I’m considering investing in microloans for semi-passive income. The two biggest hitters in this arena are Prosper and LendingClub. I’m not sure which one would be a good investment – if either. Let’s look at them for a bit, shall we?
I found some interesting information at Wealthboy. He says:
As I was doing my research on both sites, I came to realize that although LendingClub touts very good loan statistics with regards to defaults and late payments, Prosper has been around much longer. I think LendingClub’s loan statistics are somewhat misleading, as they really haven’t been around long enough for a lot of loans to default. I read a post on TechCrunch about LendingClub going nationwide and provided some of my analysis in a comment on the article:
Here’s the comment that he mentions:
I would take LendingClub’s stats with a grain of salt. The oldest loans were originated at the end of May, so there hasn’t been a lot of time for defaults to take place. Also, given the rising popularity of the service, the majority of those loans will have been in force much less than 7 months. I pulled the csv down from Lendingclub, and the average loan age is only 75.85 days (only 2 1/2 months).To provide a more fair comparison, I looked at some of the Prosper.com data on lendingstats.com. 2,869 grade AA-C loans were originated on Prosper.com between July 14 – December 13. I chose grades AA-C because Lendingclub only allows those with a 640 credit rating or higher to participate. Using Prosper.com’s AA-C grades approximates this restriction. The average age of these loans is 75.7 days. I selected the dates to provide approximately the same age as the lendingclub.com loans.
Of the 2,869 Prosper.com loans, 0.87% were late, 0.82% were 1 month late, and 0.09% were 2 months late (total of 1.78% late). None of them were any later than 2 months and none of them have defaulted. Even if I went back to May 24 on Prosper.com, only 3.61% of the loans are late and still no defaults. During this time frame, 3,796 loans were originated with an average age of 100.9 days.
I think after the loans on lendingclub.com have aged more, the statistics will likely be very similar to those of Prosper A-CC grade loans. I was all ready to open up a lendingclub.com account, but then came to the realization that the service hasn’t existed long enough to provide an accurate statistics. Also, in the process of creating my account they were unable to verify my identity. They were never able to resolve the issue and I would have had to manually verify my identity. With all the problems I had in in opening the account, I decided to take a look at Prosper and decided it was better to go with them anyway since they were more established and could provide better statistics.
He said he also had some issues with signing up with LendingClub but had no problems with Prosper. Wish I didn’t have those issues with Prosper but it’s because I’m not familiar with every detail of my credit history (and can’t get a copy from here on the Net).
He basically thinks that LendingClub isn’t a bad gig, it’s just too new for his taste. Good point.
I know that the guy at Living With Dividends uses Prosper and seems to like them.
Here are some Youtube videos you might want to see:
http://www.youtube.com/watch?v=mYax8…eature=related
http://www.youtube.com/watch?v=gRrdpbVSBGI
http://www.youtube.com/watch?v=VFmEMPuaN90
http://www.youtube.com/watch?v=qcOhl4hIESA&NR=1
After much reading, it seems that people like Prosper better but it’s been around a lot longer.
Well well well. I finally got through to their site’s ‘Lending’ page. Guess they narrowed down the choice for me if I want to do something soon. Read this:
We are not accepting new lender registrations or new commitments from existing lenders at this time.
Lending Club Quiet Period Update
On June 20, we filed a registration statement with the SEC to issue up to $600,000,000 in Member Payment Dependent Notes that Lending Club will offer on this Website. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.
The borrowing side of our site remains generally unaffected by this registration process; borrowers can continue to apply for loans and new loans will continue to be funded and held by Lending Club.
Lending Club continues to undergo a quiet period and will not be able to respond to press inquiries during that time.
Please find below the text of our press release dated June 20, 2008:
Lending Club Files Registration Statement with the SEC
SUNNYVALE, CA – June 20, 2008 – Lending Club announced today that it has filed a registration statement with the Securities and Exchange Commission under the Securities Act of 1933 relating to its social lending platform.
The registration statement seeks to register the offer and sale of up to $600,000,000 in Member Payment Dependent Notes to be issued by Lending Club in a continuous offering following the effective date of the registration statement. The Notes will be issued in series with each series of Notes corresponding to a single consumer loan to a borrower member. Lender members will direct Lending Club to apply the proceeds Lending Club receives from the sale of each series of Notes to fund a particular consumer loan selected by the lender member and originated through the Lending Club platform.
A series of Notes will be issued only if and when the corresponding member loan closes and is funded. Lending Club will have an obligation to make payments of principal and interest on the Notes only to the extent that Lending Club receives payments on the corresponding member loan. The terms of the Notes, including interest rate and initial maturity, will correspond to the terms of the corresponding member loans but will reflect a four business day lag on payment dates and maturity to allow the platform to confirm payments received on the corresponding member loan.
Lending Club will offer the Notes only through its website directly to lender members.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission but it has not yet become effective. Copies of the Lending Club registration statement can be accessed on the SEC website: http://www.sec.gov/. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.
If you are with LendingClub or are considering going with them when they lift the quiet period, check out this link if you haven’t already seen it – http://www.lendingclubstats.com/loans?p=1
In my search for this information, I ran across an interesting site: Rate Ladder. It has a lot of information on microloans. Guess that one will have to go onto the Stuff To Read list.
So, if I can get the thing faxed into Prosper and get signed up, I’ll do a bunch more research and post it for you. When I do, I’ll be looking more closely into these sites:
http://www.lendingstats.com/ and
http://www.ericscc.com/tools/loan-search
Great tools if you’re lending at Prosper.com
