or a certain type of car—is important for your quality of life.
So, should you sell your car?
Each car owner’s financial goals are unique, but reviewing these considerations should help you get to a confident answer. While one person might choose to embrace the subway and fully eliminate car costs, another could be better served by trading in a high-maintenance car for a more affordable ride.
Curious if refinancing could be a better alternative to selling your car? Find out whether refinancing could reduce your cost of car ownership in minutes with a LendingClub rate quote.