I know what it is like to look for a loan. While you usually have your finances in order, a sudden situation has caused you to need a little extra cash. Perhaps you are having a medical emergency. Maybe you are trying to pay off your credit cards and want to consolidate your debt at a lower interest rate. Whatever the case, there are a number of places where you could go for a loan, and Wells Fargo is one of those places.
Loans up to $40,000 via Lending Club
Check your rate
Won’t affect your credit score.
The problem is, they are not the best option. They are used by people only because they are popular. Wells Fargo is one of the biggest banks in the United States, people wanting a loan often choose Wells Fargo because their billboards and banks are visible in every major city.
A much much better option is applying for a loan through Lending Club. And while you might not have heard of Lending Club before, it is a really good idea to explore all the options before settling on a Wells Fargo personal loan. Looking at another option is what we will be doing today.
Getting an Online Unsecured Loan: A 6-Step Process
Getting an unsecured loan over the internet is basically the same six steps wherever you go.
Step #1: Fill Out an application
The first thing you have to do is fill out an initial application asking for a loan amount and term. A loan’s term is the number of years you want the loan to be paid back (for Wells Fargo, they offer 1-year to 5-year loans). You will also have to submit some basic information like your date of birth and yearly income. This allows the company to pull your credit history.
For Wells Fargo, online applications are only accepted from people who have had an account with them for at least a full year. If you are brand new to Wells Fargo, you will have to visit one of their branches if you want to apply for a personal loan.
Step #2: Your Loan is Approved (or Denied)
Once your information is submitted, companies like Wells Fargo will crunch the math of your application. They will look at the big picture (your credit history and current income) and score you to see if you qualify for a loan.
Often this is when borrowers get declined. The big three reasons why banks decline a loan application is because:
- the credit history is too young (earliest credit line is too recent or has too few lines of credit)
- the credit has too many negative marks (late payments, etc)
- years of employment or yearly income is too low
Step #3: Get Quoted an Interest Rate
If you meet their minimum credit score, they will offer you an interest rate for the loan amount and term you requested. For instance, if I go to the Wells Fargo repayment calculator, I see that the best rate they offer people is 7.2% (though most people will get a rate higher than this).
Step #4: Consider the Interest Rate
Alright! Once you apply for a loan, get qualified, and get offered an interest rate, you have the choice to either accept or turn down the loan. This is a really important step in the process. If you find this interest rate to be too high, you need to consider looking elsewhere. An interest rate that is too high means huge fees for your loan over the years you pay it back.
For example: if I got the $15,000 3-year loan in the above picture, I would pay $1,730 in interest. But if Wells Fargo offered me a higher rate like 12%, then I would pay $3,000 in interest! That is a difference of $1,300, a solid reminder that interest rates are important.
In short, you need to find the lowest rate possible before you accept a loan’s offer.
Step #5: Get the Cash
If you do get qualified and accept the loan, the amount is then transferred to your bank account, usually electronically, though some banks just write you a check.
With Wells Fargo, the only way to get this check is by driving to an actual branch and going inside to sign the forms in person. This may be inconvenient for some, but doing this allows Wells Fargo to possibly get people cash the same day they apply for a loan.
Step #6: Pay the Loan Back
This usually occurs over a number of years until the loan is paid back in full, but many borrowers choose to pay it off early (this is called prepayment). Some loan companies charge a fee for early payment, but Wells Fargo does not.
Wells Fargo Personal Loans versus Lending Club Personal Loans
If we compare Lending Club and Wells Fargo side-by-side, we see that in many ways they are the same. Both companies offer loans to people that are unsecured, meaning they are not tied to any collateral like a house or car. Also, both have no prepayment penalty if you want to pay the loan off early.
Wells Fargo has some advantages over Lending Club:
- Lending Club’s maximum loan is $40,000. But Wells Fargo offers loans nearly three times as large – up to $100,000.
- Lending Club only offers 3-year and 5-year loans. Wells Fargo, in contrast, offers a wider selection of terms: 1-year, 2-year, and 4-year repayment options.
Lending Club Can Be Easier. Wells Fargo Can Be Quicker.
At Lending Club, everything is done online. They less like a bank and more just a website, and this means you never have to leave your house to get a loan through them, which can be really nice.
Wells Fargo requires you to visit one of their branches in person to get the loan finalized. But the benefit Wells Fargo offers is a same-day loan. It is possible to get approved for a loan at Wells Fargo and walk out of one of their branches that same day with cash in your pocket (well, a check actually). In comparison, Lending Club takes six business days to get you your money.
So you may want to ask yourself what you need more: (1) the ease of applying at home on your computer, or (2) the quickness of going into a Wells Fargo branch and getting a loan on the same day you apply.
The Main Reason Why Lending Club is Better: Lower Interest Rates
Many people do not consider the options when they need a loan; they simply go with whatever they know. But this means that many of them are stuck with higher interest rates than they could have received somewhere else.
For instance, take people with perfect credit. In our example from earlier, we saw that Wells Fargo offers borrowers with excellent credit a 7.23% interest rate on a loan. However, Lending Club offers borrowers with perfect credit a 6.78% interest rate on a loan (this includes Lending Club’s origination fee). Imagine I got a $35,000 3-year loan with each. For the Wells Fargo loan, I would pay $4,037 in interest. For the Lending Club loan, I would pay $3,778 in interest.
That is a difference of $259 for the exact same loan.
Lending Club in the News
Some of you may never have heard of Lending Club before, so here are some stories about them in the news:
- CNN: Is Peer to Peer Lending the Future?
- The Wall Street Journal: Google Makes Investment in Lending Club
- CBS Evening News: Share and Share Alike – Lending Club
A More Detailed Review of Lending Club
If you want to see the entire Lending Club loan process outlined greater detail (with screenshots), you should read about my own Lending Club experience. I got a $2,350 loan from them in six days and really enjoyed the entire process.
Read: Lending Club Review for Borrowers
Bottom Line: YMMV (but Lending Club is Better)
YMMV stands for the phrase ‘your mileage may vary’. It means that no site on the internet (including this one) can predict which will offer you a better loan for your specific needs. It may be the case that you look for a $25,000 loan at both Wells Fargo and Lending Club, and get a better rate with Wells Fargo. Or maybe you need a $50,000 loan, an amount that Lending Club does not offer. Whatever the case, I suggest you check your rate at both and go with whatever is better.
That said, I believe that Lending Club not only offers lower interest rates to people with excellent credit (as we saw above) – they offer lower rates to everyone. I believe that, on average, most people are going to get a better rate on a personal loan if they go through Lending Club.
For a quick low-rate loan, Lending Club is one of the best options nationwide. You can easily find your rate and apply at no risk of it affecting your credit score.
Check your rate with Lending Club, and get started toward your loan.
Won’t hurt your credit score.
[image credit: Ron Cogswell “‘Wells Fargo’ sign”
“Money, Money, Money” by Daniel Borman CC-BY 2.0]
Great comparison. It was an interesting read. I agree LC offers better rate than WF.
What surprises me with WF is that they should be able to offer competitive rate to current customers considering they have the transaction history for the customer and can easily monitor the income and expense history and gage repayment capability.
The online lending is breaking the gouging by banks like the online brokerage did to full service brokers.
Thanks Anil
This is a wrong assessment of interest rates. LC does not offer better interest rates than Wells. That totally depends on each person’s credit, and no one has done the analysis to see that at each credit level who has better rates. Also what about the origination fees that LC charges that Wells does not?
Hi John. While each individual’s experience can be different, I do believe that Lending Club on average has lower rates than Wells Fargo. And I did do the math on this subject: https://www.lendingmemo.com/wp-content/uploads/2014/02/Simon-Cunningham-Why-Peer-to-Peer-Lending-Will-Replace-American-Banking.pdf
Cheers, Simon
If you recently opened a credit or debt obligation (not including a home mortgage) a major bank would more likely decline your application. This is with a 760+ credit score, a reasonable debt to income ratio, and a decent amount of reserves in the bank. Dealing with my experience, I would go with Lending Club, unless you wait about 90 days to apply at a major bank.
Usually your credit report would say something like “an account or accounts have been recently opened with not enough history”. I would go with Lending Club. I got a $25,000 personal loan while Wells Fargo declined me, and I bank there. If you have good credit and no late payments, discover card personal loans is also — good up to $25,000.
Does Lending club allow for a cosigner on a loan?
Yes Lending Club has cosigned loans.