social lending Archive

NY-based Loanio, a new peer-to-peer (p2p) social finance lender, has launched today. Loanio says what differentiates them from the other p2p lenders is that they allow co-signers to help others get credit.

Loanio CEO and Founder Michael Solomon notes, "only around
10% of borrowers on p2p lending sites wind up getting a loan." Loanio is attempting to help people with no credit and poor credit by attached a co-borrower to the loan. Loanio charges an origination fee to borrowers and a service fee to lenders.

Loanio’s suggested interest rates range from a max of 7-14% for A credit through 22%+ for E credit.

Loanio also offers a service to borrowers named "Platinum Verification Service". By paying a fee to Loanio, they will verify self-reported data which can help with the a lender’s assessment. One interesting note from the Loanio Web site, "all loans are originated by Loanio and then sold to website lenders who are legally considered the loan purchasers."

Check out our 3-part social lending overview and our coverage of p2p social lenders Lending Club, Prosper and Zopa.

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.

We were the first to report on Lending Club’s quiet period on social lending back in April. At that point, Lending Club stopped originating or issuing new loans during the quiet period. If you are new to social lending, our three-part social lending series will get you up-to-speed.

Below is the announcement that Lending Club is making today regarding their moving forward. Here’s my simple take – lenders will buy "notes" and then use the funds from those notes to provide loans to Lending Club members. Since this information is very specific, I’ve decided to post the entire press release below. It’s important to note that Lending Club is still in a quiet period until the filing is effective.

In contrast, social lending competitor Zopa is using insured CDs with their loan products.

Lending Club Files Registration Statement with the SEC

SUNNYVALE, CA – June 20, 2008 – Lending Club announced today that it has filed a registration statement with the Securities and Exchange Commission under the Securities Act of 1933 relating to its social lending platform.

The registration statement seeks to register the offer and sale of up to $600,000,000 in Member Payment Dependent Notes to be issued by Lending Club in a continuous offering following the effective date of the registration statement. The Notes will be issued in series with each series of Notes corresponding to a single consumer loan to a borrower member. Lender members will direct Lending Club to apply the proceeds Lending Club receives from the sale of each series of Notes to fund a particular consumer loan selected by the lender member and originated through the Lending Club platform.

A series of Notes will be issued only if and when the corresponding member loan closes and is funded. Lending Club will have an obligation to make payments of principal and interest on the Notes only to the extent that Lending Club receives payments on the corresponding member loan.  The terms of the Notes, including interest rate and initial maturity, will correspond to the terms of the corresponding member loans but will reflect a four business day lag on payment dates and maturity to allow the platform to confirm payments received on the corresponding member loan.

Lending Club will offer the Notes only through its website directly to lender members.

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but it has not yet become effective. Copies of the Lending Club registration statement can be accessed on the SEC website: http://www.sec.gov/. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.

About Lending Club (TM)

LendingClub.com is a social lending network headquartered in Sunnyvale, CA.

Earlier today we wrote about Lending Club and the abrupt change to their lending policy. Basically for the time being they are not allowing any further p2p (peer-to-peer) loans, only loans made directly with them. I am not sure what amount of funds Lending Club has to lend. I have heard back from CEO Renaud Laplanche and he can’t share anything at this time.

I’ve also noticed some commentary from Lending Club lenders across the net. Here are a couple:

• Scott notes that Lending Club is "no longer peer-to-peer lending"
• Jason Crews is annoyed that he wasn’t informed sooner so he could add more funds to his account to allow for more loans

We will continue to monitor the status and report updates as they become available.

Social lending site Lending Club has posted a notice on their site and blog yesterday. The notice which I have copied below notes that new loans for the time being will come directly from Lending Club and not from other individuals as they have in the past. In summary, Lending Club works by individuals lending money in groups to other Lending Club members at interest rates determined by their credit score. Check the Lending Club blog for more details.

Could the company be working towards an IPO? My guess is not and that this is a standard process to protect Lending Club as they grow. The term "quiet period" is being used and we hear this period could last as long as three months. I have an email into Lending Club to try to get more details. In any event, we will keep you informed as the situation progresses.

Important Information

Lending Club 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. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.

Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.

Check out our 3-part social lending series to learn how this new lending option works.

We’ve written about social lending several times before including our 3-part series looking at Zopa, Prosper and LendingClub. Jim Bruene at NetBanker has put together a good financial analysis of the social lending scene for the first quarter of 2008. LendingClub and Prosper share their loan information while Zopa does not.

From Jim’s analysis, "In Q1, Prosper and Lending Club combined for more than $30 million in originations, up $10.7 million (55%) compared to about $20 million in Q1 2007." Jim goes on to note that for the lower risk loans, LendingClub actually passed Prosper in total volume.

If the economy continues to sour, my guess is that loan applications at Zopa, Prosper and LendingClub will increase dramatically.

Social lending company Lending Club announced their national launch last month. They offered me a t-shirt and naturally I said that they must give some to the awesome CN readers. They agreed and so we have a few tshirts to give away. Five size Large Lending Club t-shirts.

On the front pocket area, the shirt says: LendingClub and on the back it says: We are all bankers and the URL.

If you want one, shoot over your details but make sure you can fit into a L-sized shirt. And check out all of our social lending coverage including Zopa and Prosper.