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.
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!
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!
By Jonathan Ping | Investing | 10/23/08, 11:50am