P2P Lending Update: Prosper, Lending Club, Zopa, Loanio

There have been a lot of comings and goings in the person-to-person social lending arena, so here are some updates and opinions as a casual observer sprinkled in.

Prosper Steps Away
The first and biggest (by total outstanding loans) P2P lender, Prosper, recently shut down to lenders while pursuing registration with the SEC to allow folks to buy and sell existing loans:

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you’re an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you’ll be able to track and monitor your loans; and you’ll be able to withdraw funds from your Prosper account.

If you’re a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you’re a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources.

Personally, I think having a liquid secondary market for these loans is a great idea in the long run. I always disliked the idea of making a 3-year loan that could be repaid by the borrower early, but not sold early. As a point of reference, Lending Club took around 6 months to complete the SEC registration.

More posts: Review Part 1, Review Part 2, Default rates, Scary graph

Lending Club Returns
After going through their own quiet period, Lending Club is now accepting new lender registrations again, as well as allowing existing lenders to bid on loans. But now, you can also buy and sell existing loans now on partner site FOLIOfn. It costs you a 1% fee to sell your loan, in addition to any possible gain/loss in the open market.

Right now, it would seem that Lending Club is the best game in town. For lenders, the loan performance stats seem to be better on average than Prosper, with much lower default rates so far, although there is still definitely risk these days. For potential borrowers like credit card consolidators, you can try them first to see what rate you can get. When you apply, you get an overall credit rating which determines your interest rate.

More posts: Lending Club Review

Zopa US Quits Pretending
Even at first glance, I thought Zopa US was a credit union in disguise. Well, right before Halloween, Zopa takes off the mask and reveals that… hey! We are a credit union. Now “lenders” are directed to buy a certificate of deposit at a credit union, and borrowers are offered a credit union loan from USA Federal CU.

It was (and still is) a shame that Zopa could not bring their UK model here due to legal issues. Hire some better lobbyists!

Loanio Arrives
A new competitor arrives to stir things up as well. Loanio is now open for business. Their model is pretty similar to Prosper, in that you bid on specific loans and the interest rates adjust downwards like a reverse auction. They have a referral program as well, and new lenders can earn a $25 bonus:

Every time you refer a new borrower who gets a loan, you’ll earn $50.00 and for every new lender referred, you and the new lender will receive $25.00!

Here is my referral link. I opened a new account last week. You must deposit $100 to start, but can withdraw it later. However, you must fund a loan ($50 minimum bid) to get the $25 bonus.

First impressions? Reminds me of Prosper, but the site design could be better, and it loads slowly. I’m also having trouble finding a loan to fund. If you see a good one that’s nearly funded, let me know!

Comments

  1. As a side note, have you been successfully been able to get Lending Club or prosper to work in Yodlee? I can add them, but then get an error when trying to log on.

  2. Lending Club isn’t really back doing business like they were before. They only allow lenders from certain states now and you have to certify that you make more than $70,000 before you can fund a loan. Seems a little extreme for a $25 loan. They don’t allow lenders from my state so I can’t loan any more money regardless.

  3. I was going to make the point about LendingClub only allowing lenders from 19 states, but then I saw tightfistedmiser beat me to it. I can’t use LendingClub as I’m from Maryland. Loanio scares me, as it looks like it’s completely run by one person. I’m going through P2P withdrawl…

    In answer to Joe, Prosper works great on Yodlee – they have separate ways of linking your account depending on whether you are a lender or a borrower.

  4. Prosper works for me in Yodlee. The Auto-login does not work, but the Go to site works. Like Dan says, mine is set up as a Lending Account

  5. My state is not available at the Lending Club either, but I asked them and they said they are working on more states.

    So I decided to try their secondary market (which I don’t think have the same state and $70,000 requirements) and I was able to buy some loans there at pretty much the same price.

    Has anybody else tried the secondary market? please share your thoughts.

  6. PennyS¢raper says:

    Seems like Prosper is still accepting borrowers. They are going to fund the loans with their own money.Which means you can still make $25 for referrals of new borrowers

  7. I have loaned money through prosper. I put $500 in to experiment with it. First off, I never received the $25 dollars for signing up for someone referring me even after I emailed them about it. Second it takes forever for them to put deliquent accounts in collections, I have some one that is over a year old and still not in collections. After this whole mess with the economy if no one else defaults I may break even. I’d say go with something that is more reliable to get your returns.

  8. Juke actually Prosper was bad even before the meltdown. Basically you’ll never break even over there as the default rate is just insane. It’s most peoples last resort for a loan and if they default nothing even happens to them. I mean they sick a collection agency on them, but the fees the agency gets isn’t worth their time to do more then one phone call. So let the lender beware as you’ll be lucky to lose only half of whatever you loan out.

  9. SavingEverything says:

    It’s about time these p2p lending services register with the SEC for more scrutiny. Juke, i hope you get your referral / signup bonus

  10. I signed up for Loanio using your link on the day this was posted (October 23). I still haven’t had the initial deposit deducted from my bank account. I contacted their customer support and they said my routing number was incorrect. I resent it to them and still have not had the money deposit. I definitely gave them the correct routing number. Is anyone else having problems similar to mine?

  11. Joe, I’ve read on prospers.org forum that one user had their initial deposit taken out twice! (The extra amount was returned with apology after a complaint.)

  12. Hi,

    Do you maybe know about some website that makes the same but in europe?

  13. Loanio now also steps away and has enterred a “quiet period” to begin the process of registering promissory notes with the appropriate securities authorities. The web site was slow (as usual) but was able to initiate the transfer out of all of my funds.

  14. PenelopeFrames says:

    I became a lender on Lending Club about a year ago based on the other post you did on the $25 bonus. So far, so good. I tried with $1000 to play with it. Made 50 loans at @ $25 each. Only one has defaulted. I got a few lates (3), but I’ve seen those being resolved more often than not. Have not tried Prosper or Loanio. They looked too sketchy for my taste. Glad Lending Club was able to go through the SEC review.

  15. Nate – there is a site called “Quackle” that is now in Great Britain…if you are still looking.

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