Your guide to peer to peer lending

Another Record Month for Peer to Peer Lending

by Peter Renton on April 1, 2011

March was a record month for peer to peer lending in this country. Lending Club set an all-time record for any p2p lender with $16.5 million in new loans in March. This record helped cap off a dominant quarter for the world’s largest p2p lender.

First quarter loans came in at $45.9 million which was a 95.5% increase over the first quarter of 2010. As you can see in the chart below, after a relatively flat previous quarter the three month rolling average (the black line you see below) is starting to trend upwards again.

Lending Club p2p loan growthOne thing I found curious is something that appears to be a new trend at Lending Club these days. On the last day of the month a huge volume of money comes in to Lending Club. I have been told it is mainly the institutional investors that are causing this but let me show you how dramatic it is. At the end of day on March 30th, Lending Club stood at $12.6 million in loans for the month. In that last day they basically took in $4 million in new loans, almost 25% of their monthly total in one day. Around half of all the loans that were waiting for funding on the platform at the end of day on March 30th funded on the last day of the month.

Lending Club is very close to breaking the quarter of a billion dollar milestone in total loans originated since they started operations in 2007. It should happen on Monday or Tuesday next week.

Prosper Also Has a Strong Month

While the total numbers at Prosper definitely lag Lending Club their rate of growth is just as impressive. They ended the month at around $4.5 million in new loans (a record for their post quiet period) with total first quarter loans of $11.5 million. This was up 93.3% over their first quarter last year.

The management of Prosper have to be happy with the current trajectory. After changing their lending model in December their growth has really started to take off as you can see in the chart below. It will be very interesting to see if they can keep this rapid growth going.

Prosper P2P Loan Growth

{ 8 comments… read them below or add one }

Dan B April 1, 2011 at 12:44 pm

What do Lending Club & China have in common??
They both hit their numbers (loans funded & GDP respectively) with uncanny precision quarter after quarter or in LC’s case month after month. China’s equivalent to the Fed chief recently confirmed long held suspicions of BS when he stated that China’s GDP numbers are for “guidance only”.

I have no doubt that LC’s end of month funding “surge” has something to do with “institutional” money. I just think that LC themselves are one of the institutions as they self fund just enough loans to make their number month after month.

Peter Renton April 1, 2011 at 1:53 pm

You know Dan, I think it is a little harsh to compare Lending Club to the People’s Republic of China. One is a for profit business trying to establish themselves and the other is a communist regime that tolerates no dissent or political discourse. They may both spin things to their own advantage, but from what I can tell Lending Club is far more open and transparent than most financial institutions. But of course, you knew I was going to say all that.

While it is clear that Lending Club have funded a great deal of their own loans in the past, all this is public information, the amounts seem to be reducing. From their last 10-Q filing you can see they funded just $4.1 million in loans from April 1 – December 31, 2010. Not really enough to make much of a difference to the numbers.

Having said that, I will be curious to look at their next filing to see whether their is much of a change to this number.

Dan B April 1, 2011 at 4:33 pm

@Peter………..As an American capitalist exploiter I’m surprised that you don’t realize that the average citizen of the PRC isn’t immensely interested in political discourse or dissent. He/she is interested in business & in becoming just like you, that’s all.

Besides it’s completely untrue to say that the PRC doesn’t tolerate dissent or discourse. Every citizen has the right to express himself about anything & in anyway that he so chooses………….. just like here in the US. The only difference is that the Chinese state insists that they have the right to shoot you for doing so. :)

Peter Renton April 2, 2011 at 2:43 pm

@Dan, well said.

Aaron April 3, 2011 at 12:40 pm

I don’t know about the rest of you, but all my Prosper and LC money gets deposited at the end of the month. I do this because I need to make sure that all my bills are paid during the month and then I take the excess and transfer it to my investment accounts. I then wait until some good loans come along, which usually happens around the second week of the month. If I was just investing in random notes “willy-nilly,” I would be part of the end-of-month traffic. Just a thought. Good post. :)

Peter, at this rate of new loan originations per month, how long will it take for LC or P can start making a profit?

Peter Renton April 4, 2011 at 6:57 am

Well @Aaron, that is the $64,000 question isn’t it. Looking at their financials and based on what I have heard both Prosper and Lending Club need around $25 – $30 million to break even. Lending Club may well get to that level late this year, Prosper have said they expect to breakeven in 2012.

If I had to predict I would guess that Lending Club will pass $25 million by January 2012 and possibly a month or two earlier. Proper is a tougher prediction but my best guess is it will be 2013 before breakeven happens for them. Now, with Lending Club they only need to grow 50% from where they are now to reach that number so it is a safe bet to happen soon for them.

Andrew Norton May 1, 2011 at 8:08 am

Hi Peter – I enjoyed your blog…I would be interested in understanding how this volume translates to revenue gains for Prosper, etc. Do you have any revenue numbers, industry-wide, that correlate with these origination figures?

Peter Renton May 2, 2011 at 11:32 am

Revenue numbers are available for both Prosper and Lending Club. They both have to submit a form 10-Q every quarter to the SEC which is publicly available information. Here is where Prosper has their information:
and here it is for Lending Club:

As you san see from the latest filing, Prosper had revenues in 2010 of $1.1 million for the full year. For Lending Club their financial year ends on March 31st so we will get full year numbers later this month but for Q4 2010 they had revenues of $1.6 million.

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