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Understand Your Lending Club Returns Better With These Cool New Graphs

December 5, 2013 By Peter Renton 30 Comments

Views: 22

Understanding Your Lending Club Returns

If you have logged into your Lending Club account today you will have noticed something new. Underneath your Net Annualized Return (NAR) number you will see a new link: Understanding Your Returns. This takes you to a brand new screen (just launched late yesterday) with some very interesting information.

Here is the graph I am presented with when I go to this screen in my main Lending Club account. I will explain this graph in detail below.

Lending Club Return graph with 100 notes

First we will deal with the purpose of this graph and then explain what we are looking at. Here is what Lending Club says:

The purpose of this chart is to illustrate how returns typically decrease over the life of an investment. If your account is relatively new, it is likely that your returns will decrease over time as some of your Notes become past-due and charge off. This chart is not a prediction of how your portfolio will actually perform and there are many factors that can impact your returns

A criticism that has been levied against Lending Club in the past is that they do not set investor expectations well enough. I hear this from new investors regularly. They are delighted with their 18% return and fail to realize that most likely this return will reduce to 8-10% as the account fully ages. This graph clearly shows a downward trend in NAR through at least month 18.

Here are some key points to help you understand this chart: [Read more…]

Filed Under: Peer to Peer Lending Tagged With: comparison chart, Graphs, Lending Club, NAR

Views: 22

Average Returns by Loan Grade at Lending Club

June 9, 2011 By Peter Renton 18 Comments

Views: 259

Lending Club P2P Investment Returns by Credit Grade

A couple of days ago Lending Club added this new page to their site that included the graph above. I found this extremely interesting. For years they have told us the average returns of the different loan grades on their statistics page but this is the first time they have provided a range of returns within each grade.

Here is the fine print that explains the top 50% and bottom 50% numbers in the above graph:

3 – Top 50% and Bottom 50% are dollar-weighted averages of individual loan performances for each grade calculated from either the best performing half or the worst performing half, respectively, of all issued loans in each grade as of May 25, 2011. In practice, if a portfolio of Notes was created from the worst performing half of all issued loans in a specific grade, the return would be roughly equivalent to the Bottom 50% of that specific grade as depicted in the chart above. Conversely, if a portfolio of Notes was created from the best performing half of all issued loans in a specific grade, the return would be roughly equivalent to the Top 50% of that specific grade as reported in the chart above. [Read more…]

Filed Under: Investing/Lending Tagged With: comparison chart, Lending Club, ROI, statistics

Views: 259

Corporate Bonds vs Lending Club Notes

December 6, 2010 By Peter Renton 2 Comments

Views: 25

Lending Club returns vs corporate bonds

Last month Lending Club conducted a webinar for their p2p investors that included the slide above. This was striking to me and gets at the heart of why I believe peer to peer lending is such a great investment today.

Like corporate bonds Lending Club notes are a fixed income investment. Also like corporate bonds there is a secondary market for Lending Club notes where you can buy and sell notes that have already been issued. But unlike corporate bonds, with Lending Club you get an interest payment and some principal repayment every month. Looking at the numbers above, if you want a similar return from bonds as Lending Club notes, you have to take on considerably more risk. [Read more…]

Filed Under: Investing/Lending Tagged With: comparison chart, corporate bonds, credit risk, Lending Club

Views: 25

Lending Club Versus Prosper

April 20, 2010 By Peter Renton Leave a Comment

Views: 240

As of April 2010
Founded 2007 2006
Capital Raised $52.7 million $57.7 million
Number of Loans 10,971 32,505
Total Funded Loans $105 million $194 million
Loan Amounts $1,000 – $25,000 $1,000 – $25,000
Average Loan Size $9,607 $5,989
Loan Term 3 Year Amortizing Term Loan 3 Year Amortizing Term Loan
Minimum Investment
$25 $25
Default Rate 2.34% 6.61%
Secondary Market via FOLIOfn via FOLIOfn
Complete Performance
Lending Club Statistics Prosper.com Statistics

The battle is on!

After a tumultuous start to the social lending industry in the United States, two successful rivals have emerged from the rubble to slug it out for the leadership position in this suddenly burgeoning marketplace.

Lending Club and Prosper — located just a short drive apart from each other in the San Francisco Bay Area — both now have deep pockets to help them grow their peer-to-peer lending platforms and claim market-share from each other.  In April 2010, Lending Club announced that it secured a major third round of financing, raising $25 million from Foundation Capital and other investors to bring its total capital to $53 million.  Just two days after this announcement, Prosper stole the spotlight by announcing a $14.5 million round of its own ($58 million in total capital), including an investment by a fund controlled by Google CEO Eric Schmidt.

Both of these companies roared out of the gate, perhaps a bit too quickly.  They initially suffered from poor loan quality and caught the ire of the SEC, which felt that they were marketing securities and thus required proper regulatory clearance to do so.  Lending Club took a proactive approach, suspending its operations for six months while it went through the lengthy registration process.  The company was eventually registered as a securities issuer and resumed lending operations in October 2008.

Meanwhile, Prosper pursued a wait-and-see approach that proved costly.  Weeks after Lending Club received SEC approval to resume lending operations, the Agency sent Prosper a cease and desist notice, requiring the company to seek registration as well.  Experiencing some problems and setbacks during the registration process, Prosper took nine months to emerge and restart loan originations in July 2009.  (Of course, other early competitors like Loanio and Pertuity Direct were unable to weather the storm and shut down.)  Though Prosper had initially built up a substantial market share lead, Lending Club took advantage of the nine month period where it practically had the peer-to-peer loan market to itself.  In March 2010, Lending Club originated $8.6 million in new loans, nearly quadruple the $2.2 million loans created in Prosper’s marketplace.

With deep pockets, regulatory approval and little direct competition, both Lending Club and Prosper are making large strides towards living up to the initial excitement for peer to peer lending in the United States.  Ironically, the ongoing credit crunch has proven to be a boon to these companies, as they step in to try to fill the gaps in sharply curtailed consumer and small business lending.

Going forward, the keys to success for both companies will be to continue to build awareness and carefully manage loan quality.  Loan performance has improved at both companies after a rocky start, and they now both offer a secondary market for loans via separate partnerships with FOLIOfn.  There is an increased focus on credit quality, with moderate to poor quality borrowers unable to gain approval for their loan requests.  (To date, Lending Club has declined approximately 90% of its applicants who were seeking over $1 billion in loans.)  Maintaining the balance between investors and borrowers is a challenging task for both marketplaces and an exodus of unsatisfied lenders could likely prove to be a fatal blow.

We’re only in the second round of what looks to be a marquee heavyweight battle.  It will be exciting to see which company comes out on top.

Filed Under: Reviews Tagged With: comparison chart, Lending Club, Prosper

Views: 240

Microloan Comparison Chart

December 7, 2008 By Peter Renton Leave a Comment

Views: 239

Microloan facts: Kiva, MyC4 and MicroPlace
Kiva.org MicroPlace.com MyC4.com
Launched November 2005 Summer 2006 May 2006
Who can become a lender? Anyone U.S. residents only Anyone; however, North Americans cannot make withdrawals
Average interest rate for lenders Zero 2 percent 12.80%
Lender can request specific interest rate No No Yes
# of borrower countries 42 29 6
Value of loans processed so far $45,714,935 not available 4,805,196 Euros
# of loans funded 64,073 47 2577
Current repayment rate 98.64% 100% 91.30%
Current default rate 1.36% 0% 0.72
Current # of borrowers 310,655 not available 2899
Percentage of loans made to women 77.70% not available not available
Average size of loan requested by borrower $458.36 not available 1,766 Euros
Average amount loaned $132.37 $135 not available
Loan duration 6-12 months not available 4-36 months
Current # of lenders 345,200 not available 8,378
* As of October 9, 2008

Filed Under: Micro Lending Tagged With: borrowing, comparison chart, Kiva, Microplace, MYC4

Views: 239

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ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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