LendingClub Corp (NYSE:LC) faces an uncertain future in the market, if the rate at which non-collectable loans are increasing, is anything to go by. The Wall Street Journal reports that the charge-off rate at the online lender currently stands at 38% further arousing concerns of whether the company will be able to recoup any cash from loans already issued.

 LendingClub Unending Woes

The percentage of loans written off by banks last year stood at 3.16%, a small percentage compared to LendingClub charge off rate. Compounding LendingClub woes is the fact that a good number of online lenders have to contend with a string of setbacks such as job cuts making it hard for them to borrow or pay back their loans.

LendingClub has already responded to the concerns, reiterating that it has taken the necessary steps to strengthen borrower quality. How true that is, is still a point of discussion, given the current charge-off rate of 38% compared to 3.16% in banks.

 LendingClub Algorithm Questioned

Even though the current charge-off rate is still low compared to rates seen during the financial crisis, the same raises serious concerns about LendingClub prospects. The effectiveness of the company’s algorithm normally used to evaluate borrowers has also been brought to question. Given the concerns, investors are starting to question how the company’s loans will perform in a weaker economy.

 People are increasingly using loans to pay credit debt instead of paying down current debt further complicating the issue. Recent findings show that as many as 33% of online borrowers are using loans to pay credit debt. With 46% of the people adding 10% more debt than usual, unsecured loans are on the rise away from the industry average of 30%.

LendingClub Corp (NYSE:LC) says it is addressing the issue by increasing interest rates on its products in a bid to protect investors providing it with the funding.