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Lending Club, a network for lending by individuals to individuals, today announced that it has secured a third round of funding for $25 million. It has raised $53 million in total. The new round of funding will be used to further development of the peer-to-peer lending platform and new products for existing and new customers.
Lending Club positions itself as an attractive alternative to the high costs of bank lending. The company brings together investors looking for high returns and borrowers searching for low interest rates. The process works a lot like a bank loan: Borrowers fill out a loan application and investors can agree to provide funds. The system appears to have benefits for both loan investors, who can see returns of up to 9 percent, and borrowers, who can see interest rates as low as 8 percent, according to the company website.
There are several peer-to-peer lending companies, one of which is also also raising money. Prosper.com, one of the first websites for peer-to-peer lending, recently raised another $1 million for a total raised of $41 million. Another peer-to-peer company, People Capital, is taking a unique angle to the industry and focusing on student loans.
LendingClub has funded over 10,000 loans for a total of more than $103 million, but appears to decline more than it accepts. There are more than 100,000 declined loan requests reaching over $1 billion.
So, what are accepted borrowers using their loans to pay off? According to LendingClub, more than 60 percent use the loans to consolidate debt or pay off credit cards.
The Redwood City, California-based company, founded in 2007, recently secured a second round of funding for $12 million and at the same time period claimed to hold about 79 percent of the peer-to-peer lending market.
The new round was lead by Foundation Capital and joined by existing investors including Morgenthaler Ventures, Norwest Venture Partners and Canaan Partners.
Here’s a chart of LendingClub’s loan issuance: