When a LendingClub loan gets funded but denied, it means that investors were willing to back the loan but LendingClub decided the applicant was not creditworthy enough. LendingClub is a peer-to-peer lender. They allow loans to get funded by groups of individual investors looking to make money through interest. But before the investors shell out their money, LendingClub is responsible for making sure that the applicant has a reasonable chance of paying it back.
The first part of the LendingClub loan process is pre-qualification. If LendingClub determines the borrower meets its basic requirements, LendingClub then shows the person their loan options and lets them select the one that works best for them. But at this point, the prospective borrower has not actually submitted an application.
Once the prospective borrower fills out a full application, their loan gets listed on the site and investors can pledge funding if they are interested. During this time, LendingClub performs an additional review of the application. This includes a hard inquiry into the applicant’s credit report to confirm that the applicant is creditworthy. LendingClub may also ask the applicant to verify their income or other information included on their application. If the applicant does not give this information, or the application review determines they do not qualify for a loan, they will be denied.
LendingClub’s review of an application usually takes place entirely within the funding stage, according to the company’s online FAQ. But it could still be going on “after the loan is entirely committed.” That’s how a LendingClub loan could be funded but denied anyway.
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