Lending Club Loans Being Snapped Up Quickly

Back in the old days, as in last year, Lending Club regularly had more than 1,000 loans and sometimes 2,000 loans available to investors on their platform. But in 2013 that has changed. Today, there are rarely more than 500 loans available at any one time. What gives?

This is particularly curious when you consider that Lending Club has issued over $76 million in new loans this month and we are not even half way through the month. And yet as I write this there are only 323 loans available to investors.

Take a look at the charts below. They show the loan volume activity of a typical day at Lending Club taken on Wednesday of last week. The top chart is for loan grades A-C and the bottom chart is for grades D-G (click on the charts to see them at full size).

As many investors know Lending Club adds loans to their platform in batches at 6am, 10am, 2pm and 6pm (Pacific time) every day. You can see these spikes in both graphs. The 6am addition is usually the largest as you can see but it also generates the most investment activity.

So, what is happening is that investors are gobbling up loans just as fast as Lending Club can put them on the platform. The result of all this is that some loans are now being funded within minutes and most loans are funded within 24-48 hours.

This morning I followed the loans that were added at 6am very closely. At 5:59am today there were 353 loans on the platform. At 6am 89 new loans were added. By 6:03am 14 of these new loans were at least 50% funded. Interestingly, all of these loans that were immediately funded were grades C4 or below – as in the higher risk loans. By 8am 25 of the 89 new loans had been fully funded and by 10am that number was up to 35 with the vast majority being the higher interest loans.

How Are These Loans Funding so Quickly?

It is no secret that there are some large investors now investing at Lending Club. But what has changed in the last few months is that many of these investors are no longer using the LC Advisors funds as their investment vehicle, they are investing directly on the platform.

Now, Lending Club does have a whole loan program that many of these large investors take advantage of but they also invest in loans on the main platform. However, they don’t use the regular Lending Club website like most investors, they invest through the Lending Club API, which is actually still in beta and not available for general release yet. These large investors  have programmed the API with their investment criteria and it runs within minutes of new loans being added to the platform.

How can individual investors compete? Well, the good news is that these large investors are limited to a maximum of 75% of the total loan amount so if you are quick you can still invest in any of the loans. I had no problem at 6am this morning investing in all eight loans that met my criteria and the large investors had touched only two of my eight.

Lending Club Needs Automated Investing for All Investors

But what would really level the playing field more is if Lending Club allowed automated investing within their platform in a similar vein to Prosper’s Automated Quick Invest. I have been told such a tool is in development, so it will be very interesting to see whether this tool really does even the playing field for the retail investor. Because at Prosper the API investors take their large bites out of each loan before Automated Quick Invest is run.

Others are not waiting for Lending Club. I know of a couple of different tools in development that will allow investors to take advantage of the Lending Club and Prosper APIs. I will certainly write about these tools when they become available.

The industry is maturing before our eyes as the volume dramatically increases. The speed of investing has certainly quickened this year and I don’t see that changing any time soon. Regular investors who want to have as much choice as possible need to get in the habit of logging in at those times when Lending Club adds new loans to their platform.

Hat tip to Viking, a regular participant on the Lend Academy forum, who created these charts that prompted me to write this post.

Subscribe
Notify of
59 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Viking
Viking
Mar. 12, 2013 3:06 pm

Note that Times given are PST and that there are also two small additions of loans at 2 AM and 10 PM.

Josh Brooks
Josh Brooks
Apr. 3, 2013 9:11 am
Reply to  Peter Renton

Viking, Peter,

Great work with these charts and this information. With my filter, I was struggling to get four notes ordered in a day (which turns into two notes issued). But since I read this article, I have been logging in at 0500, 0900, and 1300 EDT, and am easily able to get my target of seven notes ordered per day.

It is also very interesting to watch how many notes get funded to 70% in just a couple of minutes, while others remain untouched. The obvious reason is that the institutional money of course has their own filter, which I would very much be interested in studying.

Again, though, solid work. Once again, Lend Academy delivers remarkable value to its readers.

Viking
Viking
Apr. 3, 2013 4:54 pm
Reply to  Peter Renton

I have been wondering the same thing myself. However, I have not found any historical data for how fast a loan was funded. How did you plan to get that data?

Trent
Trent
Jan. 1, 2014 1:56 pm
Reply to  Viking

For east-enders like myself new notes are added at:

9 AM, 1 PM, 5 PM, 9 PM Atlantic Standard Time (AST)

Dan B
Dan B
Mar. 12, 2013 3:12 pm

It’s worth noting (or repeating) that these loans that are being funded real quickly are nothing more than loans that happen to meet the criteria of (perhaps as few as) several individuals or institutions. There is nothing that suggests that these loans are better or worse than the remaining ones on the platform. Nor is there anything that suggests that these big hitters are necessarily outperformers. I know that a lot of people like to believe that is definitely the case, but the evidence doesn’t support it. Just look at worthblanket over at Prosper. They perform maybe just a tad better than average. Lots of posters here outperform them……………& for some, by a wide margin.

dontvote
dontvote
Mar. 15, 2013 4:15 pm
Reply to  Dan B

reduced liquidity necessarily reduces good loans too. to the extent anyone has a loan you prefer in their basket during these times, it’s gone. not really relevant if they also ate up a bunch of dirt with their bite – they still ate my delicious cabbage.

Dan B
Dan B
Mar. 15, 2013 9:10 pm
Reply to  dontvote

This has nothing to do with “liquidity”.

Well, if you really feel that your day is incomplete unless you have a chance at every single loan that is offered……………..you can always set your alarm clock & log on 4 times a day. Problem solved. 🙂

James
James
Mar. 8, 2014 9:48 am
Reply to  Dan B

I’m not buying this. The loans that my filters identify, filters based on factors know to out preform, are often the very loans that disappear first. That is a fact. To put it another way, I can find loans right after they post that meet my criteria and can not 15 minutes later. There are still lots of loans 20 minutes later. . . just not out preforming loans. We can back test, using actual data, and see that all loans that pay the same interest rate are NOT created equal. The evidence does support filtering for better results, often 2-3 % better results.

Mia
Mia
Mar. 12, 2013 3:23 pm

Is it possible LC is also offering up larger and larger percentages of the loans to the whole loan program, which get funded before ever hitting the retail platform?

Mia
Mia
Mar. 12, 2013 7:55 pm
Reply to  Peter Renton

I tried downloading the complete loan data but it doesn’t seem to go beyond Aug/2012. Is there another file I should look at? The only other file I see is in funding data. That wouldn’t help in doing a comparison.

Mia
Mia
Mar. 12, 2013 8:07 pm
Reply to  Peter Renton

I did. Most recent loan issue date seems to be Aug 2012, therefore 100% of loans are “F.” Am I missing something?

Mia
Mia
Mar. 13, 2013 1:31 pm
Reply to  Peter Renton

Thank you, Peter. I downloaded it again and it worked. Not sure what I did wrong.

I get this, roughly:
Sept: 0/6087 W = 0% (6087 F loans) Control
Oct: 845/6262 W = 13% (5417 F loans)
Nov: 1292/6383 W = 20% (5091 F loans)
Dec: 1765/6066 W = 29% (4301 F loans)
Jan: 1955/6872 W = 28% (4917 F loans)
Feb: 2389/7563 W= 31% (5172 F loans)
Mar(1-12)1398/4930 = 28% (3532 F loans)

But these increasing percentages don’t appear to be significantly affecting the overall number of F loans available, so I think you are right. Also, I know a trickle of W loans make it to the F platform, but I don’t know how to calculate that. $ percentages also seem to correlate closely with loan number percentages.

It does look like something work keeping an eye on though.

(Disclaimer: this is not my forte and I did this in a hurry, so all of this might be wrong.)

Mia
Mia
Mar. 13, 2013 1:35 pm
Reply to  Mia

“worth” not “work.” Can’t figure out how to edit my entry.

Viking
Viking
Mar. 13, 2013 1:43 pm
Reply to  Mia

Maybe the ” trickle of W loans make it to the F platform” is what we see at 2 AM and 10 PM..?

Viking
Viking
Mar. 12, 2013 3:24 pm

I agree with Dan B. Like in the stock market, each investor have their own selection criteria and they may vary dramatically. Therefore, just because the available loans decline rapidly, that does not necessarily mean that the “good loans” (from each investors perspective) are gone first. To test this, I checked the loan availability meeting using one of my favorite selection criteria, and the availability of those notes declined much slower (see here: https://www.lendacademy.com/forum/index.php?topic=801.msg4494#msg4494)

Fred
Fred
Mar. 17, 2013 7:15 pm
Reply to  Viking

I have to disagree with Viking & Dan on this.

Unlike stock market where anyone can buy anything (for the right price), the LC has loans only for a limited time. Once the loans are fully funded, they are no longer available for the next lender.

In this situation, the term “availability” is better than “liquidity”.

In a simple scenario, let’s say I have a filtering criteria that match on average 1% for the existing loans. At 6 AM, this criteria would give me 5 loans; but at 6 PM, this would only give me 3 loans (ceteris paribus).

The issue here is not about reduced liquidity (which simply means lower number of transactions per unit time), but reduced population size.

In statistics, population size does matter. 🙂

Steve
Steve
Mar. 12, 2013 5:38 pm

Peter – given the much faster turnover and consequent limited “stock” of loans, wouldn’t that adversely affect the whole LC Prime approach? It seems like the only way to compete with the big guys is to be online every time a batch of loans is added, which is 180 degrees away from the Prime strategy, isn’t it?

B. Mason
Mar. 12, 2013 9:17 pm

Remember that large funds have a very different problem than smaller investors. It’s easy to way outperform the average with a small portfolio. The big players are investing millions, tens or even hundreds. There just aren’t enough selective loans to invest that much, otherwise cash drag gets you. So, it’s not surprising to see WorthBlanket beating the average by just a little bit.

Dan B
Dan B
Mar. 13, 2013 4:51 pm
Reply to  B. Mason

Depends on what you mean by a “small portfolio”. And it’s hardly easy. There are individual investors with thousands of notes that are outperforming the averages & outperforming institutional investors handily.

It is actually a bit surprising that worthblanket is only outperforming the averages by a bit. Of course they are “intending” to deploy $150 million at Prosper (or so they have said)……………..but they are doing it at a very leisurely pace, so it’s obvious that they’re not really seeing cash drag as a major concern. So no, I think it a bit surprising, & makes me care even less as to what notes they may or may not be gobbling up.

Bryce M.
Bryce M.
Mar. 13, 2013 7:24 pm
Reply to  Dan B

All I mean to say is that it’s harder to go big.

Dan B
Dan B
Mar. 13, 2013 8:43 pm
Reply to  Bryce M.

Oh, absolutely.

Craig Hollyfield
Craig Hollyfield
Mar. 13, 2013 10:45 am

Thank Peter for giving us a better picture at what is happening with the larger investors

samuel hu
Mar. 13, 2013 3:47 pm

Hi – does anyone know if there is an API for the folioFN secondary platforms (either prosper or lending club)

Viking
Viking
Mar. 13, 2013 4:52 pm


Is there any “official” documentation (e.g. Prospectus?) which describes how many whole loans LC are allowed to set aside? If so, has it been updated?

So the rejected loans would be posted at 2 AM, 6 AM, 6 PM and 10 PM. We would not see a separate peak at 6 AM or 6 PM because the new loans are also posted at those times. It may be interesting to download the notes.csv just before and after 2 AM and 10 PM to see which types of loans were rejected by the institutional investors.

p.s. I was not able to reply directly to your “March 13, 2013 at 2:36 pm” post above. Is that maybe an issue with word press (e.g. set to only allow 9 replies)?

Viking
Viking
Mar. 13, 2013 5:26 pm
Reply to  Peter Renton

Is LC is allowed to set aside an arbitrary number of whole loans w/o disclosure?

Golden Graham
Golden Graham
Mar. 26, 2013 3:21 pm

It’s 2:20pm PST and the number of available loans within my criteria of C-E loans hasn’t budged from 425 (using Peercube). What gives?

AlphaGen
AlphaGen
Apr. 3, 2013 10:13 am

An even bigger issue is LC offering institutional investors ‘first look’ at loans BEFORE they hit the API. They offer an ‘Institutional’ setup structure bypassing the regular platform. Obviously this is not advertised.

These favoritism tactics are no different from wall street with soft-dollar arrangements, ‘side letters’, HFTs, etc. Note I am not defending nor attacking these practices, but rather exposing them in fairness.

At some point the institutional advantages will become more evident like the evolution of the stock market and creation of mutual/hedge funds versus individual stock picking.

Not all, but most Investors will eventually realize the advantages of investing through funds such as heliox capital, who seem to have the advanced predictive modeling, portfolio management expertise, advanced technology infrastructure, risk management, and access to all global platforms, which give them the higher risk-adjusted returns versus the platforms or most other investors.

Also, most people don’t think there is a need for risk management in this space, but as history tells us one doesn’t need risk management….until you do, and then its too late!

My point is ‘p2p lending’, ‘consumer credit’, or whichever term one uses will naturally follow the evolution of markets.

David Weinstein
David Weinstein
Jun. 20, 2013 7:51 pm

Peter. I have been investing in Lending Club since the beginning and its been a great investment. With the institutions now investing, and today banks joining the investment side, my guess is that these large groups are using an API to buy notes. I don;t mind matching my buying algorithm against the big guys, but it is not a level playing field if they have an API and I get on multiple times a day and hit keys to buy notes. In addition I have multiple accounts to manage. Do you have any insight on a) do the institutions use an API today and 2) what is their plans to make it available to retail customers?

Thanks

Dave

Brian
Brian
Aug. 16, 2013 7:18 pm

What I see happening now is every loan in my filter being snapped up (literally seconds after they pop and often before I can invest in more than one or two notes) only for the ones with “issues” to be re-released by whoever had grabbed them 10-15 minutes later.

The deck is almost completely stacked against the little guy.

David
David
Aug. 16, 2013 9:23 pm

Literally only about 80-90 notes, all grades, on the entire platform for days. What’s going on here? Is this the end of LendingClub?

andrew
andrew
Aug. 22, 2013 2:55 pm

Do you know who some of the funds and institutional investors are that are investing in peer-to-peer notes?

Jake
Jake
Sep. 3, 2013 4:29 pm

I wonder if there will be a tipping point with more money to lend than borrowers to borrow? I hope not.

Dean
Dean
Sep. 14, 2013 6:07 pm

Thank you for the information and interesting comments.
Question: At what point will Lending Club be forced to start lowering the interest rates to encourage more borrowers? Or start lowering the underwriting standards to allow more sub-standard loans (I purposefully did not use the term sub-prime as that is a very bad word these days)?

Dave
Dave
Sep. 22, 2013 4:52 pm

If there was no shortage of borrowers, there would be more than only 40 to 80 loans available at any time. Down from 300 to 500 just a few months ago. I have had about $3000 sitting in my Lending Club Account for the past 2 months wanting to invest in $25 or $50 loan amounts. But after reducing to the 36 month and C-F grade, I want, there are never more than an handful, not worth my time.

Viking
Viking
Sep. 23, 2013 1:21 pm
Reply to  Peter Renton

I am not sure that I understand the CEO’s comment.
I thought that the applications for ALL borrowers, which satisfied the underwriting requirements, were “instantly” posted on the website (actually at the next upload which occurs 4 times/day). Those loans would immediately be made available to the investors. However, it may then take LC several weeks to approve the borrowers.
Is this no longer correct? Are not all loan applications “instantly” posted on the web (apart from a fraction that goes to the whole loan program)?

Joey W
Joey W
Oct. 23, 2013 10:25 pm
Reply to  Dave

I too have too much money just sitting in my LC account because I can’t find any loans. These days I’m forced to withdraw and invest in something else. I’m so glad I didn’t transfer my retirement funds to LC.

Viking
Viking
Sep. 23, 2013 5:45 pm

I think that it was clear… However, I do not understand why LC cannot get enough borrowers on the platform. Every single application is supposed to be automatically posted on the platform within a few hours at most. Indeed, if you look at the platform shortly after 2 PM for example, you will see that the majority of loans were submitted between 10 AM and 2 PM the same day (“new” loans). Will some of these loan applications now not be posted because of some technical limitations?