Comments on: Social Lending — Just How Many Loans Can Go Late Before We Worry? http://www.centernetworks.com/social-lending-bad-debt Web 2 and Social Media News and Reviews Sat, 21 Nov 2009 01:50:56 -0600 http://wordpress.org/?v=2.8.6 hourly 1 By: antje wilsch http://www.centernetworks.com/social-lending-bad-debt/comment-page-#comment-16096 antje wilsch Wed, 30 Nov -0001 00:00:00 +0000 #comment-16096 we could knock them back into an earlier beta version for every ding they get :) we could knock them back into an earlier beta version for every ding they get :)

]]> By: Tom http://www.centernetworks.com/social-lending-bad-debt/comment-page-#comment-16409 Tom Wed, 30 Nov -0001 00:00:00 +0000 #comment-16409 The social lending sites are pretty open about default rates. Lending Club has a <a href="http://www.lendingclub.com/info/statistics.action">statistics page here</a>. According to the page, only 3 of nearly 800 loans are late. Of course, Lending Club has only been around since May 2007 so most of the loans have not had a chance to mature. Prosper's <a href="http://www.prosper.com/lend/performance.aspx?referrer=Spider5&utm_source=referrer-Spider5&utm_medium=referral-link&utm_content=link&utm_campaign=referrals-unknown">statistics page</a> contains a bunch of good info. With Zopa you just by a CD with a 5.1% interest rate. It's insuredby the National Credit Union Administration so you don't lose any money if your borrowers default. Tom from <a href="http://prosperlending.blogspot.com">Prosper Lending Review</a> The social lending sites are pretty open about default rates.

Lending Club has a statistics page here. According to the page, only 3 of nearly 800 loans are late. Of course, Lending Club has only been around since May 2007 so most of the loans have not had a chance to mature.

Prosper’s statistics page contains a bunch of good info.

With Zopa you just by a CD with a 5.1% interest rate. It’s insuredby the National Credit Union
Administration so you don’t lose any money if your borrowers default.

Tom from Prosper Lending Review

]]> By: Jay http://www.centernetworks.com/social-lending-bad-debt/comment-page-#comment-16416 Jay Wed, 30 Nov -0001 00:00:00 +0000 #comment-16416 Allen, I think it's very important that you include Andy's stated loan-making strategy before you start casting doubt on Prosper's, or peer to peer lending in general's, effectiveness: "We focus our lending efforts on people who [...] Have a lower credit score (and are thus willing to pay higher interest rates)"* While Andy does try to mitigate that risk, he's still purposely lending to the <strong>highest-risk</strong> group available. Using Prosper's own (very useful) dynamic statistics page, we can see that of all loans made since March 28th(when Andy made his first loan)**, 8.17% are late. BUT, only 4.53% are over 1 month late. Furthermore, out of the total number of late loans, <strong>~60% are loans made to D, F, and HR credit ratings</strong>, the low credit score group Andy loaned to. When you loan to a high risk group, you have to be willing to accept the potential negative consequences of that risk. Andy decided to limit that risk, but I think he staked too much importance on loaning to people with no delinquencies on their credit report, forgetting that past performance is not always a good indicator of future actions. By Andy's own admission, he's <em>gained</em> 10% on the 5k he loaned. Hardly cause to start waving the bad debt flag, especially if the 2/3rds of his bad debt that are 1 month late or less come back to current, with late fees. I've been keeping my own coverage of <a href="http://socialstrategist.com/2007/06/08/small-loans-big-bucks-the-world-of-social-lending">social lending services</a> updated. I hope you'll find it useful. *<a href="http://andyswan.com/2007/06/25/prosper-is-really-cool/">Andy's initial post.</a> **<a href="http://www.prosper.com/lend/performance.aspx?af=0&esba=63&gc=&gm=0&gr=0%2c1%2c2%2c3%2c4%2c5&hw=0&iba=255&ibid=0&iwatch=0&lc=0%2c1%2c2%2c3%2c4%2c5%2c6%2c7&lq=&maxAmt=25000&maxDTI=1000000&maxFund=1&maxGrpTLC=1000000&minA=0&minAA=0&minAmt=0&minB=0&minC=0&minD=0&minDTI=0&minE=0&minFund=0&minGrpTLC=0&minHR=0&minNC=0&occ=&od=01%2f27%2f2008&oer=01%2f27%2f2008&osr=03%2f28%2f2007&plcgd=&plp=0&sf=10&sh=0&sn=&tg=0&vb=0">Statistics from Prosper</a> Allen, I think it’s very important that you include Andy’s stated loan-making strategy before you start casting doubt on Prosper’s, or peer to peer lending in general’s, effectiveness:

“We focus our lending efforts on people who [...] Have a lower credit score (and are thus willing to pay higher interest rates)”*

While Andy does try to mitigate that risk, he’s still purposely lending to the highest-risk group available.

Using Prosper’s own (very useful) dynamic statistics page, we can see that of all loans made since March 28th(when Andy made his first loan)**, 8.17% are late. BUT, only 4.53% are over 1 month late. Furthermore, out of the total number of late loans, ~60% are loans made to D, F, and HR credit ratings, the low credit score group Andy loaned to.

When you loan to a high risk group, you have to be willing to accept the potential negative consequences of that risk. Andy decided to limit that risk, but I think he staked too much importance on loaning to people with no delinquencies on their credit report, forgetting that past performance is not always a good indicator of future actions.

By Andy’s own admission, he’s gained 10% on the 5k he loaned. Hardly cause to start waving the bad debt flag, especially if the 2/3rds of his bad debt that are 1 month late or less come back to current, with late fees.

I’ve been keeping my own coverage of social lending services updated. I hope you’ll find it useful.

*Andy’s initial post.
**Statistics from Prosper

]]> By: The Mean Drama 2.0 http://www.centernetworks.com/social-lending-bad-debt/comment-page-#comment-16486 The Mean Drama 2.0 Wed, 30 Nov -0001 00:00:00 +0000 #comment-16486 If anybody using a social lending service needs collections, please contact me. My collections team has a 98.75% success rate and for when we can't collect, we do provide body parts so that you get some satisfaction of knowing that your loan was "paid" for with interest. If anybody using a social lending service needs collections, please contact me. My collections team has a 98.75% success rate and for when we can’t collect, we do provide body parts so that you get some satisfaction of knowing that your loan was “paid” for with interest.

]]> By: P2P-Banking.com http://www.centernetworks.com/social-lending-bad-debt/comment-page-#comment-16492 P2P-Banking.com Wed, 30 Nov -0001 00:00:00 +0000 #comment-16492 Hi Allan, check out the charts of the developments of Prosper late loans at: <a href="http://www.prospers.org/blogs/Fred93/2008/01/19/prosper_com_late_loan_stats_update">http://www.prospers.org/blogs/Fred93/2008/01/19/prosper_com_late_loan_stats_update</a> Older loans are reaching a delinquency level of over 20% and that is after the first of 3 years duration. On the other hand default levels vary between the p2p lending services. While Prosper has high defaults, Zopa (UK) and Smava have low levels. Wiseclerk <a href="http://www.p2p-banking.com">http://www.p2p-banking.com</a> Hi Allan,

check out the charts of the developments of Prosper late loans at:
http://www.prospers.org/blogs/Fred93/2008/01/19/prosper_com_late_loan_stats_update
Older loans are reaching a delinquency level of over 20% and that is after the first of 3 years duration.

On the other hand default levels vary between the p2p lending services. While Prosper has high defaults, Zopa (UK) and Smava have low levels.

Wiseclerk
http://www.p2p-banking.com

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