Peer-to-Peer Lending: Lending Club Originates $4.3 Million in Loans in August, Prosper.com Originates $905 Thousand
During the month of August 2009, Lending Club.com originated a total of $4.3 million in loans and its older brother Prosper.com only originated $905 thousand.
Prosper.com pioneered the peer-to-peer lending industry in the United States in 2006, along with Zopa, which is no longer operating in the United States. It first brought forth the idea that consumers could lend each other money through the internet without the bank acting as a middle man.
For a while, Prosper.com was the behemoth in the peer-to-peer lending industry, originating up to $2 million in loans per month, but now it’s been dwarfed by a newer competitor to the market, Lending Club. Lending Club has issued over $23 million in loans during 2009 through the month of August, and Prosper.com has issued only $988 thousand.
Prosper.com was out of operation for a significant majority of the year to date due to legal issues with the SEC which were finally resolved during the month of July, but Lending Club is still originating loans at a rate 5 times that of what Prosper.com is providing.
Prosper is hoping to gain back some of its former glory and has launched a new web-based ad campaign in hopes of gaining some new customers. Prosper may have a difficult time attracting new lenders as many of them have been burned by a lack of collections efforts by Prosper in the past and have generally been disappointed with the high-levels of default that have become common on the site.
According to Prosper.com’s own statistics, its borrowers have lost $38 million in charge-offs, which represents 21% of all loans that have been originated on the site. Lending Club has had a charge off rate of approximately 7.3% since June 2007. Since January of 2009, Lending Club has revamped some of its borrower qualifications and has decrease the charge-off rate to a fraction of 1%
Prosper will need to significantly improve its default rates and develop better collections practices before many lenders give Prosper a second look. To Prosper’s credit, the loans that it has originated since it re-launched a couple of months ago have been performing much better. Since very few loans have been originated with Prosper in the last couple of months, there’s not enough data to determine if Prosper has gotten their act together.
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Great post but complicated to understand since I am from Faroe islands ;-) 
What would be your top three tips for anyone new to this topic?
Perhaps you need to take a closer look at Lending Club's SEC filings and do an apples to apples comparison vs. an apples to oranges comparison. In the first month after Lending Club received SEC approval they did approx. $2 million in loans… but wait… Lending Club themselves funded about $750k of that… in fact Lending Club has funded about $15 million or so of their own loans. I think that Lending Club's site should be more transparent about the volume of loans funded by real people and the volume funded by the company itself… if the company is funding loans themself, it's not p2p lending.
Emmet, that $2 million only reflected the loans originated up to the date of its agreement with the SEC. In total, Lending Club has originated $54 million in loans (see https://www.lendingclub.com/info/statistics.action). In a recent video-cast that they did, they stated that Lending Club is now only funding less than 10% of the total loan money out there.
Emmet, that $2 million only reflected the loans originated up to the date of its agreement with the SEC. In total, Lending Club has originated $54 million in loans (see https://www.lendingclub.com/info/statistics.action). In a recent video-cast that they did, they stated that Lending Club is now only funding less than 10% of the total loan money out there.
The key is transparency in statistics… why report one thing to the SEC and show something else on your statistics page? Lending Club investors don't have any idea when looking at the stats page on the Lending Club site what the true volume of p2p loans is… according to SEC filings it's over $15 million, meaning Lending Club's REAL p2p originations are closer to just under $40 million. I'm interested in this because I'd like to see the difference in performance of loans Lending Club has directly invested in versus loans that only people invested in. I also think that an apples to apples comparison would have showed Lending Club's volume the first full month following their SEC approval (Nov. 2008 / approx. $2 million) given that August 2009 was Prosper's first month in the same boat and noted that Lending Club actually funded about $750k of that $2 million. So bottom line… both companies are tracking very similarly when compared on an apples to apples basis… but why the lack of transparency by Lending Club and American Banking News?
In all actuality I could care less how much they fund. Personally I hope they continue to fund loans right along with the others in the community. It only shows me that they are willing to put their money where their mouth is and will get their hands dirty with the rest of us. And with them gettin their hands dirty, then I know they will be super serious about returns and collections. So bottom line is its all about the green and they will collect the green. I'm all for it!
Please Read as I am looking for some feedback from the investors and potential investors…In my opinion, we are not even to the first inning of the P2P lending capabilities, consider yourself all on the ground level of this new investment strategy. In my “big picture” outlook, I believe that people are excited about taking a more active role in their investments and how and where there money is invested, as opposed to handing your money to a money manager to invest in a stock market that most of us truly dont understand and have all suffered from. I think this Lending Club is a fabulous concept.
Hopefully a few readers will respond as I am doing some market research…I run a highly succesfull private equity real estate fund out of Irvine, CA that focuses on buying distressed residential and commercial assets directly from the regional and national banks, as you can imagine we are extremely excited about the opportunties that exist today and the future. In the past, our fund and other funds like us were only available to high net wealth individuals with a minmum of $100,000 to invest in a particular opportunity fund, mainly due to the headache of dealing with so many investors in the pre computer/software automation world. Why raise $1,000 from 20,000 people if we could raise $100,000 from 200 people? However, I have always felt that the smaller investor was underserved in our investment world and that truly bothers me, the rich only got richer because they were the only ones to have the opportunity to invest. Would you, the investors, be interested in this opportunity as an equity partner with our operating fund to take adavantage of the huge upside in todays real estate market? Obviosuly, you are also exposed to the downside of equity loss as you are in all investments, but you would also have the opportunity to participate in the upside that can be in the 25% IRR annually. Would this be something that the investors looking for alternative investment opportuntiies would be interested in?
Please Read as I am looking for some feedback from the investors and potential investors…In my opinion, we are not even to the first inning of the P2P lending capabilities, consider yourself all on the ground level of this new investment strategy. In my “big picture” outlook, I believe that people are excited about taking a more active role in their investments and how and where there money is invested, as opposed to handing your money to a money manager to invest in a stock market that most of us truly dont understand and have all suffered from. I think this Lending Club is a fabulous concept.
Hopefully a few readers will respond as I am doing some market research…I run a highly succesfull private equity real estate fund out of Irvine, CA that focuses on buying distressed residential and commercial assets directly from the regional and national banks, as you can imagine we are extremely excited about the opportunties that exist today and the future. In the past, our fund and other funds like us were only available to high net wealth individuals with a minmum of $100,000 to invest in a particular opportunity fund, mainly due to the headache of dealing with so many investors in the pre computer/software automation world. Why raise $1,000 from 20,000 people if we could raise $100,000 from 200 people? However, I have always felt that the smaller investor was underserved in our investment world and that truly bothers me, the rich only got richer because they were the only ones to have the opportunity to invest. Would you, the investors, be interested in this opportunity as an equity partner with our operating fund to take adavantage of the huge upside in todays real estate market? Obviosuly, you are also exposed to the downside of equity loss as you are in all investments, but you would also have the opportunity to participate in the upside that can be in the 25% IRR annually. Would this be something that the investors looking for alternative investment opportuntiies would be interested in?
Please Read as I am looking for some feedback from the investors and potential investors…In my opinion, we are not even to the first inning of the P2P lending capabilities, consider yourself all on the ground level of this new investment strategy. In my “big picture” outlook, I believe that people are excited about taking a more active role in their investments and how and where there money is invested, as opposed to handing your money to a money manager to invest in a stock market that most of us truly dont understand and have all suffered from. I think this Lending Club is a fabulous concept.
Hopefully a few readers will respond as I am doing some market research…I run a highly succesfull private equity real estate fund out of Irvine, CA that focuses on buying distressed residential and commercial assets directly from the regional and national banks, as you can imagine we are extremely excited about the opportunties that exist today and the future. In the past, our fund and other funds like us were only available to high net wealth individuals with a minmum of $100,000 to invest in a particular opportunity fund, mainly due to the headache of dealing with so many investors in the pre computer/software automation world. Why raise $1,000 from 20,000 people if we could raise $100,000 from 200 people? However, I have always felt that the smaller investor was underserved in our investment world and that truly bothers me, the rich only got richer because they were the only ones to have the opportunity to invest. Would you, the investors, be interested in this opportunity as an equity partner with our operating fund to take adavantage of the huge upside in todays real estate market? Obviosuly, you are also exposed to the downside of equity loss as you are in all investments, but you would also have the opportunity to participate in the upside that can be in the 25% IRR annually. Would this be something that the investors looking for alternative investment opportuntiies would be interested in?
Well I hate loans…To me credit cards and loans are blood suckers…