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Last week I mentioned that I was trying out Lending Club. And, now that I’ve given it a spin, here is the rundown of what Lending Club is all about. Oh, and one of you lucky readers can have a free $100 in your Lending Club account. Here are the rules of this $100 giveaway from Lending Club:

1. Leave a comment on this post by 11:59 p.m. Eastern Time this Friday, March 13, 2009. Make sure you have a valid email address, or I won’t be able to contact you — if you win.
2. Sign up for Lending Club. It’s free. But you need to have an account, so that if you are the winner, your $100 can be added to your account. I suppose you could leave a comment, and then sign up if you win If you never use the account, that’s fine. You do not actually have to go through the “funding” process in order to have an account when you initially sign up. If you are already a member of Lending Club, you can still win the $100.

One winner will be chosen at random from the comments on this post to win the $100 account credit at Lending Club.

What is lending club all about?

With the economy making it difficult to get approved for loans, many people are turning to P2P lending. Lending Club is one of many P2P sites (like Prosper or Green Note) that offer ordinary people the chance to lend money to their peers in small chunks. It is possible to get loans for credit card consolidation, business expansion, auto loans or money for a down payment on a home. I gave it a try when I was approached by a representative of Lending Club.

$50 was placed in my newly-opened Lending Club account for me to try it out. Turns out that I enjoyed it so much that I actually added my own $50 (via PayPal) to do a little more funding. Here’s how it works if you want to invest:

• You look through loans requested from borrowers.
• You choose to fund part of the loan by buying $25 notes.
• You receive a portion of the interest earned on the loan, plus repayment of the principal that you lent.

The nice thing about Lending Club is that you can browse available notes and limit who you lend to. If you are more risk averse, and don’t mind getting a lower return, you can restrict your search to those with only A or B rated credit. If you have a little more to risk, you can earn higher returns by funding someone with lower credit ratings. Of course, the lower the credit rating, the higher the risk of default — so you could lose your investment.

Lending Club includes payment history information, risk information, and allows you to pose questions to the borrower. This helps you make a more informed decisions about whom you lend to. All of this is done without divulging telling personal information about the borrower.

Overall, I found Lending Club fairly easy to use. The interface is straightforward, and you can decide how many notes you want to buy — as long as you have at least $25 in your account. I like that you can use PayPal to fund your account, and the ease (in theory — since I haven’t started receiving payments yet) with which you can withdraw money from your Lending Club account when you start receiving your portion of the payments on the loans. It is also possible to reinvest your earnings fairly easily.

Since I’m the cautious sort, I’ll give it some time before I add further funds. But if my current notes yield some returns, I’ll probably start devoting a portion of my monthly earnings to notes at Lending Club as part of a long-term savings plan.

Do any of you have experience with Lending Club or other P2P Lending? Remember to leave comments by this Friday night in order to be eligible for the $100 giveaway.

image credit: US government