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12 Alternatives for LendingClub Investors

With LendingClub's retail investment platform closed down we went looking for high yield alternatives

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It has been almost four weeks since LendingClub closed down their retail investor platform and cash is already starting to build up. I have had many people reach out to me to ask what I am doing with this idle cash so I thought I would provide some suggestions.

Important note: Nothing I write here should be taken as investment advice. This article contains my own opinions only and may not be suitable for your circumstances. You should always consult with a finance professional before taking any action on investments.

Here are twelve platforms for individual investors, most of which I have made investments on, that provide a similar kind of return to what we came to expect from LendingClub.  I have broken these down into two groups: non-accredited investor options and those for accredited investors only.

Non-Accredited Investor Options

  1. Prosper (prosper.com)

Prosper is the only offering that will provide exactly the same type of investment as LendingClub: unsecured consumer loans. I caught up with Prosper yesterday to get an update on their retail investor offerings and was pleasantly surprised. Retail Investor volume is up over 90% from April to December and this month is maintaining that trend. They are trying hard to ensure that idle cash is minimized and that is certainly true in my case as I am fully invested as of today. They are working on enhancements to the investor experience with an updated interface and new tools for monitoring investments. They are also committed to offering notes across the credit spectrum based on investor demand. Prosper increased interest rates at the start of the pandemic and the Loan performance for the 2020 vintage has been better than expected, performing even better than the typical vintage so far.  To get more details on performance, you can read Prosper’s monthly performance updates on their blog. I will be increasing my allocation to Prosper significantly as cash builds up in my LendingClub accounts.

  1. Fundrise (fundrise.com)

[Read more…]

Webinars this Week: Roadmap Back to Growth, Every Company is a Fintech and Debt Collections

We have three great webinars on tap this week covering the most pressing issues in fintech and digital banking today.

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Recovery, Re-Boot, Resilience: Roadmap Back to Growth

August 25th at 2:00 PM ET: Register Today

Banks, Lenders and FinTechs have spent the last months responding to the crisis. From office closures, the CARES Act and resulting economic impact, it feels like we have been in a constant state of reaction to market events. When will the shift from reaction to proactively accepting this new normal happen? What does the path back to growth look like? In this webinar, you’ll hear from a panel of industry leaders at Mascoma Bank, BCU, Zions Bank, Upstart and Salesforce how they are prioritizing and accelerating their roadmap to grow in the next normal.

Every Company is a Fintech Company

August 26th at 3:00 PM ET: Register Today

There has never been a more important time to build financial products that are fair and have the customers interests in mind. Fintech has come a long way in the last decade and it is now delivering on its promise.

This panel will examine opportunities for companies and lenders to create new products that utilize financial data to help underbanked people in the U.S.

How to build resiliency against credit losses – Intelligent strategies for Debt Collection in the new normal

August 27th at 11:00 AM ET: Register Today

With the ongoing crisis affecting delinquency rates, banks and financial institutions cannot rely on conventional methods to improve collections without affecting customer experience. Can banks make existing debt collection processes more intelligent with AI?

This webinar will discuss how collections teams can be empowered with AI enabled risk segmentation, early prediction of delinquent accounts; and suggested treatment plans based on risk segment, which helps them improve efficiency and customer experience.

My Quarterly Marketplace Lending Results – Q1 2020

My latest quarterly investment results show an overall 4.93% return for the year ending March 31, 2020

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Many of you have emailed me to ask whether I am still doing these quarterly investment reports. The answer is yes, so here is the latest installment. I have been providing these updates for all my marketplace lending investments since 2011 and I will continue to do so.

Regular readers will notice a significant change with this year’s report. There are several investments that I have decided to discontinue completely so I am separating these out now so everyone can see the returns of all my current investments. But I will still report my overall return for the time being until these investments have been mostly liquidated. I will also be sharing my thoughts on the impact the pandemic will have on this portfolio.

Overall Marketplace Lending Return at 4.93%

My overall returns for the twelve months ending March 31, 2020 was 4.93%. This is down slightly from the 5.12% return last quarter. But what has been quite encouraging is that my LendingClub and Prosper investments continue to improve. Of course, you should keep in mind that these returns are through March 31 so we have seen very little impact of the pandemic. I don’t expect these improvements to continue.

Now on to the numbers. Click the table below to see it at full size.

As you look at the above table you should take note of the following points: [Read more…]

My Quarterly Marketplace Lending Results – Q4 2019

My latest quarterly investment results show an overall 5.12% return for the 2019 calendar year

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I have finally been able to conclude my quarterly returns report from Q4 of last year.  I have been sharing my detailed quarterly returns with readers since 2011 and I will continue to do so for the foreseeable future. Given the turmoil we are experiencing today it is going to be fascinating to see how these companies hold up as we are almost certainly headed for a significant downturn.

Q4 of 2019 feels like a decade ago now with how much the world has changed. Given how the economic crisis really didn’t get started until the second half of March we won’t see much impact from returns even in my Q1 2020 report. But this year is going to be interesting to say the least.

Overall Marketplace Lending Return at 5.12%

The overall returns for the calendar year 2019 of my marketplace lending investments stood at 5.12%. This is down over 1% from my last update but the drop is almost entirely due to my largest holding: the Lend Academy P2P Fund which took a major hit in Q4. More on that below.

Interestingly, my original six LendingClub and Prosper accounts had their best quarter since Q1 2017 as underwriting changes made in 2017 have continued to bear fruit for investors. My lone holding in double figures is once again Streetshares as it continues to perform extremely well.

Now on to the numbers. Click the table below to see it at full size.

As you look at the above table you should take note of the following points: [Read more…]

New Action Plans from the Leading Consumer Lenders

We reached out to several leading online consumer lenders to see what actions they are taking to deal with the fallout from COVID-19

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There is likely no one alive who has witnessed this level of economic disruption in this country in such a short time span. With potentially millions of people losing their jobs in the past two weeks this could have a dramatic impact on the consumer lenders.

We reached out on Monday of this week to several leading online consumer lenders, across a range of the credit spectrum, to get a sense as to how they were responding to the rapidly changing economic conditions. We asked four questions:

  1. What are you doing to help your existing borrowers?
  2. How are you changing their underwriting?
  3. How are you responding to increased loan demand?
  4. What is your message to investors?

We heard back from several of the leading companies although some wanted to talk on background only, preferring not to go on the record at this time. Suffice it to say that every single lender has reacted quickly to this looming crisis.

Below are their responses.

LendingClub 

LendingClub released this 8-K earlier this week that has a detailed explanation as to how they are responding. Here is a short summary: [Read more…]

My Quarterly Marketplace Lending Results – Q3 2019

My latest quarterly investment results show an overall 6.29% return for the year ending September 30, 2019

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I am certainly late with this but I have finally found the time to bring you my quarterly returns report for Q3 2019. Every quarter I share my marketplace lending investment returns with the world. I started doing this back in 2011 with my LendingClub and Prosper accounts and since then I have added many investment positions across a variety of investment vehicles and platforms.

Overall Marketplace Lending Return at 6.29%

After a consistent upwards trajectory for the past year my returns appear to have stabilized at least for now. My trailing 12 month returns for the year ended September 30, 2019 across all my accounts was 6.29% which is almost exactly the same as my last update (6.30%). My original six accounts, all with Lending Club and Prosper, were also relatively stable at 5.34% versus 5.48% last quarter.

I continue to move money out of my taxable LendingClub and Prosper accounts, focusing my investments here on my retirement accounts. My standout account continues to be Streetshares, the only one of my investments solidly in double figures. But I am also very happy with AlphaFlow, Money360, Yieldstreet and Fundrise as they are all returning more than 8%.

Now on to the details. Click the table below to see it at full size.

As you look at the above table you should take note of the following points: [Read more…]

The Ten Biggest News Stories of the Decade in Marketplace Lending

We take a look back at the news stories that shaped marketplace lending in the 2010s

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I started writing about marketplace lending back in 2010, so I have spent almost the entire decade immersed in this space. While we have expanded our coverage on Lend Academy today beyond marketplace lending this remains a major focus.

We have certainly come a long way in the past ten years and the industry is almost unrecognizable from where it was in 2010. Back then there were just two notable companies in the space, LendingClub and Prosper, originating just a few million dollars a month in loans. No one could have predicted that by the end of the decade marketplace lending would have led to a resurgence in personal loans and changed expectations for customer experience across all lending verticals.

As I look back at the past decade here are, in my opinion, the top ten most important news stories in chronological order.

Prosper Recapitalizes and Brings in a New Management Team
(January 2013)

At the time this was a huge story. The number two marketplace lender had been struggling for some time and was in serious danger of running out of money. This new funding round was small by today’s standards at $20 million but it ensured that Prosper would remain a going concern. The deal was architected by, the now fintech legend, Ron Suber as he brought in a new management team and a new board to guide Prosper on to their future growth path. It helped set the industry up for success over the next several years.

LendingClub Becomes First Marketplace Lender to go Public
(December 2014)

This was a momentous day for marketplace lending as market leader LendingClub became the industry’s first company to go public. The IPO was a huge success by any measure. By the end of the first day of trading LendingClub was valued at $8.46 billion and they had raised $870 million in cash. Of course, at the time we had no idea what would happen to the stock but there was a sense a real optimism that this company was going to change the world.

Second Circuit Rules on The Madden Decision
(August 2015)

The biggest legal issue the industry dealt with this decade was the ramifications of the Madden v Midland decision. We have been following this case since the Second Circuit ruling in 2015 and it has had far reaching consequences for the industry. It has led to a reduction in lending activity in Second Circuit states (NY, CT and VT) but the bigger concern was that this kind of ruling would spread nationally. That has not happened and there have been multiple regulatory fixes proposed plus the OCC and FDIC have weighed in as well. But as of this writing nothing concrete has changed since the 2015 decision.

SoFi Raises $1 Billion Led by SoftBank
(September 2015) [Read more…]

Prosper Officially Launches HELOCs with First Bank Partner BBVA

After a year since the first announcement Prosper has launched HELOCs with BBVA

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It was last November when we first heard that Prosper had plans to expand their offerings from personal loans into HELOCs.  In 2018 David Kimball noted that they would be partnering with banks on the new product and loans would be available both directly through Prosper.com and also as a white-labeled offering. Now we know their first bank partner is BBVA.

As you’d expect from a fresh offering in 2019, the online application takes just a few minutes and potential borrowers are provided with an instant pre-qualification. There are also no origination fees. Per the official press release, BBVA USA is Prosper’s exclusive bank partner in four states (BBVA Ventures has also participated in Prosper’s equity financing rounds).

We were able to catch up with Prosper CEO David Kimball again to get an update on the new offering. He noted that while they would have liked to bring it to market faster they wanted to make sure they took the time to do it right.

The platform will initially be available to customers in Alabama, Arizona, Florida and Texas direct through Prosper.com and a select group of BBVA US customers will have access via a BBVA branded version of the same platform in the coming months. One of the benefits of this bank partnership is Prosper will not need to go to the capital markets for funding. BBVA is just their first bank partner and Kimball shared with us that they have an additional bank partner in the pipeline and they are looking towards having a national footprint soon.

Most people are already familiar with Prosper’s personal loan offering and Prosper tested the cross sell of their HELOC in an interesting way. After a potential borrower went through the application process for a personal loan, some borrowers were offered two different options: the personal loan they applied for, or a HELOC. The types of applications that typically fit were those loan applications for debt consolidation or home improvement.

Kimball noted that since these customers already were in the mindset of receiving a personal they often ultimately selected the personal loan. Some consumers weren’t swayed by the promise of a lower interest rate (often several hundred basis points cheaper) and they also had to weigh other factors. Prosper has worked hard to improve the user experience, but the application process is longer than that of a personal loan meaning the borrower may not receive their funds as fast. It is also likely that borrower education is a factor as some consumers just aren’t familiar with a HELOC. Prosper is looking to remedy these challenges both with speeding up the process and working on a strategy for borrower education on HELOCs. They are also looking to offer the HELOC as an option sooner in the funnel for particular situations like a borrower seeking funds for a home improvement.

As for the partnership approach itself Kimball noted that their two pronged approach through Prosper.com as well as offering it as a white label approach has its benefits, mainly the stability of funding. It seems like there is a trend these days of the fintech lenders becoming tech providers. We’ve seen this in consumer lending with Avant’s Amount as well as on the small business side with OnDeck’s ODX platform. By offering the tech platform the fintech companies get to benefit from the banks existing customer base thereby saving on customer acquisition costs.

Conclusion

The HELOC is a product with an interesting history. HELOCs peaked around 2009 as many consumers used their HELOCs as an ATM to fund various purchases as home prices continued to go up in value. Since then it’s no surprise that they have fallen steadily over time and HELOCs have not rebounded with the recent rise in housing prices and the subsequent rise in equity that homeowners have ($6.3 trillion in the second quarter of 2019). One of the big challenges will be educating borrowers on the benefits of this product over competing products like the personal loan which are already optimized for a great customer experience. When used responsibly and with further innovation to the time to fund, the HELOC is clearly a better product for homeowners. With a few fintechs getting into this space, namely Figure and now Prosper it’s going to be interesting to see if we see an increase of homeowners again opting for HELOCs.

My Quarterly Marketplace Lending Results – Q2 2019

My latest quarterly investment results show an overall 6.30% return for the year ending June 30, 2019

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[Update: an earlier version of this post had the preliminary return number of 6.20% as I awaited for the final statement. I underestimated the closing balance there so my actual return was 6.30%]

Time for an update on my quarterly investment returns. This is something I have been doing for many years now and I know it is appreciated by many of you. I started out reporting on my marketplace lending investments in Q4 2011 and have provided updates every quarter since then. I share all the details of my LendingClub and Prosper investments as well several other investments I have made in the online lending space.

Overall Marketplace Lending Return at 6.30%

The upward trend in my returns continued in Q2, making it the fifth quarter in a row with increasing returns. My preliminary return for the 12 months ending June 30, 2019 is 6.30%, the best I have achieved since Q3 2017.

My six original accounts at LendingClub and Prosper have all been open for at least seven years so they are very mature accounts that have experienced several turns of capital as I have kept reinvesting over the years. I have separated these out because these were the accounts I had when I first started doing these reports so readers can go back and see how they have trended over time. But as I have said before I am liquidating my taxable accounts here and will focus my investments in consumers loans in my retirement accounts.

Underwriting changes that were made in 2017 continue to bear fruit for my personal loan investments. My six original accounts had a return of 5.48%, a vast improvement from the 2.34% return of just a year ago, and back to near where it should be. In today’s benign credit environment I would still like to see returns in the 6-7% range for personal loans and we are headed in that direction.

Now on to the numbers. Click the table below to see it at full size.

[Read more…]

My Quarterly Marketplace Lending Results – Q1 2019

My latest quarterly investment results show an overall 6.09% return for the year ending March 31, 2019

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Put this in the “better late than never” department. Yes, I know it is late July and I am only now just publishing my Q1 2019 returns. Thanks to those of you who reached out but rest assured I am still committed to sharing my results publicly and I apologize for the extreme tardiness of this update.

I am happy to report this quarter that my returns continue to improve. Since hitting bottom in Q2 of 2018 my returns have improved each quarter. Both LendingClub and Prosper showed their best returns in almost two years as the underwriting changes that were implemented in 2017 have had a positive impact.

Overall Marketplace Lending Return at 6.09%

My overall returns for the twelve months ending March 31, 2019 was 6.09%. This is up from 5.35% that I reported in Q4 and 4.77% in Q3. My original six LendingClub and Prosper accounts had another full percentage point jump. Last quarter I reported the returns on those six accounts had jumped from 3.19% in Q3 to 4.16% in Q4. We see this quarter they are at 5.18%. This is quite a remarkable turnaround and while I still think 5% is not a high enough return for unsecured consumer lending, it is certainly moving in the right direction.

One point to note is that I am liquidating my taxable accounts at LendingClub and Prosper. I have a little too much exposure to consumer credit in my overall portfolio and so I will be focused only on investing in my IRA accounts there. I am moving my redeemed cash into other marketplace lending accounts as well as other investments outside of fintech.

Now on to the numbers. Click the table below to see it at full size.

[Read more…]

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