An online lending company is trying to make money by encouraging University alumni to directly lend or borrow with other alumni.

The Lending Club matches individual borrowers and lenders for loan transactions who share specific social connections, like graduating from the same university.

By directly connecting borrowers and lenders, the company bypasses banks or other financial institutions and offers lower loan rates.

In a statement released by the Lending Club last week, the company announced what it called partnerships with three major university alumni associations, including the University of Michigan’s.

But Jerry Sigler, senior vice president and chief financial officer of the University’s Alumni Association, said no official partnership had been agreed upon between his association and the Lending Club.

“From our standpoint they’re only an advertiser, like the hundred other companies that advertise in our print or electronic publications,” Sigler said.

The alumni associations at Georgia Tech and Kansas State – the other two universities cited in the statement – have entered official partnerships with the Lending Club.

The Lending Club began as an application available exclusively on, where the company says it has arranged more $1 million in loan transactions. This fall, the Lending Club also launched a public, independent website offering the same services.

The company profits from all of its loans by charging a 1 percent processing free on all borrowing and lending transactions.

Renaud Laplanche, founder and CEO of the Lending Club, said his company’s network-based lending services will cultivate bonds between borrowers and lenders, which will make borrowers feel more compelled to repay their loans.

“As a person-to-person lender, we’re creating a network where people will feel connected while also reinforcing accountability on the part of the borrower,” Laplanche said.

To use the Lending Club, borrowers submit loan requests, which the company matches with lenders from similar social networks or communities. Often times multiple lenders will be matched to fund a single loan request.

For example, Laplanche said a $5,000 loan request could be matched with 50 separate lenders all contributing $100.

The Lending Club’s website lists its borrowing rates at about 7 percent and lending rates at about 12 percent.

According to the its website, the company doesn’t guarantee any of its loans.

Sigler said the Lending Club’s social network idea could help University graduates take advantage of resources other alumni might be willing to share.

“If you’re a new graduate looking to buy a new car or borrow to have a down payment to buy a house, this might be the kind of program that would allow you to do something like that in a way that might be beneficial,” Sigler said.

Sigler said the Alumni Association will continue to monitor the development of the Lending Club.

“We’ll see what the response is and look at the possibility of an expanded relationship going forward,” Sigler said.

Jeff Mirmelstein, who graduated from the University with a bachelor’s degree in business in 2005, said in an e-mail interview that he thought the Lending Club offers a good opportunity for alumni looking to borrow but isn’t sure about the company’s lending rates and whether he would use the company to lend money.

“While the Michigan bond – no pun intended – is a strong one, the investments and loans have to make financial sense,” said Mirmelstein, who works at an investment bank in New York.

Ultimately, Mirmelstein said when it comes to looking for a loan, he would, above all, try to find the lowest rate on the market.

“If it’s from a fellow Wolverine, great,” Mirmelstein said. “If not, that’s fine with me too.”

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