Social Lending / Your guide to peer to peer lending Sat, 04 Feb 2012 10:33:10 +0000 en hourly 1 http://wordpress.org/?v=3.2 Roundup of Social Lending News – February 4, 2012 /news/roundup-of-social-lending-news-%e2%80%93-february-4-2012/ /news/roundup-of-social-lending-news-%e2%80%93-february-4-2012/#comments Sat, 04 Feb 2012 10:33:10 +0000 Peter Renton /&p=3983

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week.

Last week, I included in this column an article by This is Money about Zopa in the UK that caused a bit of an uproar there. Basically they said that Zopa’s default rate was increasing, but it was still under 1%, and so this week they published a followup article. I hope to have an in depth look at Zopa published here some time this month. Plenty of other interesting articles below including one from a blogging newcomer, Lend Facts, about defaults at Lending Club. Enjoy your weekend and go Giants.

Nickel Steamroller - Using Mint and Yodlee to Track Your P2P Investments

This is Money (UK) - We are a safe place to invest: Angry lend-to-save websites hit back over ‘rising risk’ claims

Consumerism Commentary - Top Ten Personal Finance Start-Ups

Lend Facts - Defaults and Charge-Offs

The Wall Street Journal (Money Hunt) - How to Finance Your Start-Up Without Tapping Home Equity

Money Q&A - Review Of Peer-To-Peer Lending Site – Prosper

The New York TImes - Banks Taketh, but Don’t Giveth

The Anonymous Widower (UK) – Zopa in Hard Times

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Lending Club Surpasses $500 Million in P2P Loans /investing-lending/lending-club-surpasses-500-million-in-p2p-loans/ /investing-lending/lending-club-surpasses-500-million-in-p2p-loans/#comments Thu, 02 Feb 2012 19:11:29 +0000 Peter Renton /&p=3977

Lending Club announced $500 million in new p2p loans since 2007

We all knew this was coming but this morning it became official. Earlier today Lending Club crossed over $500 million in new loans originated since they started operations in 2007. In fact, it has been quite a rapid start to the month for Lending Club with nearly $10 million in new loans issued in the first day and a half of February.

You should go and read the press release announcing this milestone. In this release they announced that 2011 revenue came in at $12.8 million – they also released this interesting tidbit:

Investments are also soaring: Lending Club now receives more than $30 million a month in new investments from a base of over 50,000 retail investors and a rapidly growing pool of institutional investors, with more than 50 investor accounts over $1 million and several accounts over $10 million.

About a year ago I remember an article quoting Lending Club as having 25 accounts of more than $1 million, it looks like they doubled that number last year. This doesn’t include all the big money investors at LC Advisors, their private placement fund for accredited investors. That has grown from zero to $80 million under management in the last year.

Prosper Crosses $300 Million in Total New Loans

It was a big week for round number milestones. Prosper also sent out a press release earlier this week announcing they have surpassed $300 million in new loans issues since their inception.

While Prosper’s announcement was eclipsed by Lending Club, it is healthy for the industry to have two fast growing players. Now, I will be even more impressed when we can see these higher numbers trickle down to the bottom line. Both companies, particularly Lending Club, should be making serious inroads towards profitability in coming months.

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Prosper Breaks $10 Million and Lending Club Keeps Rolling On /state-of-the-industry/prosper-breaks-10-million-and-lending-club-keeps-rolling-on/ /state-of-the-industry/prosper-breaks-10-million-and-lending-club-keeps-rolling-on/#comments Wed, 01 Feb 2012 01:50:26 +0000 Peter Renton /&p=3964

Both Lending Club and Prosper have started out 2012 strongly. In January Prosper broke $10 million for the first time and achieved an all time high in new monthly loan originations beating their previous high of $9.6 million set in May 2008. Lending Club had an amazing month with most days originating more than $2 million in new loans.

Lending Club Issues $34 Million in New Loans in January

Just seven months ago Lending Club broke $20 million in new loans for the first time. This month they came in at more than $34 million. They also issued far more loans than ever before: 2,622. All in all it was yet another very strong month.

The one statistic that I was somewhat surprised about this month is that the average loan size went down. In December the average loan was $13,678 (an all time high), but this month that dropped down to $12,967. I am surprised about this because Lending Club announced in late December that they were waiving service fees on large loans. I don’t know how that promotion has gone but I was thinking the average loan size would have increased because of it.

Lending Club has now originated $494 million in new loans since they started in 2007 and later this week they should cross over $500 million. Their 18-month loan volume chart is below – the black line is the three month moving average.

Lending Club 18-month p2p loan volume through January 2012

Prosper Records Their Best Month Ever

What a difference a year makes. A year ago Prosper had just completed their first full month without the auction system. There were few loans on the platform and they did a paltry $3.3 million in new loans. On this very blog some people questioned whether they would survive the year. Not only has Prosper survived but they are thriving with a good war chest of cash and rapidly growing loan volume.

As usual worth-blanket2 lead the way with an investment of $2.6 million in January (according to Lendstats). But this month worth-blanket2 was not alone in investing a seven figure sum. Another institutional investor made a big splash this past month.

We first learned of intelligent-repayment8 back in September. Since then they have been steadily investing a couple of hundred thousand dollars a month, certainly nowhere near the volume of worth-blanket2. But in January this all changed. They changed their screen name to Index_Plus and proceeded to invest over $2 million in new loans – not far behind worth-blanket2. It will be very interesting to see if this increased volume continues. But it is clear that Prosper wouldn’t have broken $10 million in January without this big bump from Index_Plus.

Below is Prosper’s 18-month loan volume chart.

Prosper 18-month p2p loan volume through January 2012

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You Can Now Open a Prosper IRA /investing-lending/you-can-now-open-a-prosper-ira/ /investing-lending/you-can-now-open-a-prosper-ira/#comments Mon, 30 Jan 2012 10:33:40 +0000 Peter Renton /&p=3959

This week Prosper is set to announce the launch of an IRA option for investors. They did a soft launch of their IRA product back in November to a handful of customers but it is now available to everyone. There will likely be an announcement from Prosper on their new IRA some time this week. But you can go to www.prosper.com/ira right now to open your account.

The IRA will be managed by Sterling Trust, one of the leaders in self-directed IRA’s. Because this is an IRA product and Sterling Trust will be the custodian of your funds it is not as simple as just opening up a regular account at Prosper. You will have to open an account at Sterling Trust and then transfer your money there before being able to invest in Prosper notes.

You Will Need $10,000 to Open A Prosper IRA

You will be able to open a new IRA or rollover an existing IRA or 401(k) into Sterling Trust for investing in Prosper notes. But there is a catch. There is a $10,000 minimum to open an account. But the good news is that Prosper will waive all IRA management fees if you invest all your $10,000 within two months of opening your account.

This is a big deal for investors. Until now, you have had to jump through expensive hoops in order to invest in Prosper notes through an IRA. But now, it will be a relatively simple process. Peer to peer lending is an investment that is perfectly suited to an IRA. With all interest taxed at the standard tax rate, investing through an IRA will make a huge difference in the real return for many investors. I have been hoping and pushing for a Prosper IRA option for over a year now, so I say it is about time – Lending Club has had an IRA option since 2009.

What do you think? Will you be taking advantage of the new Prosper IRA? As always I am interested to hear your comments.

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Roundup of Social Lending News – January 28, 2012 /news/roundup-of-social-lending-news-%e2%80%93-january-28-2012/ /news/roundup-of-social-lending-news-%e2%80%93-january-28-2012/#comments Sat, 28 Jan 2012 09:38:58 +0000 Peter Renton /&p=3951

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week.

We have an interesting cross section of articles this week. I would like to highlight the Prosper review by Wealth Pilgrim – I think that is the most detailed review of Prosper that I have read. Another  interesting one was the Reuter’s blog post on the regulatory history of Lending Club and Prosper. While the historical account is not 100% accurate, there are some interesting ideas about the future regulatory environment for p2p lending. Enjoy your weekend.

Money Q&A - Lending Club Waives Service Fees On Large Loans

P2P Banking (UK) - How Do the Efforts of Prosper and Lending Club in Search Engine Marketing Compare?

Prosper blog - Independent Audit Confirms Prosper’s Industry-Best Returns

Reuters Financial Regulatory Reform blog - Peer to peer lending: the murky future with America’s new consumer protector

Smart Peer Lending - Lending Club Strategy Challenge

This is Money (UK) - Beware the lure of web savings and lending sites after a rise in borrowers failing to repay debts

NY1.com - Peer-To-Peer Lending Can Help Investors’ Accounts Grow

Small Business Trends - 8 Ways to Finance Your Startup with Debt: Part 2

Bloomberg - Programmers Size Up Bank Borrowers With Algorithms Rather Than FICO Scores

Wealth Pilgrim - Prosper Review – Should You Take the Social Lending Plunge?

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Why is This E-Grade Loan Paying Just 6% Interest? /investing-lending/why-is-this-e-grade-loan-paying-just-6-interest/ /investing-lending/why-is-this-e-grade-loan-paying-just-6-interest/#comments Wed, 25 Jan 2012 00:04:34 +0000 Peter Renton /&p=3942

I first noticed this in one of my Lending Club accounts about a year ago. It was a C-grade loan that went from 14% and was suddenly paying 6%. I thought it must have been a mistake but when I did some investigating I discovered this 6% rate was indeed correct. How can that be?

I didn’t think much more about it because it was an isolated incident that hasn’t happened since. Then yesterday, I noticed this tweet from Michael at Nickel Steamroller. There are several low grade loans for sale right now on Folio with a 6% interest rate including this E-grade loan. What gives?

Active Duty Military Can Only be Charged 6% While Deployed

These loans didn’t start out at 6%. They were normal loans with an interest rate commensurate with the credit risk. But there is a law called the Servicemembers Civil Relief Act (SCRA) that states that when active duty military are deployed they can only be charged a maximum of 6% on any debt incurred prior to their deployment. Here is the pertinent information. This act:

Clarifies and restates existing law that limits to 6 percent interest on credit obligations incurred prior to military service or activation, including credit card debt, for active duty servicemembers. The SCRA unambiguously states that no interest above 6 percent can accrue for credit obligations (that were established prior to active duty or activation) while on active duty, nor can that excess interest become due once the servicemember leaves active duty – instead that portion above 6 percent is permanently forgiven. Furthermore, the monthly payment must be reduced by the amount of interest saved during the covered period.

This is not an issue that impacts many investors. Of the more than 30,000 loans that are active right now at Lending Club only 11 of them have been adjusted down to this 6% rate. I don’t have the numbers for Prosper but I imagine it is a similar tiny percentage.

So sure, as an investor you may lose a little in interest but that doesn’t worry me in the least. In fact, I look at it as just a way to provide support for those hardworking men and women serving our country. In my case the 6% C-grade loan stayed that way for several months and then it returned back to its normal interest rate and the borrower continued making payments.

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Roundup of Social Lending News – January 21, 2012 /news/roundup-of-social-lending-news-%e2%80%93-january-21-2012/ /news/roundup-of-social-lending-news-%e2%80%93-january-21-2012/#comments Sat, 21 Jan 2012 10:39:39 +0000 Peter Renton /&p=3938

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week.

There was plenty of news items from the UK this week but it was a pretty quiet week in the U.S. We did hear from a new blogger (at least new to p2p lending) with the unusual site name of Aiglstorfer.me – he shared his thoughts on investing in Lending Club. One of the most interesting articles of the week was the one on the Financial Times website (FT.com). The author paints a pretty dismal picture of the current state of the global financial system but sadly hits on some valid points. Don’t dwell on this article, otherwise it might spoil what will hopefully be a good weekend.

Wiseclerk (UK) - Adwords Marketing Activity of British P2P Lending Marketplaces

Nickel Steamroller - FICO vs VantageScore

FT.com (UK) - Trust no one with your money is the tragic legacy of the crisis (free registration required)

Beating Broke - Lending Club Returns Update

Mindful Money (UK) - Seeking income? Try an alternative

Lending Club Experience - Six Months and I’m Reaching A State of Peace

Aiglstorfer.me - My Experience with LendingClub

Scotsman.com (UK) - Social lending offers frustrated savers chance to see cash grow

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A Snapshot of All My P2P Lending Accounts /investing-lending/a-snapshot-of-all-my-p2p-lending-accounts/ /investing-lending/a-snapshot-of-all-my-p2p-lending-accounts/#comments Fri, 20 Jan 2012 05:50:57 +0000 Peter Renton /&p=3907

Today, I am going to open the kimono, so to speak, and provide an inside look at all six of my p2p lending accounts. The question I get more than any other is about the returns I am getting. This is what nearly every investor wants to know. So, today I will answer that question in detail.

The table below shows the beginning balance, additions, closing balances and returns on all six of my accounts. If there is no opening balance this means that the account was opened in 2011.

AccountBalance 12/31/10AdditionsBalance 12/31/11Net InterestXIRR ROIReturn on Site
Totals $83,839.52 $36,000.00 $127,460.29 $7,620.77 8.12%
Lending Club Main $11,470.76 $0.00 $12,192.77 $722.016.29%8.48%
Lending Club Roth IRA$0.00 $5,000.00 $5,302.50 $302.509.08%15.85%
Lending Club Trad IRA $56,847.97 $0.00 $60,823.31 $3,975.34 6.99%8.85%
Lending Club Roth IRA PRIME $14,487.37 $0.00 $15,640.10 $1,152.73 7.96%8.71%
Prosper Main $1,033.42 $29,000.00 $31,209.49 $1,176.07 17.37%19.44%
Prosper - 2$0.00 $2,000.00 $2,292.12 $292.1221.78%20.77%

Here is an explanation of the above table. I have six separate accounts – four at Lending Club and two at Prosper. All of these accounts are under my name or my wife’s name. I took the balance from the December 31st 2010 statements, I included any additions I made during the year and provided the balance on the December 31st, 2011 statements. Then I used the XIRR() function in Excel to calculate my real world return on these accounts. The Net Interest column is interest earned plus late fees less the amount of principal written off due to defaults. The final column is the return number that Lending Club and Prosper provided on the accounts on December 31st, 2011.

A Note About XIRR() and Real World Returns

I have written extensively about the different ways to measure your p2p lending ROI and why I like to use the XIRR() method. Keep in mind, to get an accurate return at Lending Club you must use the balances from your statements, not what is provided on the screen when you login. When there are no additions to an account (I have never made a withdrawal) it is a simple calculation to figure out the return: net interest/opening balance. With any additions and withdrawals you need to use the XIRR() method. This also takes into account any gains or losses on the trading platforms because these will be reflected in the closing balance on your statement.

Lending Club Main

This was the first p2p lending account I opened back in July 2009. I started out with a more conservative strategy, focusing on A, B and C grade loans and continued with that strategy for two years or so but a few months ago I changed to a more aggressive strategy targeting D, E, F and G grade loans. I made no additions to this account in 2011, but I will add substantially to it in 2012 (I have already added $5,000 in January). My new strategy is already impacting my returns. My annualized ROI for the last six months for this account is 9.59% and for the last three months is 12.9%. But the fact remains that in 2011 I made a 6.29% return on this account.

Lending Club Roth IRA

I opened this new Lending Club IRA in April of this year and took around six months to fully invest the cash. From the start the goal with this account has been to earn the maximum ROI possible at Lending Club. I have only invested in D, E, F and G grade loans from the very beginning. I took so long to invest the money because I was very picky in my criteria and only invested in loans that met all my criteria.

Today, I am very happy with this account. I earned only 9.08% real return in 2011 because I invested my money so slowly, but in the last quarter of 2011 (when I was fully invested) my real return was 14.14%. I had one default in 2011 and I have had two more defaults so far in January. But with just one late loan right now I don’t expect many new defaults for some time. This is despite investing in some of the riskiest notes on Lending Club.

Lending Club Traditional IRA

I rolled over several IRA and 401(k) accounts that my wife had from various jobs and consolidated them into one Lending Club traditional IRA. That was in May 2010. I opened it up as a PRIME account with a medium risk focus which meant notes were mainly grades B, C and D. The total balance I started with was just over $52,000 – I wrote more about this account in my first review of Lending Club PRIME back in February last year. In October, I decided to take this account off PRIME and manage it myself because I believe I can do better with my note picking strategies.

Lending Club Roth IRA – PRIME

My second Roth IRA account at Lending Club is another of my wife’s accounts where I rolled over a Roth 401(k). I opened this as a PRIME account and have kept it that way because I am interested to see how a PRIME account will fare over the long run. Having opened this account in May 2010 the average age of notes here is over 12 months now. I am earning a real world return of close to 8% here which I think is quite satisfactory for an account that is completely on autopilot. I expect this account will probably dip below 7% in real world return this year before settling in to a 7-8% range in 2013.

Prosper Main

I opened my first Prosper account back in September 2010 with $1,000. In 2011 I added to this account substantially. You can see this is where the majority of my new money went in 2011 witha total of $29,000 new money invested. I invested $20,000 in October and an additional $5,000 in December so the average age of notes in this account is still very young. I am focused on D, E and HR notes in this account (mainly repeat borrowers) so I expect a large number of defaults here. So far, I have only had two defaults but I expect an annual default rate of well over 5%. You can see a portfolio breakdown of my Prosper account on Lendstats here. My Prosper screen name is SLN-10.

Prosper – 2

I opened my second Prosper account (under my wife’s name) when Prosper ran a special giveaway in April. They were giving new investors $104 to open an account and I couldn’t resist the free money on offer. I have only added $2,000 to this account and I have been focused primarily on new borrowers in grades E and HR (the highest risk borrowers on Prosper).

My goal with this account is to see if I can earn a decent return by investing just a small amount into the highest risk notes in all of p2p lending. My Prosper screen name for this account is green-inspiring-peace. I should also point out a good portion of my returns this year were gained by investing in my own Prosper loan – this was at 31.99% and I invested $750 in that loan. So that definitely skewed my results higher than normal. I paid back that loan in late December.

My Overall P2P Lending Returns

When I do the calculation of my real return across all my p2p lending accounts I come up with 8.12% in 2011. I consider this a decent return but one that I would certainly like to improve upon. My goal for this year is to have this number over 10%. In 2011 my Lending Club strategy shifted to focus purely on the high risk loans (with the exception of the PRIME account) and I expect to have my three actively managed Lending Club accounts showing a real world return over 8.5% this year and my long term goal is get this number up above 12%. I expect my new Roth IRA will do more than 12% this year.

You can also see the large difference between the Lending Club and Prosper return numbers and my actual returns. As I have written before there are two main reasons for this: their ROI numbers do not take into account the amount of cash in your account and they ignore profits and losses from trading activity on the Folio platform.

My Prosper accounts continue to perform better than I expected. However, I am not getting carried away with this success because the average age of my notes in these accounts are still very young. I do anticipate a large number of defaults this year, so I don’t expect 17% and 22% returns in 2012. But my goal is to finish the year with a real world return of 15% or more between both accounts.

Managing Six Accounts

I do spend a few minutes every day logging in to each account and recording various data points such as return numbers, late notes and available cash. Then once a week I invest my available cash in my three Lending Club accounts (the PRIME account is invested automatically). On Prosper, I have Automated Quick Invest setup on each account, so I do only occasional investing outside of this.

It is quite a task keeping track of six accounts and making sure there is no duplication of notes between accounts. How do I do that? Well that is a topic I will cover in a post next week.

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Prosper Running a $1,000 Cash Giveaway /special-offers-2/prosper-running-a-1000-cash-giveaway/ /special-offers-2/prosper-running-a-1000-cash-giveaway/#comments Sun, 15 Jan 2012 20:10:12 +0000 Peter Renton /&p=3900

Prosper $1,000 Sweepstakes

Prosper has a new promotion to start out the New Year. Just provide them with your name and email address and you will have a chance to win $1,000 cash. There is nothing else you have to do to enter.

You can also increase your chances of winning by using your special referral link and getting your friends to sign up. The contest runs through January 31st and you can enter up to 25 times. As you would expect there is plenty of fine print on the contest but nothing I read that would cause concern.

I am not a big fan of promotions like this because you get a bunch of free loaders who never have any intention of becoming a borrower or investor. But they might generate some marketing buzz by getting media coverage and it is a pretty cheap way to create a list of potential prospects.

I get no kickback from Prosper for mentioning this contest – but it is a free $1,000 and it takes roughly 15 seconds to enter. So go at it.

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Roundup of Social Lending News – January 14, 2012 /news/roundup-of-social-lending-news-%e2%80%93-january-14-2012/ /news/roundup-of-social-lending-news-%e2%80%93-january-14-2012/#comments Sat, 14 Jan 2012 10:13:00 +0000 Peter Renton /&p=3896

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week.

It seems that the mainstream media are most interested in the borrower side of p2p lending, in particular the small segment of p2p lending that is for small business loans. There were three articles this week that dealt with that very topic and I think probably more than half the stories I cover here from mainstream media in my weekly roundup are about small business financing. It is a compelling story I guess even though small business loans account for just a small percentage of loans issued at Lending Club and Prosper. There were plenty of other interesting articles this week from my fellow p2p lending bloggers. Enjoy your weekend.

Ky3.com - Funding your small business — get creative

Lending Club blog - Lending Club’s Year in Review

Smart Peer Lending – Loan Recommendations Newsletter

Wiseclerk - P2P Lending Predictions For 2012

Entrepreneur - How to Raise Money for Your Startup — Now

P2P Lending News - Peer-to-Peer Lending Federal Tax Guide

Peerform blog - Peer to Peer Lending Looks More Attractive to Small Business Loan Seekers

Sweating the Big Stuff - Lending Club Returns at 15.85% in January 2012

Nickel Steamroller - Taking Estimated ROI to the Next Level

The White Coat Investor – Lending Club Update

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