Lending

Four New Features from Lending Club

January 3, 2009 by rickety 4 Comments

The Lending Club blog announced four new features today:

Notes Already Invested in
Charged off loans and notes
Give your friends $50
Reinvesting Monthly Payments

These are all very useful features. I checked them out in my Lending Club account. But first, to give you some idea of the possibilities of peer to peer lending here are a few details of my rickety lending. Currently I have 44 notes in Lending Club that have a weighted average interest rate of 11.45%. None of my notes have ever been late. Based on outstanding principal the composition by rating are A 6%, B 55%, and C 39%. It seems to me that this is a very good interest rate when compared to Certificates of Deposit.

Notes Already Invested In

The “Notes Already Invested in” feature was one that I had requested in October. The part that is most useful to me is the ability to exclude notes already invested in when browsing and searching. I just have to select the check box at the top of the search page.

Charged off Loans and Notes

As far as “Charged off loans and notes” are concerned, I don’t have any of my notes that are past due so there is nothing for me to see — yet. Here is what Rob has to say:

We have added a “charged off” status to your account, so that you can now differentiate defaults from charge-offs. While “default” occurs automatically when a loan is 120 days past due, a loan or note only gets charged off when Lending Club considers it unrecoverable after a review of the collections activities (which can happen before or after 120 days). These charge-offs will appear in your end of year statement so that you can report them as losses for tax purposes.

Give Your Friends $50

The “give your friends $50” feature appeared at first to me to be a gift certificate I would have to buy. But no, it is a promotion and a very good one. Lending Club explains their generosity:

Well, we spend around $50 attracting a new customer anyway so instead of making an ad agency richer, we thought it would make more sense to let you invite your friends and deposit $50 in their account, make them $50 richer and make you look good in the process!

I have already sent invites to several friends and family who will appreciate $50 to play with. The slick interface allowed me to choose from my email contacts and edit the email invitation if I wanted.

Reinvesting Monthly Payments

“Reinvesting Monthly Payments” offers the ability to schedule a search that runs automatically when your cash balance equals or exceeds a given amount. This feature currently uses LendingMatch; Lending Club will be adding the ability to use the more granular credit criteria soon. I am using this feature by setting the minimum amount of $25 and the lowest target average interest rate. As soon as my cash balance reaches $25 I should be notified by Lending Club of the order that is waiting. I’m not interested in the order — I pick my own notes — I just want to be notified that I have enough to invest in another loan. We will see if it works the way I have set it up.

Update

22 Feb 2009 A Lending Club Investment Analysis (PDF) was conducted by Javelin Strategy & Research (January 2009). Accounting for loans paid off early, late payments, defaults, and a Lending Club 1% service charge, the overall investment return still averaged 9.05%, with a median return of 10.48%, based on a Weighted Average Return on Invested Capital.

YadYap Peer-to-Peer Payday Loans

November 10, 2008 by rickety 17 Comments

YadYap, payday spelled backward (how’s that for a rickety but innovative name), is the first people-to-people lending platform specifically for the payday loan industry. YadYap is looking forward to an official launch soon. It is interesting that I should hear about YadYap (thank you Jared) so soon after I wrote that “there will be many peer to peer lending websites.”

The Inspiration for YadYap

According to their website, YadYap was inspired by three characteristics of the payday loan industry:

The significant need for short term loans.
The controversy over lending rates charged.
The lack of borrower representation in the market.

How do Borrowers Benefit from YadYap?

Instant loan approvals.
Funds quickly deposited to their bank account.
Lending rates determined by the free market through a competitive auction.
Good repayment performance is rewarded with lower interest rates and loan fees.

How do Lenders Benefit from YadYap?

Provided with pre-screened loan applicants.
Credit / payment history is tracked resulting in a YadYap risk rating.
YadYap handles all documentation, fund transfers and loan administration.
Lenders benefit from both monetary and social returns on their capital.
YadYap takes the inefficiencies out of the market.

The biggest advantage of YadYap is the almost instant liquidity that comes from offering short term 2-4 week payday loans. Unlike Prosper and Lending Club, no secondary market is needed to achieve liquidity for lenders. When YadYap opens, this may prove to be a significant advantage for them. And maybe there will be a few less “Payday Loans Here” signs on main street as business migrates to the web.

Updates

5 Mar 2009 I removed my instant liquidity link to YadYap’s blog. All it returns is a WordPress message that reads:

This blog has been archived or suspended for a violation of our Terms of Service.

Not a good sign. I wonder if they need a payday loan to tide them over?

12 Mar 2009 Restored my instant liquidity link to YadYap’s blog, which has changed location and is now called [link no longer works]. Set aside money for a payday loan to YadYap through their platform once they launch.
19 Oct 2010 Yadyap launched. In this first phase, all lending will be done by YadYap LLC, their affiliates, and other institutional lenders.
25 Feb 2012 ConnectFund link no longer works, replaced all references to it with this bracketeted phrase: [link to longer works].

Rickety signature

My Experience with Lending Club

October 31, 2008 by rickety 5 Comments

Getting Started

Ten days ago I funded my Lending Club account with a few spare dollars. On Monday the transfered money was available for use. Lending Club connects those seeking a loan with lenders. Risk of default from rickety borrowers can be spread out by investing only $25 per loan. Unlike Prosper, the interest rate is determined by Lending Club and remains fixed during the funding process. Lending Club sets the interest using a base rate and adds to it an adjustment for risk and volatility.

A few months ago I opened a Prosper account but the company is currently in a quiet period. Hence I moved my Prosper earnings over to Lending Club. I was able to invest in several notes without any difficulty. The software did present two procedures that were a little awkward at first but I readily adjusted. I will detail them below. Also remember that I am showing you how easy the process is but I am not telling you which loans to choose.

[Read more…]

Lending Club Open for Loans, Prosper in Quiet Period

October 18, 2008 by rickety 3 Comments

Prosper Quiet Period

Prosper will not accept new lender registrations or allow new commitments from existing lenders. This is called a quiet period. During this time they can register with securities authorities promissory notes that may be offered and sold to lenders through Prosper in the future. I wrote about my Prosper experiences in August. Currently I have 35 loans with three of them a little rickety at less than 15 days late. I am earning 17.34% with a goal to earn 10%, hence I have allowed for several defaults. I have been reinvesting the principal and interest back into new $50 loans. Now that I cannot make new loans I will move the cash from the repayments over to Lending Club.

Lending Club

Lending Club opened up to lenders again at just the right time now that lending at Prosper is temporarily closed. According to the Lending Club blog, Utah, where I live, has already been added:

We were delighted to open our doors to lenders again on Tuesday this week and see hundreds of lenders signing up for the new program in just a few days. In addition to the federal filing with the SEC, we have made a coordinated “blue sky” filing in all 50 states, and state clearances have been trickling in all week, with four new states already added: Hawaii, Nevada, Utah and Wyoming.

What I am most interested in trying is the Note Trading Platform. This is how it works:

If you are a Lending Club lender and wish to sell some of your Notes, or buy Notes currently held by other lenders, you can now use the Note Trading Platform operated by FOLIOfn, member FINRA/SIPC. You will need to open an account with FOLIOfn but you can use the funds available in your Lending Club account to buy Notes through the Trading Platform, and receive the proceeds of any sale of Notes (minus a 1% trading fee) directly into your Lending Club account. Only Notes that were issued after October 12, 2008 can be traded on the Trading Platform.

A benefit of trading Notes is that you can review loan payment history and credit score trends since the date the loan was issued. You can buy Notes that have a shorter maturity. You may identify Notes that are priced below their fair value. Notes can be sold to obtain liquidity. I may try this just to see how it works.

Lending Club statistics are reasonable. Since 1 June 2007 Lending Club has issued 2,447 loans worth $19,541,150 and has declined 18,802 loans valued at $151,626,494. There have been $577,586 (2.96%) in late loans (31-120 days) and $970,225 (4.97%) prepaid. Defaults (120+ days) are $327,862 (1.68%).

Kiva Lending Team: Kiva Mormons

October 1, 2008 by rickety 6 Comments

I’ve blogged about Kiva before. Kiva is a non-profit organization that uses the internet and a worldwide network of microfinance institutions to enable individuals to lend as little as $25 to help fund small businesses run by low-income entrepreneurs. The lender chooses who to lend to from a database of profiles. When the loan is repaid the money can be withdrawn or loaned out again.

I have made several loans and they have been repaid within 6 months to a year. It is a lot of fun to pick where you want the loan to go and also to lend your money again and again to help someone. A change was made recently where you get your payments back immediately instead of having to wait for all of the loan to be repaid.

Another change that I like very much is the introduction of Kiva Lending Teams. Members of these teams continue lending as individuals, but they have the option to count each loan they make towards the overall impact of one of their teams. As of today there are 1,650 Kiva Lending Teams. The top team in terms of members is the Atheists, Agnostics, Skeptics, Freethinkers, Secular Humanists and the Non-Religious with 845 members. I passed on that one, I wouldn’t be able to remember the name of my team. KivaFriends.org has the highest number of loans at 2,236 and the highest dollar amount, $58,575.00.

I joined Kiva Mormons with 61 members, 107 loans with a dollar amount of $3,350. Here is what part of our lending page looks like today. It will change as more loans are made. Recognize me on the left?

You can see who on your team made the last five loans. The loan from Orange Third Relief Society, which is classified as an individual lender but is made up of several women. Only new loans can be credited to a team so you have to wait until a loan is repaid and a new loan made before it can be counted. This is important for our friendly rivalry with the Flying Spaghetti Monster. With just 71 members (10 more than us) they have 209 loans, leaving us in the dust. Then there are the Kiva Baha’is that raced passed us with 157 loans with only, get this, 14 team members.

Are you are part of a Kiva Lending Team? Tell me about it and why you joined your particular team.