Benefits of Investing in P2P Lending via Lending Club

Lending Club lenders have invested more than 45 million US$ in loans to fellow borrowers. Not yet a Lending Club investor?

You might off by watching this presentation, which was recently webcasted by Lending Club to lenders. The 30 minute presentation lists benefits and explains the basics on how the website works.

Since it is marketing material it does show a very rosy picture on the numbers, but you can crunch all figures for yourself on Lending Club’s statistic page (e.g. change observation to loans issued from June 2007 to June 2008).

If you are ready to start investing at Lendingclub. com you can sign up here.

Lending Club receives 12 million US$ VC funding

Lending Club announced today that they have closed another funding round. Excerpt from the press release:

… closed a $12 million Series B round of funding. Morgenthaler Ventures led the round and is joined by existing investors, Norwest Venture Partners and Canaan Partners. Rebecca Lynn, a Morgenthaler Principal, is joining Lending Club’s board of directors.

Lending Club also announced today that it has added Pamela Kramer as Chief Marketing Officer. Ms. Kramer is an established marketing veteran … . She was most recently Chief Marketing Officer of MarketTools, Inc and, before that, spent 9 years in leadership roles with E*TRADE Financial … .

Lending Club invested 2.4 million US$ to fund loans

As has researched Lending Club has invested 2.4 million US$ of its own money to fund loans since the relaunch in last October. The total volume of funded loans is approx. 10 million US$, that means that Lending Club funded about 24% of all loans itself.

The data is from weekly sales reports that Lending Club files with the SEC. The sales reports look like this and give details on each loan funded.

More details and numbers in the article (recommended reading) by

While this may be contrary to the “pure” idea of peer to peer lending my take on this is:

  1. I see it as a positive development. By using own money to fund loans Lending Club demonstrates their belief in the business model and shares the same risk it expects lenders to take. By the way: There are ongoing discussions at MYC4 about changes that could lead to MyC4 and MYC4 providers to share more risk in funded loans.
  2. By co-funding loans Lending Club adds continuity. When supply of money by lenders is low, Lending Club co-funds more. That way the demand by borrowers can be served without interruptions.
  3. However since due to SEC filings very detailed information on the funded loans is publicly available, the explanation of Rob Garcia that the download data was removed due to privacy concerns (see previous post), seems stale.
  4. P2Plendingnews questions, if Lending Club can continue with co-funding for running out of funds. On the other hand, Lending Club earns interest from the funded loans and can sell the notes any time on the secondary market (that would explain why so many of the notes there are offered for sale immediately after the loan was funded).
  5. One further and important aspect: Only residents of 25 states can participate as lenders on Lending Club directly. However on the Note Trading platform residents of all but the states Kansas, Maryland, Ohio, Oregon, Texas and Vermontand the District of Columbia can buy notes.
    That means by co-funding loans and selling part of their investments on the Note Trading Platform Lending Club enables a larger target audience to use their service.

Please share your opinion by commenting here or in the Lending Club forum. Thank you.

Lending Club Observations

Recently I noticed two changes on p2p lender’s Lending Club website.

On the statistics page the link to download the loan data was removed. Before it was possible to download the complete loan data since inception of the service. Furthermore the predefined setting for the parameter “Loans issued from” is set on March 1,2008 now. That means, if you look on the page and do not change that parameter manually you see how loans performed that were issued between March 1, 2008 and today. Older loans issued between June 1, 2007 and Feb 29, 2008 are not included in the displayed results.

When I noticed that, I was reminded of what Prosper did with it’s statistics. Prosper segmented it’s loans (e.g. prosper select index) and cited only results for better performing segments in press releases. Furthermore the predefined values on Prosper’s statistic page, were set in a way that lowered the late payments and default ratios compared to an average over all Prosper loans.

But Lending Club had successfully positioned itself with transparency a core value in the past, so I asked Lending Club to comment on the reasons for the changes.

Rob Garcia, Director Product Strategy told

This is a temporary situation. We chose to take down the files due to privacy concerns raised by our customers. We are working to address these concerns in a way that continues to provide full transparency to platform data, while protecting the privacy of our customers….

On the setting of the parameter he stated:

The default setting for the statistics page is a year. So since we are now in March, the “From” date is defaulted to March 2008. This is to show the most relevant annualized indicators for the last year. Users can then change the “From” and “To” dates to explore the indicators for a specific time frame they may be interested in, including from inception (June 1, 2007). We did this based on numerous email inquiries from lenders asking for annual default rates instead of a general default rate since inception (so that they can compare annual defaults to annual interest rates to get actual net returns). We’re looking at tools to make that calculation easier…

Yesterday Lazy Man wrote about his observations on how Lending Club reports risk. The posted screenshots show that interpretation of the risk figures is not obvious under certain circumstances.