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Upstart Makes Changes Today That Benefit Investors

June 23, 2014 By Peter Renton 25 Comments

Views: 644

Upstart logo

Upstart, who just launched their p2p lending platform a couple of months ago, has made some very interesting changes today for investors. One of the complaints I hear from investors in Lending Club and Prosper is that when a loan defaults it is the investors, not the platforms that take the hit. With the changes made today, Upstart is addressing that issue head on.

Investors Will be Refunded Origination Fees if a Loan Defaults

This is the really big news for investors and the change that I am most excited about at Upstart. The industry standard today is this: if a loan defaults the investors will lose their outstanding principal. Meanwhile, Lending Club and Prosper keep the origination fees they made by issuing the loan and lose nothing. This has always felt like a misalignment of goals to me.

Upstart is taking a different approach. Now, if a loan defaults at any time over the course of the three-year loan term (all Upstart loans are currently three-year terms) then Upstart will take the revenue they earned from the origination fees and refund the money to investors.

Now, like the other platforms, Upstart has a sliding scale of origination fees ranging from 1% up to 6%. So, we could be talking a significant credit to investors in the case of a default. And I confirmed that there is no time limit on this refund. So, in theory a borrower could default in month 32 of a 36-month loan term and investors will receive the full credit for the origination fee.

No More Service Fees for Investors

[Read more…]

Filed Under: Peer to Peer Lending Tagged With: accredited investors, service fees, Upstart

Views: 644

An In-Depth Look at Investor Service Fees

September 19, 2012 By Peter Renton 31 Comments

Views: 1,928

No investor likes fees. But for many investments, including p2p lending, fees are a part of life. The topic of investor fees at Lending Club and Prosper is not one that has been covered in depth anywhere until now.

This is detailed post that took me a long time to put together but if you read the entire post you will have an excellent understanding of how investor service fees work. But before we get started here is a quick primer on fees. All investors pay a 1% service fee . But how this fee is calculated differs at both companies. We are going to be looking at these differences and how it impacts investors at both companies.

Lending Club Investor Service Fees

Every time a borrower makes a payment Lending Club takes a 1% service fee. This fee is rounded up or down to the nearest cent with a minimum fee of $0.01. This fee is a fixed rate and will be charged on any payment whether it is a regular payment, partial payment or a loan payoff. This doesn’t mean that your returns are reduced by 1%, in some cases it will be more and in some cases less.

Here is the explanation of how these fees work from the Lending Club site. This explains why the impact of the 1% fee is in fact less than 1% in most cases:

[Read more…]

Filed Under: Investing/Lending Tagged With: Lending Club, Prosper, service fees

Views: 1,928

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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.

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