Member Payment Dependent Note

Member Payment Dependent Note

Investopedia / Laura Porter

What Is a Member Payment Dependent Note?

Member payment dependent note refers to a note issued by LendingClub, a peer-to-peer lending company located in San Francisco, California. The income from these notes is used to make loans to club members.

Key Takeaways

  • Member payment dependent notes are speculative notes with high interest rates issued by LendingClub. They offer fixed rates that begin accruing interest on the date of issue.
  • Member payment dependent notes are unsecured notes, meaning they are not backed by collateral.
  • In 2008, member payment dependent notes had an initial maturity of three years and four business days.

Understanding Member Payment Dependent Note

Member payment dependent notes are categorized as securities by the SEC and are highly speculative in nature. They should only be purchased by aggressive investors who can absorb the loss of their entire investment. However, these notes also pay a very high rate of interest, ranging from about 7% to nearly 20%, depending upon various factors.

In 2008, member payment dependent notes had an initial maturity of just three years and four business days and accrued interest from the date of their issuance. Payments are made monthly, and the loans have no underwriters and therefore no discounts from underwriters. Because of the lack of market for these notes during 2009, many investors who purchased this type of note were expected to hold the note to maturity.

As of Dec. 31, 2020, LendingClub will retire its retail peer-to-peer platform.

The LendingClub issues notes in series and each series will correspond to a single consumer loan originated through the company's platform to one of its borrower members. The company's obligation to make payments on a note is limited to an amount equal to the investor's pro rata share of amounts with respect to the corresponding member loan for that note.

Details of Member Payment Dependent Notes

There are no prerequisites to invest in member payment dependent notes, meaning they are open to retail investors. The notes have a fixed interest rate and begin to collect interest from the date of issuance. They are only offered in electronic form through the LendingClub's website to its members and are not transferable except through the LendingClub's trading platform. The LendingClub's online platform allows qualified borrower members to obtain unsecured loans with interest rates that they find attractive. The platform also provides investors with the opportunity to indirectly fund specific member loans with credit characteristics and interest rates they find attractive.

LendingClub has established safeguards to reduce the risk associated with the notes. For example, borrowers on the platform need to have a minimum FICO score to be eligible for the loans. The platform has also assigned various grades to borrowers based on their annual default rates. The base rate for loans decreases as the default rate increases. As of 2017, only 19% of LendingClub's loans came from member payment dependent notes.

About LendingClub

LendingClub is an online financial community that offers loans and enables investors to purchase member payment dependent notes, the proceeds of which fund specific loans made to individual borrower members. With LendingClub, borrowers can create unsecured personal loans between $1,000 and $40,000. Investors can search and browse the loan listings on the LendingClub website and select loans they want to invest in based on the information supplied about the borrower, amount of loan, loan grade, and loan purpose. Investors make money from interest, and LendingClub makes money by charging borrowers an origination fee and investors a service fee. 

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Securities and Exchange Commission. "Form S-1: LendingClub Corporation." Accessed Mar. 10, 2021.

  2. SEC Form 8-K. "LendingClub Corporation," Pages 4, 98. Accessed Mar.10, 2021.

  3. Lending Club. "Amounts For Personal Loans." Accessed Mar. 10, 2021.

  4. Lending Club. "What Fees Do Borrowers Pay?" Accessed Mar. 10, 2021


  5. Lending Club. "Interest Rates and Fees." Accessed Mar. 10, 2021.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.