Lending Club and Prosper have both been around over 10 years now. A lot has changed since both companies were founded, including the performance of the loans. In this blog post we’ll share the performance of each platform over the last 10 years. The fact that we have access to this data set is one of the things that makes marketplace lending unique. The screenshots from this post are taken from NSR Invest, a marketplace lending robo advisor that is also a sister company to Lend Academy.
In the early days of this industry, it was relatively easy to earn outsized returns. The early adopters, including Peter Renton, founder of Lend Academy, commonly touted double digit returns with a few simple filters. This was before both Lending Club and Prosper began to really scale with the arrival of institutional investors.
Lending Club Data
For Lending Club investors, most loan grade returns peaked in 2013. Below is a screenshot of platform performance for all loan grades across 36 and 60 month loans. As you look at this chart it is worth noting that the 2017 numbers are somewhat meaningless because the loans there have not seasoned yet. Also, it should be note that these numbers are only for Lending Club’s standard personal loan program, that which is available to individual investors (it does not include auto, small business or other special loan programs).
Looking at the above chart we see that 2013 was the high water mark for returns at Lending Club with 8.24%. While that is impressive, D grade loans performed even better returning 9% to investors that year. The below screenshot shows performance across D grade loans over the years.
Generally speaking, Lending Club investors earned healthy returns if they began investing from 2010 onwards. These solid returns lasted until around the fourth quarter of 2015 when loan performance began to degrade, particularly with the high interest loans. The decreasing returns affected both Lending Club and Prosper and is a topic we have covered extensively. Perhaps the best way to show where investors currently stand is with the below chart taken directly from Lending Club’s statistics page.
Highlighted in red is the filtered selection including those investors with 500 or more notes where the maximum note size is less than 0.5% of the portfolio value. Each dot represents an individual investor. The highlighted range is where portfolios are considered seasoned. As you can see the overall return today for the typical investor is far less than it was back in 2013.