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Social Lending Updates: Lending Club Passes $1 Billion in Loan Demand; Prosper Sees High Debt Consolidation
It’s been a while since we’ve taken a look at the social lending industry in the U.S. Both Lending Club and Prosper are out with new updates that are worth taking a look at. It’s no shock that social lending has taken off during the current economic crisis. If you are new to social lending, check out our 3-part series.
Earlier this week, Lending Club Sr. Director, Product Strategy Rob Garcia posted an update on the company’s progress. Rob noted the following stats:
- $1 billion in loan demand (these are people requesting loans)
- $95 million in funded loans
- 10,000 loans funded since June 2007
Lending Club provides a near real-time stats page that shows figures including: loans funded, total dollars funded, use for funds and investor return rates.
Last month Prosper released findings that showed debt consolidation loans at an all time high. “Over the course of the last six months, debt consolidation loans have been ticking up, and in January hit an all time high of 59% of loans. Historically debt consolidation has tracked at approximately 45% of loans.”
The Prosper release also discusses the new credit card rules and notes that will be included in customer’s statements beginning this month. Chris Larsen, Chief Executive Officer and Co-founder of Prosper noted, “We’ve always believed that credit cards provide a convenient payment mechanism, but are terrible as a financing solution. As more consumers start realizing it will take them approximately 30 years to pay off their credit card if they pay only the minimum payment each month, we think more will realize that they need to eliminate their credit card balances quickly. So seeing more people turning to Prosper to pay off destructive, high interest credit card debt is probably a trend that will continue for the foreseeable future.”
Have you used social lending tools to help with debt refinancing or new purchases? Leave a comment (you can post anonymously) about your experiences.
Just a week after announcing a $12 million series B venture capital round, social lending company Lending Club has announced a new partnership with EntrustCAMA. The new partnership will allow lenders to use monies from their IRA retirement accounts as funding sources for loans made on Lending Club.
Renaud Laplanche, CEO and Founder of Lending Club said regarding the launch, "Now investors have more choice for their retirement accounts beyond traditional asset classes."
EntrustCAMA will serve as the administrator for the accounts. Check out the full press release which includes links about the program. Clearly there are a lot of pros and cons about using your retirement account in this manner and the best advice I could give you is to speak to someone who fully understands the retirement account market and can guide you and your monies.
P2P social lender LendingClub has announced they have raised $12 million in a Series B round of funding. Morgenthaler Ventures led the round and is joined by existing investors, Norwest Venture Partners and Canaan Partners. Renaud Laplanche, Lending Club’s CEO and Founder noted, "This additional capital will allow us to continue to expand our capabilities and accelerate the growth of our customer base." The company has raised just over $28 million to-date.
Lending Club has also announced Pamela Kramer as the company’s first CMO. Pamela has spent the last two decades in the online financial space.
Interestingly enough, p2p lending news caught a twitter message from LucHardy, president of Sagax, a venture capital firm. The message, posted on Tuesday, noted the funding amount but was quickly deleted.
p2p lending news has another post that is well worth reading which has a lengthy breakdown of the loans that Lending Club is currently funding. Lots of charts and graphs along with their analysis on the lending. They note that 24% of the loans Lending Club makes come from them versus the p2p community. I can’t comment on this as it’s not my area of expertise but the information came from the SEC filings that Lending Club is required to make.
We’ve got a couple updates on the social lending front this morning. First, Prosper has entered a quiet period which they note, "Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future."
During this time Prosper will not accept any new loans but will continue to service the loans that have already been completed. Lending Club just completed this process which took about six months to complete.
I’ve also received some loan numbers from Lending Club on the 10-day period since the quiet period completion. They have signed up 1,072 new lenders and in total have transferred just under $2 million to their Lending Club account. These numbers are higher than before the quiet period began earlier this year.
If you are new to social lending, our three-part social lending series will get you up-to-speed.
Back in April we reported on P2P social lender LendingClub entering a "quiet period" from the SEC. In June Lending Club filed with the SEC for $600 million in notes. Today Lending Club will announce at the Finovate conference in NYC that they have completed the SEC registration process which ends its six-month quiet period. The updated Lending Club website is available again to lenders and borrowers.
Lending Club notes that the average interest rates for a person with good credit will be 12%. They are also launching LendingMatch which provides lenders with loan information to create a well diversified portfolio. Loans becomes notes registered with the SEC and Lending Club is also launching a secondary P2P loan market.
Lending Club is pushing the concept of "people lending to people" — this concept online is called social lending or social finance. To-date Lending Club has originated more than 2,000 loans with a value of over $19 million.
With the current economic situation, will more people turn to P2P lending if denied by their bank or financial institution. Something tells me that today’s announcement from Lending Club comes at the perfect time. Check out my interview with Lending Club CEO Renaud Laplanche.
Last year we asked a number of startup entrepreneurs to provide their top tips for success. Today "DebtKid" on the LendingClub blog listed 7 mistakes made when he/she was building out his/her startup. Check out the full blog post for all of the details and apparently later this week will come 7 things done right.
Update: Top Dog Ted has a post regarding the mistakes listed below. Ted discusses hiring a friend and the points to consider.
Here’s the 7 things:
- I Managed People like Michael Scott from “The Office”
- I Hired My Friends
- I Budgeted Like Britney Spears: Terribly
- I Leased A Fancy Office While My Large Basement Went Unused
- I Raised Money Before I Had Customers
- I Mixed Business with Pleasure
- I Assumed Everything Would Go According to Plan
In June 2008, Lending Club filed with the SEC for registration of $600 Million in Member Payment Dependent Notes. Lending Club has been in a "quiet period" since April 2008 while working on the registration. Today the DoughRoller blog was able to gather new information on the SEC registration filing.
DoughRoller notes, "In its Amended S-1, LendingClub disclosed that under a new formula, it will also use several other credit markers in calculating interest rates. Specifically, LendingClub will factor in a borrower’s number of open accounts, the number of credit inquiries in the last six months, how much of a borrower’s available credit is used up, and length of credit history." Previously Lending Club used only an applicant’s FICO score, debt-to-income (DTI) ratio, and amount borrowed. This new set of loan criteria should provide a more balanced picture of the applicant for potential lenders. Many times an applicant will apply for a large number of credit cards at once but they won’t show up as tradelines for several months. By viewing current inquiries, a lender can get an idea if the borrower has been out grabbing lots of new credit.
We will continue to actively monitor the social lending space. Considering the current financial picture, social lending could become even more active than it is currently.
If you are new to the concept of peer-to-peer lending, check out our social lending series. Also check out our exclusive interview with Lending Club CEO Renaud Laplanche.