For those of us looking for new loans to invest in late on Friday night we were greeted with the screen above. Yes, that is the Lending Club Browse Notes screen showing zero notes available. What happened?
Well, first let’s preface this with a little information about recent trends at Lending Club. Three months ago I wrote about the new reality for p2p investors and how you need to adjust to this if you want to remain fully invested. Since then, even more investor money has come into Lending Club as well as Prosper.
So, as I followed along with this forum thread on Friday night I wondered whether we had reached a new level where all the loans that were being added were snapped up by investors in a minute or two.
For those of you who weren’t glued to your computer late on Friday this is what happened. At 6pm Pacific Time (to be precise at 6:02pm) just over 100 new loans were added. But by 6:04pm pretty much all these loans had disappeared from the platform. Which left us with just 40 loans of so available. Over the next several hours all these 40 loans were fully invested until we were left with the situation at around 9:45pm PT where no loans were left on the platform for investors.
A Technical Glitch
I contacted Lending Club over the weekend to find out what happened and received a prompt email back on Saturday afternoon. On Friday night there was a technical glitch with the 6pm load and the loans were removed from the site by Lending Club – it was not due to excess investor demand. These loans were slowly added back to the site late on Friday and early on Saturday morning.
Given the investor demand it is clear now that if one of these new loan additions has problems then Lending Club can run out of loans very quickly. Thankfully, it was only for a very short time and it was late on a Friday. But it does expose a vulnerability at Lending Club. With such an oversupply of investors any hiccup with bringing in new borrowers can have a dramatic impact.
Maybe one day we will have the situation where all new loans added will be fully invested immediately. But we are not there yet. Let’s just hope we don’t see any more technical glitches like this.
It looks more serious than I thought, hehe. Are we creating a new bubble here? If now investors are buying whatever comes under their hands without even watching what those loans are about? Two to three years ago I remember reading all Q&A, reviewing credit score reasons for the loan – I remember once excluding those loans where borrowers didn’t write down a reason why they need the money… I no longer do any of these otherwise I wouldn’t be able to invest at all. I am surrendering one filter after another to have at least a few notes available for investing. Why all this resembles a mortgage crisis in 2008 to me?
Just because an investment is becoming more popular it doesn’t mean it is a bubble. I think p2p lending has a long way to go before we get into bubble territory. But you are dead right on one thing. Long time investors have had to adapt in order to put money to work – that is the reality of investing in Lending Club and Prosper today.
Well I wasn’t that serious about it and also didn’t say we were there already, but maybe started building one 🙂
As Lou below I also am thinking on reducing money going towards LC and move it to equities. Not completely, but invest only 25% of available cash in LC and the rest in equities.
Glitch or not, the trend is real. EVERY day, the available notes diminishes to nearly nothing. Those that remain are there for a reason – nobody wants them. (Borrowing $30k when he/she makes $20k/year, sketchy payment history, etc.) My wife and I have 4 accounts (before and after tax included), and we have significant money in LC for the last 3 years. We’ve watched the trends, and whether it is institutional investors or not, good loans are scarfed up in minutes, not hours. There are some things you can do, but I won’t post them here and give up that edge.
Yes, before every new addition available loans at Lending Club are few – usually less than 50 with the vast majority of those A and B grade loans. And when the loans are added to the platform the most popular ones are fully invested within 1-3 seconds with 25% or more gone within a couple of minutes.
1-3 seconds? I log in at the “anointed” 🙂 hours, download the CSV file as soon as it’s available, load it into my Excel (about 3 seconds time for this process) and bam…. 90+% funded loans are littered across my screen (and they all fit on one screen! :-). Without an API, how in the world are they funded so fast? What am I missing? Is there a faster way to access loans than the CSV file?
The short answer is that nearly all the investments made in the first 1-3 seconds of new loans being added are done through the API or in some other automated fashion.
Peter, do you know how to automate buying? I was trying to set up a strategy via Interest Radar (buying from Folio didn’t work either), but must be doing something wrong since it wasn’t working. Can you help me if you know?
Thanks
I’ve been having trouble finding loans that meet my criteria for awhile now. I refuse to eliminate filters just to find more loans and I have trouble remembering to log into LC at the anointed hours. I’m moving stale cash into equities. Twas fun while it lasted.
Lou
I completely understand Lou and you are not alone believe me. I hear from many investors who are throwing in the towel because they cannot find the loans they want.
Lou, looks like I will be following you…