Lending Club TurboTax Integration Attempts to Solve Marketplace Lending’s Tax Problem
Lending Club’s retail investors scored big on February 12th when they announced an integration with TurboTax software. The complexity of marketplace lending from a tax perspective has historically been one of the most prohibitive cost barriers for retail investors. Unlike savings accounts which issue a standard 1099-INT, Lending Club (and Prosper) issue both a 1099-OID and a 1099-B.
According to the IRS, the 1099-OID should “state the excess of an obligation’s stated redemption price at maturity over its issue price. Original Issue Discount (OID) on a taxable obligation is taxable as interest over the life of the obligation. If you are the holder of a taxable OID obligation, generally you must include an amount of OID in your gross income each year you hold the obligation.”
For the average person, explanations like these are enough to warrant the help of an accountant. But that’s a problem for people that are investing a small amount. For example, if $10,000 invested in Lending Club notes generated $700 in income for the year, it wouldn’t be practical to pay an accountant $500 to help you figure it all out. Between that and the actual taxes owed, an investor could easily end up losing money.
Lending Club tries to make it all as easy as possible for investors with their step-by-step tax guide, but it can still feel a little confusing. One problem to consider is that investors can only deduct up to $3,000 of their losses if they don’t have any other capital gains.
While an integration with TurboTax is a win for retail investors, marketplace lending had long been a thorn in the side for TurboTax. Complaints about the software not being “peer-to-peer friendly” have haunted Intuit’s help pages for years.
Last modified: February 15, 2016
Sean Murray is the founder of deBanked , an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.
Lending Club Reviews: Still a Stable Online Loan Option?
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Are you trying to keep your small business afloat but can’t get a bank loan? Or, maybe you are looking to get your latest entrepreneurial idea off the ground but are lacking funds. You’re certainly not alone — funding is one of the most stressful parts of owning and building your own business. But you don’t have to give up hope. Online small business loans can be a viable option if you’ve come up dry with other funding sources. Lending Club loans are a popular choice for tons of small businesses. Our Lending Club reviews give you all the information you need to decide if they could be a lifesaver for your business.
Note: Your chances are better for getting approved with online small business loan services compared to more traditional lenders, but these services will cost you — their interest rates are extremely high. However, if you’ve run out of other options, or need funding immediately (and plan to pay it off quickly), an online loan is worthy of consideration.
Lending Club has the lowest APR compared to other online small business loans we reviewed, and their customer service is excellent. But you'll have a longer waiting time for funding.
- A+ Better Business Bureau accredited
- More than $11 billion loaned to small businesses
- Peer-to-peer lending site, backed by a secure base of everyday investors (not large financial institutions)
- Lending Club rates: they have the lowest APR compared to other services we reviewed
- Offers small business loans from $5,000 up to $300,000
- Named one of Forbes’ America’s Most Promising Companies for three years in a row
- Named one of the World’s 10 Most Innovative Companies in Finance by Fast Company in 2013
- Much lower APR average at 5.9%-25.9% (doesn’t include origination fee of 0.99%-6.99%)
- Small business loans up to $300,000
- Flexible terms — one to five years
- Excellent customer support
- Fixed monthly payments
- No prepayment fees or penalties
- Also offers business line of credit and personal loans
- Lending Club investor reviews are largely very positive
- Lacking website resources for small business owners
- Collateral required for loans over $100,000
- Personal guarantee required
- Have to wait several days on average for investors to fund your loan
- Qualifications are more stringent than most — must have at least $75,000 in annual revenue as a small business (higher than many), have been in business for two years and own at least 20% of the business
- Lending Club CEO resigned in May 2016 based on internal loan purchase review (see video below)
Check out what customers have to say about their experiences getting Lending Club business and personal loans.
The process was seamless and very easy. My loan was approved within 7 days and deposited into my checking account. Because of this loan, I was able to rid myself of some very high interest credit card accounts. As a result, my FICO score increased by 31 points. This was the way to go for me. – Cheryl G., Trust Pilot 2/25/2016
I have never had such an awesome experience with loan companies. This one takes the cake by far. I applied after hours on a Tuesday and was contacted the very next day with questions in regards to my application. They were with me every step of the way. Even calling their office was easy and quick! I was never on hold for longer than ten minutes and everyone that I spoke to was nice and friendly. They actually cared about you as a customer and a person. – Kara S., BBB 10/27/2015
Like others, I applied and was quickly “approved” but three weeks later I learned there had not been any funding of my loan. I have my doubts there are many backers for these loans as mine should have been fairly simple. With a credit score of 785+, I was offered a good rate. Perhaps the lenders are looking for more risk/earning potential. – wss1, creditkarma.com 5/24/2016
Please don’t be taken in by the ads this company sends out, You are not really pre-approved even tho that’s what the solicitations say. Unless you have a pay stub instead of income from multiple sources (such as annuities and pensions and LLC income) they can’t handle it. After well over a month of sending in the same 1099s, 4 bank statements and income tax statements 3 or 4 times they finally got around to saying they couldn’t process a loan. – Daryl P., BBB 1/20/2016
In early May 2016, the CEO of Lending Club unexpectedly resigned. See the following video by The Wall Street Journal, which explains the details. This may not appear to be a good sign, but it doesn’t appear that borrowers have too much to worry about.
Lending Club won our “Best for Lowest APR” award in our online small business loan comparison article against all Lending Club competitors we reviewed. They also have a ton of positive reviews for quick, helpful and knowledgeable customer service. If you want the speediest turnaround on getting your loan funded, the Lending Club may not be your best bet since you have to wait for an investor to get on board with your loan request. However if you don’t need funding immediately, Lending Club is an excellent option— and will save you money in the long run compared to similar services.
What experiences have you had with Lending Club’s small business loans?