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Over $36 Million in New Loans for U.S. P2P Lenders

by Peter Renton on November 1, 2011

It just keeps getting better. Lending Club and Prosper continued their impressive growth record in October. Between the two companies they issued $36.2 million in new loans – a staggering 139% year over year growth over October 2010.

Lending Club Issues $27.5 Million in New P2P Loans

Lending Club not only issued more loans than ever before last month but the average loan size was also much higher. There were 2,118 new loans issued (also a record) which makes an average loan size of $12,976. Since they increased the maximum loan from $25,000 to $35,000 in February of this year the average loan amount has moved slowly higher.

On the last day of the month Lending Club crossed over $400 million in new loans. The total at the end of the day was $400,956,525 in new loans since they launched in 2007. Below is the 18-month chart for Lending Club – the black line is the 3-month moving average which continues to march ever higher.

P2P Loan volume at Lending Club

Prosper Continues Their Impressive Growth

Prosper also had a fantastic month in October with $8.7 million in news loans issued. They are now within sight of their all time record of $9.6 million achieved in May 2008. The growth numbers at Prosper continue to be astounding. New loans were up more than 18% over September and an impressive 74% over just six months ago.

As usual their number one investor, known as worth-blanket2, lead the way. They invested around $1.3 million according to Lendstats which is actually down somewhat from their pace of the last few months. But I noticed several big new investors picking up the slack. The biggest new investor was new-gold-wrangler. They signed up for Prosper on October 24 and in the last week of the month had already invested over $400,000. That is starting with a bang.

Other big newcomers were brightest-gain-investor, managedfundtransparency-river1, bellaquito and progressive-economy261. Each of these investors kicked in more than $100,000 in October. It looks like Prosper’s efforts on trying to attract the larger institutional investors are really starting to pay dividends. Below is their 18-month chart.

Prosper p2p loan volume through October 2011

Last year November was a down month at Lending Club and it was just slightly up at Prosper. With the holiday-shortened month it will be interesting to see if this record pace continues.

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{ 25 comments… read them below or add one }

Charlie H November 1, 2011 at 3:11 pm

Peter

Next time you talk to LC or Prosper can you ask them the abligitory question about what protections they have against commingling the firms funds with investor funds.

This in light of MF-Global using investor trader accounts to cover the firms margin calls and Commingling of the firms at risk capital with investor capital.

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Michael November 1, 2011 at 5:41 pm

The metric that seems to be of monthly concern is amount lended. I think it’s worth pointing out issued loans were down for LC, in fact they dropped to May 2011 levels. Meanwhile Prosper’s issued loans were up.

To be honest I’m not sure what to make of that. I would be curious to hear other people’s theories.

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Dan B November 1, 2011 at 6:37 pm

Michael………..I have no idea how you’ve arrived at your statements but I’ve just done a quick run through Lending Club’s official numbers, then looked at Lendstats numbers & both sets confirm that October 2011 has been their all -time best numbers, in BOTH loan origination volume & in number of loans originated. Contrary to what you’ve stated, the number of loans originated easily surpass every month before that (including May 2011, 2100+ vs. 1704) by a significant margin..

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Peter Renton November 1, 2011 at 6:40 pm

@Charlie, Funny you should mention that but I have just arrived in San Francisco and will be meeting with Lending Club tomorrow and Prosper on Thursday. I will add your concern to my list of questions. Although I am not sure what your concern is exactly. Is it that they will use investor funds for purposes other than funding borrowers?

@Michael, Can you explain the difference between issued loans and total new loans as I present it? I just use the widely used metric but I am curious to know what you are seeing.

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Michael November 1, 2011 at 7:36 pm

@Dan B and Peter
I use the column “application date” to measure applications – not issued date.

Issued loans might include applications from September. Application date is a measure of when the loan came to be on the platform, on Prosper this is known as the creation date.

Dan, are you sure you are looking at application date and not issued date?

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Peter Renton November 1, 2011 at 8:23 pm

@Michael, I imagine Dan is using the same numbers I am using. On Lendstats in the Lending Club loan filter if you use the starting and ending month as October 2011 you get $27.5 million in “total lent”. There is no indication whether this is application date or issued date – but based on what you say it is issued date.

I wouldn’t worry too much about application date. This is actually relatively easy to control with marketing. If they find themselves short of borrowers they can just up the marketing budget on Google (and other marketing partners) and bring in more loan applications.

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Louis Lamoureux November 1, 2011 at 9:24 pm

Micheal, Why would you not want to use the “issued date” after all, that is the date it is a fully funded and a real loan.
The application date will over estimate the loan numbers as some loans will not fully fund (you will always have more applications than issueds), some loans will be rejected by borrowers, and some may be pulled by Lending Club/Prosper for fishy data.
So perhaps your numbers reflect that Prosper accepts more applications and then rejects them or perhaps Prosper is funding quicker. I don’t really care, so I’m not going to do the research on this one to figure out why there is a discrepancy.
I’ll go with Peter’s apples to apples comparison of issued real loans.
Lou

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Michael November 1, 2011 at 9:40 pm

I only use application dates and and creation dates for loans that are issued so it’s not every application. That is a key point.

I may convert the chart to use issued dates and rename it to issued loans. The application charts on the site are the only ones that use application/creation date.

There is still useful information that can be derived from the application date:

http://www.nickelsteamroller.com/analysis/chart

The lender demand chart is a measure of the average days it takes from application to issue. As you can see the 200 day moving average is creeping up. I’m going to redo that chart and take it back all the way to the first loan. There is some interesting cyclical information!

If you look at all the charts on my site, you see the average interest is going up a little on LC.

All of this means is Lending Club is likely entering a period where they are trying to attract lenders.

The application chart will be about ~9 days ahead of issued loans. I’ll think about it, I’ll likely just convert to issued loan dates to avoid confusion.

Thanks for the feed back everyone.

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Dan B November 1, 2011 at 9:46 pm

Michael………I’m sorry but I don’t see the logic or accuracy of your argument.If by application date you mean application of dates of loans that get approved & funded (which are the only ones that matter) then I still don’t see what you’re saying.
It’s certainly obvious that there is going to be spillover from month to month on “originated” loans but so what? That effect can only spillover 1 month maximum. So if you look at any 2 consecutive month period the figures still add up to clearly show that the last 2 months (Oct & Sept 2011) have had the largest number of loans & of loan totals compared to any other 2 month period to now. It’s not even close. So that’s 20 minutes of my life that I’ll never get back.

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Peter Renton November 2, 2011 at 6:48 am

@Michael, I am still not sure why application date would be going down. If you are looking at only all funded loans then wouldn’t this show the same trajectory as issued loans but just delayed by a few days.

But I know there are people in the p2p lending community who believe that the day the loan is listed is a better metric. Eric from Eric’s Credit Community is one of them – he shows his Prosper chart by listing date:
http://www.ericscc.com/

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Michael November 2, 2011 at 9:11 am

Let’s revisit this December 1st. I have a feeling the loan application chart might help predict next month’s trend.

In the mean time I will create a separate chart that plots only based on issued date.

Thanks for the feed back.

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Peter Renton November 2, 2011 at 9:38 am

@Michael, Sounds good. The first day and a half of the month have been very strong for LC – around $2.8 million in new loans. I would have thought if the applications were down in October that we would have started the month off more slowly. We’ll revisit in a month.

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Charlie H November 2, 2011 at 11:26 am

@Peter

Prior to Lehman Brothers I would have never even thought to ask the question. Now again we see with MF Global they use funds in traders accounts to support operations and trade with.

That the golden rule and they broke it.

What protections does LC and Prosper have that prevent them from using or touching the ballances in investor accounts?

That would be the question I would want asked just froma due diligence stand point.

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Louis Lamoureux November 2, 2011 at 11:40 am

Michael, I looked at the chart you linked to, but the chart shows how quickly loans are funded (app date- issue date), not how many loans are funded. Is that what you were trying to say in your first comment? That loans were taking longer to fund based on the 50 day moving average.

We think you are saying the App date data was showing LC was putting out fewer loans.

Lou

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Peter Renton November 2, 2011 at 9:39 pm

@Charlie, I have asked this question of LC (and will do the same at Prosper) but have no answer yet. Will let you know when I find out more.

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Charlie H November 3, 2011 at 9:53 am

Thanks Peter

Is just something I think will be useful to have them on record about.

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Shawn November 3, 2011 at 12:53 pm

Isn’t the problem alleviated at least partly by the fact that the money isn’t controlled by Prosper but in fact held in trust at Wells Fargo I believe?

~Shawn
Prosper lender “shawnw2″

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Peter Renton November 3, 2011 at 11:02 pm

@Charlie, I asked this exact question to the senior management at Prosper today and they basically said there are multiple checks and balances internally and externally. Multiple people need to sign off on any adhoc transfer and two different external audits are conducted regularly to keep track of the flow of cash.

@Shawn, The Wells Fargo account wasn’t mentioned so I am not sure if that is a big factor. It sounds like the money is in fact controlled internally by Prosper.

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Dan B November 4, 2011 at 12:10 am

The Wells Fargo account is just a “pass through” account, if I remember correctly, though I don’t recall if that’s the term that’s used. It just holds the money temporarily from ACH transfers as it passes from party to party. It’s not a deposit account.

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Shawn November 4, 2011 at 3:26 am

Right, not a deposit account, but as I understand what Prosper says, it’s considered a ‘separate’ or ‘in trust’ type account. They keep it this way to protect investors’ money from any sort of bankruptcy proceeding so I imagine there are other barriers there as well. Not sure how all that works though and if they could move funds in those accounts by themselves or only with permission from investors. In fact, besides it’s own money, Prosper is mainly just the marketplace and doesn’t control any money with loans going through WebBank and investments held by Wells Fargo…

Shawn
Prosper lender “shawnw2″

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Peter Renton November 4, 2011 at 9:02 pm

@Dan/@Shawn, I don’t think the Wells Fargo account is an issue. The way I understand it is that every movement of money has checks and balances involving multiple people (except the automated movements – they are checked during auditing). While you can never safeguard fraud completely basically it would take collusion among several people and the outside auditors for something like an MF Global thing to happen.

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Dan B November 4, 2011 at 9:31 pm

Oh I’m not concerned at all. Just addressing a question, that’s all.

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Michael November 6, 2011 at 8:59 am

@Dan B/@Peter

Sorry to beat a dead horse. I made a chart to better illustrate my point:

http://www.nickelsteamroller.com/chart_combined/issued/

As long as the application line (yellow) is above the issued line (blue) you tend to see upward movement, conversely when it is below you see a drop in issued loans.

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Charlie H November 6, 2011 at 10:51 am

Thanks again for asking my question.
Thansk for the insite Dan/Shawn

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Peter Renton November 7, 2011 at 10:33 am

@Michael, I looked at your chart and I can see that at Lending Club it does vary from time to time but then it seems to fall back in line. So, I see that any divergence between loans issued and loan applications is likely a temporary thing.

@Charlie, You are welcome. Still haven’t heard back from LC yet but will let you know when I do.

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