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Another Huge Month for U.S. P2P Lenders: Lending Club Goes From $50 Million to $60 Million

by Peter Renton on July 31, 2012

Wow. There are no summer doldrums in p2p lending. We have gone from a total of $63.8 million in new loan issued by Lending Club and Prosper to $75 million in just one month. This is by far the biggest one month jump in history thanks primarily to Lending Club and their massive increase in originations in July.

Lending Club’s Loan Volume up 20% in July

Throughout the past year Lending Club has been growing steadily. Typically, their loan volume has been up around 7-10% month over month – it was rapid growth but steady and predictable. In July their playbook has been thrown out the window as their volume has rocketed up almost 20% from the previous month.

The official numbers for July were $60.1 million in new originations spread over 4,627 loans. This last number was even more impressive – the number of loans were up 21.2% over the previous record set in June. The average loan size dipped below $13,000 for the first time in six months as it continues to fall after the high of over $14,000 reached in February.

For most of July the number of loans available on Lending Club at any one time was over 2,000 and as I write this there are over 2,500 new loans available for investors. Clearly, they have their foot on the marketing accelerator and they are not letting up. It will be very interesting to see if they keep this pace up in August. Given the fact that August is a long month and there are no public holidays I would expect loan volume to easily end at over $70 million this coming month.

Their 18-month chart is below, note the big bump at the end. The black line is the three month moving average.

Lending Club P2P Loan Volume Chart

Prosper Records Another Very Strong Month of 10% Growth

But for Lending Club’s massive month the Prosper numbers would also look impressive. Total loan volume came in at just over $14.9 million up 10.1% from last month. There was also a record number of loans issued at Prosper – 1,961 loans were issued in July for an average of $7,611.

Normally, I include the total loan volume for the major Prosper investors in my monthly update but with Lendstats still not allowing any Prosper queries I don’t have access to that data this month. I have found a work around for next month but for July I have no investor breakdown. Given the increase in loan volume, though, I suspect it was another big month for Worth-Blanket2.

What is interesting is that Prosper is at the exact same volume that Lending Club was at just 18 months ago. If they stick to a similar growth curve we should see loan volume of $20 million by the end of the year. Below is the Prosper 18-month chart and their three month moving average.

Prosper 18-month p2p loan volume through July 2012

{ 19 comments… read them below or add one }

Bryce M July 31, 2012 at 6:53 pm

I did my part. $10,000 invested in July.

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Peter Renton July 31, 2012 at 7:32 pm

Great stuff Bryce. You were 0.1% of the total increase…

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Dan B July 31, 2012 at 7:43 pm

Me too. $4k of my own, $18k of OPM.

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Dan B July 31, 2012 at 7:44 pm

I say we keep Peter & his calculator busy the rest of the evening. :)

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Megan August 1, 2012 at 6:34 am

This growth makes me nervous. If it had been a slow increase in the rate of growth for the preceding months I wouldn’t be as worried. Did LC change their loan criteria? Are they offering credit to less stellar borrower? Did they keep their ratio of loans rejected the same? And if so, where did all the lending $$ come from and how are they going to keep that level of lending up? I know they just got a huge inflush of cash from private equity, but is that sustainable?

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Peter Renton August 1, 2012 at 8:04 am

Megan, Your feelings are understandable but the driver of this growth is the investor money. Remember this month they announced another $25 million investment from Peter Thomson – I am sure that figured in to some of the total. I am also quite certain that LC didn’t adjust their underwriting standards in order to increase the number of loans – they realize that would be a a stupid move for the long term. Through their marketing partners they have a great deal of control on the supply side and they increase the supply when they know the investor funds will be there.

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Bryce M. August 1, 2012 at 8:43 am

To chime in, Megan, I use an automated rating system to purchase my notes and the cutoff I use to buy notes was still targeting about the top ten percent of them. If their underwriting changed dramatically, my fixed cut point would not have resulted in the same number of identified notes to buy.

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Kent August 1, 2012 at 9:33 am

Thanks for the trend information Peter. I invest primarily with Prosper ($28k). I do have a Lending Club account but only have $200 invested. The main reason I prefer Prosper is that when searching loans you can filter on previous Prosper borrowers. I can’t find how to do that with Lending Club. Any thoughts/help anyone? Also, I am concerned about Prosper. Any thoughts on Prosper folding or being bought by Lending Club? Thanks again for maintaining your website Peter. It is extremely useful.

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Peter Renton August 1, 2012 at 6:28 pm

Kent, That is one of the advantages of Prosper – there is no way to filter on repeat borrowers on Lending Club. And while it is true Lending Club is in a very strong position financially I don’t think they are looking to buy Prosper any time soon. I have no concerns about Prosper going out of business – they have strong support from their investors and they really have some momentum behind them these days.

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Dan B August 1, 2012 at 8:54 pm

Incidentally, this month was also Prosper’s largest month to month increase in dollar volume since coming out of SEC registration way back in July 2009.

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Peter Renton August 2, 2012 at 8:45 am

You are dead right on that and something I should have mentioned in my article. Prosper is certainly ramping up their growth as well.

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Dan B August 2, 2012 at 11:44 am

Quite.

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mcs August 2, 2012 at 11:22 am

Why is Lending Club suddenly down to 1500 loans?

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Peter Renton August 2, 2012 at 11:31 am

Because in the last day and half $17 million in loans have been originated on Lending Club. There is a huge influx of cash these days in the first two days of the month and that takes a lot of loans off the platform. I expect it will be back up over 2,000 loans within a week.

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Dan B August 2, 2012 at 11:48 am

My response was longer than yours. :)

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Dan B August 2, 2012 at 11:41 am

Because, as I mentioned in another thread, the first 2 business days of every month is when Lending Club deploys a big chunk of their institutional money. This month the total is $17 million! So naturally this eats up quite a few loans all at once. However……………..& before anyone revisits the whole fear of the best loans being gobbled up etc etc. again………… Please keep in mind that there are rules & procedures in place at both LC & Prosper that balance/limit the percentage/amount of institutional investments in such a manner that retail investors (i.e. the rest of us) have the opportunity & the time to get in on each note as well, if they so wish.

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Roy S August 3, 2012 at 4:22 pm

I’m not sure what is happening over at LC, but Prosper is starting to annoy me. I thought they instituted the verification stage so lenders would know how close a loan is to being originated. As I’ve commented previously, they have been taking longer and longer to originate loans. I currently have 2 loans that I invested that were in verification stage 3. The loans were fully funded over a week ago, and they have yet to originate. Really, I’m beginning to think the verification stage information is a placebo. Either that or they really need a verification stage 4, where the loan will originate once it is completely funded. I purposely invest in stage 3 loans (and even stage 2 loans) because I don’t want to deal with the length and uncertainty that comes with investing in loans that could potentially take a long time to fund and may not even originate after funding. But if the information is meaningless, then they need to stop posting it. And if they can’t keep up with the loan volumes, then they need to hire more people or invest in better technology. I’m beginning to think that LC is probably a better place to invest, especially since the returns on LC were closing in on those being achieved on Prosper. ROI-wise, Prosper had the advantage. But this no longer seems to be the case, and LC has the advantage with a larger investor and borrower base, which is still growing dramatically. Prosper is still a year and a half behind LC in terms of volume. They really need to do something to begin to challenge LC. And taking a week AFTER funding for the Notes that are furthest along in the verification process is unacceptable and will hamper their efforts to catch up to LC. Okay…my mini rant is over. Thanks.

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Dan B August 3, 2012 at 6:00 pm

Hmm. Call me crazy but I assumed that the “verification stage” numbers were to let lenders know at what stage the “verification” process was at……………..the higher the number the closer the process was near its completion. I do understand your frustration though.

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storm August 9, 2012 at 8:01 pm

It seems like there is a lot of investor cash floating around on Lending Club these days. There are fewer loans available after using my usual filters. It also seems many of the good loans are fully funded within a couple of days after being posted. Someone has really been on a buying spree on the trading platform as well. I can sell a grace period loan within a day with a discount as little as 1%. Earlier this year, when I search for “never late” loans with a discount, there used to be 15-20 pages of notes (60 loans/page). Now there is usually only 1 or 2 pages at the most. I may need to start investing more money per loan or loosen up my filters.

I have also seen a few borrowers comments that they received a promotion in the mail from Lending Club and decided to try it. I think LC could really open the flood gates to new borrowers without compromising its default rate if it wanted to.

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