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May Was a Big Month for Lending Club and Prosper

by Peter Renton on May 31, 2013

May will certainly go down as a milestone month for the U.S. p2p lending industry. We had the much talked about Google/Lending Club deal and then we had major milestones being hit by both Lending Club and Prosper. Lending Club issued more than 10,000 new loans for the month for the first time and Prosper continued their record setting ways and issued $25 million in new loans.

Lending Club Issues $148 million in New Loans in May

Total loan volume was up 5.6% over last month at $148 million with the official number of new loans coming in at 10,350 or 470 per business day. The average loan size was down slightly to $14,303. Let’s put Lending Club’s growth in perspective. In May 2012 I gushed about Lending Club’s rapid growth as they issued $45 million in new loans – they are up an astounding 228% in loan volume since then.

The average number of available loans stayed steady as investors continued to snap up loans as fast as Lending Club can list them on the platform. Most of the time there are between 100 and 200 loans on the platform at any one time these days. This seems like a new normal for Lending Club with most investors adjusting to the new reality.

Below is their impressive 18-month loan volume chart. The black line is the three-month moving average.

Prosper Keeps Up Their Rapid Growth in May

It has been a remarkable turnaround at Prosper. From December through February total loan originations were below $10 million well down from their high of $15.8 million last September. Many investors questioned on this very blog whether Prosper would make it. Now, they are going from strength to strength with very strong investor interest.

Here are the official numbers. Prosper issued 2,436 new loans (up nearly 500 loans from last month) totaling $25 million in new loans in May. The average loan size stayed steady at $10,278. In May 2012 Prosper issued $12.8 million in new loans so they are almost back to their 100% year over year growth

I spoke with Prosper president, Aaron Vermut, yesterday. about their month. He was obviously very pleased with the results, he said particularly when you consider Prosper moved into a new office space during the month. He said that there has been continued strong institutional investor interest and that retail investors are also showing gains again. Now, that institutional investors are restricted to 75% of any loan in the fractional loan pool retail investors are finding it easier to put their money to work.

Below is Prosper’s 18-month loan volume chart with the three-month moving average which has an almost hockey-stick like shape to it now.

Prosper p2p loan volume through May 2013

{ 12 comments… read them below or add one }

RussG June 6, 2013 at 5:20 pm

I really don’t care how much Lending Club lends out or if they’re setting new records, if it isn’t my money they are lending (I have a Prime account where they do the loan picking for me). My cash at LC has been growing so Iv’e been withdrawing it and deploying it elsewhere.

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Peter Renton June 6, 2013 at 9:27 pm

Fair enough RussG. But on that point about Lending Club PRIME. For a couple of months there LC was doing a poor job investing cash for PRIME investors. In my account that has been rectified and now there are investments being made every 2-3 days which is the best it has ever been since opening my account. Just thought you should know.

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RussG July 6, 2013 at 1:33 am

It’s a month since your email immediately above, Peter, and I thought I’d pass along this update.

You seemed to indicate that your Prime account was being invested every 2-3 days “the best it had ever been since opening your account”. Maybe LC gives you special consideration (without your knowledge) because of the influence you may have in P2P lending.

The frequency of investments made by LC for my Prime accounts is only part of the story. How much they actually mange to invest may be the bigger part of it. My two Prime accounts, even after withdrawing $10,000 cash from each, each have over $5,000 cash in them now. Had I not made those $10K withdrawals each account would presumably have over $15,000 of uninvested cash.

If I do not see a turnaround soon and my uninvested cash amount becoming smaller with the passage of time, I’ll make additional withdrawals. BTW, I also have money at Prosper. While it’s been slow to get it invested at least they are moving in the correct direction: less and less uninvested cash rather than more and more such as it is at LC.

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Peter Renton July 7, 2013 at 2:50 pm

Thanks for the update Russ. I can see why you would want to withdraw your cash. To let the cash build up that much is very poor service. It is possible my account could be getting special attention, I really don’t know. But I just checked again today and I am remaining fully invested with around two new investments a week.

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RussG July 7, 2013 at 3:06 pm

The difference between your account being fully invested and mine having a lot of uninvested cash may be that in order to stay fully invested you need a smaller number of new loans than do I. I imagine this would have to do with the account value, how many loans are held in an account, and also the amount invested in each loan. For example, an account with $100,000 and only $25 invested per loan would require 4,000 loans to be full invested. With more loans in an account more of them would be paid off early and default, requiring more new loan availability to replace them. Investing $50 per loan would require half as many loans be available and made in order to be fully invested.

Without getting specific about my account values, let’s just say I have thousands of loans in each of my accounts. While I’ve increased the amount I’m willing to invest in each loan from $25 to $50 my cash balances continue to grow with nearly $6,000 in cash in my Prime IRA, for example.

Peter Renton July 8, 2013 at 6:37 am

That is likely the problem. My Prime account is only $17,000 so it takes just a few loans of $25 each week to remain fully invested. I think it is a good move to increase the average amount invested per loan for large investors. Still, I would have thought Lending Club could have been proactive about contacting you to try and minimize your cash – after all it sounds like you are not a small investor.

RussG June 8, 2013 at 5:23 pm

That’s good to know, Peter, thanks. I’ll keep an eye on my accounts and should the cash balance return to the low-mid 3 digits I’ll consider moving some money back to LC, but not before.

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Simon Cunningham July 6, 2013 at 1:19 am

Quick question. If I use the Prosper Performance Data site it says 2390 loans were issued. Why the discrepancy from Aaron Vermut’s number?

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Simon Cunningham July 6, 2013 at 1:28 am

ack! realized I didn’t have the dates set correctly :P

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rj November 11, 2013 at 1:00 pm

Are LC and Prosper a good fit if I have 2-400k to invest? i.e. will cash get invested quickly?

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RussG November 11, 2013 at 1:52 pm

rj,

I’ve been taking money out of my LC accounts for a long time now because they have not been able to invest it. As loans get paid off and interest is paid this money goes into the cash balance of the account. My cash balance keeps growing because they don’t have enough loans in need of funding. (I have a Prime account where they do the investing for me.) I have taken about $40,000 out of my Lending Club accounts in the past year or so and I’m getting ready to withdraw more.

So, NO! I would not give any money to LC at this juncture. None! As I’ve said, I’ve been having to WITHDRAW funds in order to invest them in something else rather than letting the cash sit idly at LC. I don’t have nearly as much with LC as you say you have to invest so unless you have some inside connections I expect you’d experience the same problem I’ve been having with LC. Is LC even accepting new investors now? I don’t think they should be, not until they can consistently reinvest the cash of their existing Prime account customers.

Prosper has done a little better for me. I gave them 10K in May of this year, which, except for about $350 is invested. In July I opened another account giving them a like amount of money. In October I put another $6K into this second account. About $4300 remains uninvested, but at least things are moving in the right direction.

So, for me, Prosper has been moving my funds from cash into loans, whereas Lending Club has been moving my funds from loans into cash. Prosper is working for me. Lending club is not.

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Peter Renton November 11, 2013 at 1:53 pm

I think LC and Prosper are a great fit for large and small investors alike. How quickly you invest your cash is up to you and is dependent on many factors. There are more loans at the lower risk end of the spectrum and they stay on the platform longer, so if you want to invest in A and B grade loans you could easily put your entire investment to work in a month or so. Even less if you want to invest in every loan.

Keep in mind that to be fully diversified I think you need to invest in about 500 different loans. So, if you investing $200K then your average investment per loan would be around $400. So, investing in 500 different loans does not need to take much time at all. When you look at Lending Club right now they have added almost 5,000 loans in the past 7 days alone.

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