If you default on a LendingClub loan, you will owe late fees for each missed payment and will experience credit score damage from those late payments being reported to the credit bureaus. In addition, you will have to deal with calls from debt collectors, and it's possible you could be sued. Naturally, it's best to try to avoid defaulting on a LendingClub loan, through methods like working out a new payment plan, settling the debt or refinancing with a cheaper lender.
What Happens If You Default on a LendingClub Loan:
You owe late fees: For each payment you miss, LendingClub will charge 5% of the payment amount or $15, whichever is greater.
Your credit score decreases: Payment history is one of the biggest factors in your credit score. A late payment will remain visible on your credit report for 7 years and can hurt your score that entire time, though the damage will diminish over time. LendingClub reports late payments to the credit bureaus once they are 30 days past-due. And if you don't pay at all, your debt may get sold to collections or charged off. Those negatives stay on your credit report for 7 years, too.
You will likely be contacted by debt collectors: LendingClub says they make “significant” efforts to contact delinquent borrowers and collect outstanding payments. They do so both through internal departments and by working with debt collection agencies. Make sure you know your rights concerning how debt collectors can and cannot behave toward you.
You may be sued: Anecdotal evidence suggests that it is rare, but not unheard of, for LendingClub to sue a borrower who defaults. Since LendingClub loans are unsecured, a court judgement provides an alternative way to get the funds back. If you were to be sued and lose, the judge could garnish your bank account or wages to pay back what you owe.
If you've defaulted on a LendingClub loan, you may want to try to settle, since lenders are more likely to settle when they are afraid of you not paying altogether. Negotiating a settlement could let you pay as little as 30% of what you owe, but you'll need to have enough cash to pay the settlement amount in a lump sum. Keep in mind that while there are reports of customers settling with LendingClub, the company has no obligation to agree.
You could also refinance your debt with another lender. But if your credit score has been damaged by missed payments, you're not likely to get better terms on a new loan. Another option is to call LendingClub and try to work out a new payment plan that's more manageable for you.