The third quarter has drawn to a close and another great month is in the books for Lending Club and Prosper. Between the two companies they issued $236.5 million in new loans this month. I think it is safe to say that number will be over $250 million next month. To put some perspective on this growth – the two companies combined in September 2012 for $92.9 million in new loans.
Lending Club Issued $203.4 Million in New Loans
Lending Club crossed the $200 million mark for the first time ever as their steady but rapid growth continues unabated. This was up from $190.3 million in August. As Renaud Laplanche said in my visit with Lending Club earlier this month they continue to control their growth as they add steadily to their capacity.
The milestones keep happening for Lending Club and one that almost went unnoticed this month was crossing $2.5 billion in total loans issued since inception. At their current growth rate they will pass $3 billion some time in early December.
Below are some stats from September for Lending Club as well as their 18-month chart. The black line in the chart below is the three month moving average.
Average loan size: $13,800
Percentage 36/60 month loans: 74.2%/25.8%
Average interest rate: 16.0%
Percentage of whole loans: 24.3%
Average FICO score: 699
Prosper Issues $33.2 Million in New loans
Hot on the heels of their $25 million funding round Prosper closed another solid month in September. Total new loan volume came in at $33.2 million up from $31.4 million in August. After being on a growth tear earlier in the year the rate of growth has slowed at Prosper over the summer.
This was part of the plan according to Aaron Vermut, Prosper’s president. He told me in our regular end of month call that there were some infrastructure changes that needed to be put in place before they could enter the next phase of their growth. The good news is that the changes implemented earlier this month for the borrower funnel have been a resounding success. In the last two weeks conversions of borrower visitors to the website were roughly double what they were before the changes.
What this means is that Prosper can now get more borrowers on their platform for a much lower cost. This will certainly bode well for them as they continue their journey to profitability.
Below are the statistics for Prosper this month as well as their 18-month chart.
Average loan size: $10,517
Percentage 36/60 month loans: 63.6%/36.4%
Average interest rate: 19.0%
Percentage of whole loans: 58.1%
Average FICO score: 694
Prosper avg interest rate……….19%……………avg FICO……694
LC avg interest rate……………….16%……………avg FICO……699
I find the above set of numbers particularly interesting.
Yes, I’m well aware that Prosper only recently switched to FICO & that part of the reason for the substantially higher Prosper rates are due to the heavier weighting towards the 5 year term. What I find interesting is the closeness of the FICOs
Just to clarify on the Prosper FICO score. I only included loans that were issued from 9/24/13 onwards, around 1,200 loans. This cutoff date should have provided enough time so that only FICO scores were included – the switch from Scorex Plus to FICO was made on 9/8/13.
As for interpreting the numbers, one could assume from these numbers that LC and Prosper are trying to attract a similar borrower and the increased interest rate at Prosper is because, as you point out, they put more borrowers into 5-year loans. Having said that Prosper has a FICO cutoff of 640 for new borrowers and 600 for repeat borrowers so one would have expected the average FICO to be much lower at Prosper than LC. But their Chief Risk Officer said to me in a recent visit that they expect to have an average FICO somewhere around 700. And he is achieving that goal so far.
Peter, what do you think of using the whole loan percentage as an indicator for a platform’s preference for institution vs retail? For instance, LC & P *say they are balancing these two tensions, but then a very large percentage of their loan pool never even crosses the screen of the retail investor. Wouldn’t this be a numeric measure of which party they prefer over the other?
Simon, That is a fair question but I think it is a little too simplistic to view that number alone as an indicator of a platform’s preference. For instance, I am finding it much easier to stay fully invested at Prosper than I am at Lending Club because there is far more competition between investors at LC. This, despite the fact that the percentage of loans available for the fractional platform is far lower at Prosper than LC.
It is clear to me that both platforms would like to keep retail investors happy. But Prosper has another high priority and that is grow their platform rapidly in order to remain a strong #2 player. They also need the economies of scale this growth provides to get to profitability. It is easier to do this by increasing the percentage of their loans to their whole loan platform.
Agreed. I’m not trying to claim it as an absolute statement, but simply a much needed starting place. So often the retail vs institutional conversation devolves into emotional hearsay, but this monthly number provides us with, at least, a hard metric from which to begin.
All, does LC source FICO from Experian, TransUnion or Equifax bureau data? Same question for Prosper. My point / question being: are the sources the same? (There are known to be differences in various segments depending on what underlying data is used to computer FICO. )
Good point John. The answer is no. Lending Club uses TransUnion FICO and Prosper uses Experian FICO – so we are not comparing apples with apples when comparing the two FICO scores from LC and Prosper.