Interesting. I really haven't seen that much of a difference on LC, but I did a huge run of purchases when I started my third account 8-10 weeks ago and haven't invested new funds since then. Only reinvesting payments.

I used to follow lendstats while it was running all-out, and I still look at it for some large stats. Pretty amazing there is an issue like that with the loan volume they have now. http://www.lendstats.com/

Either way, I think you'll be disappointed when you get into Prosper. It's pretty dry (way drier than LC) and actually had some negative month to month growth a few months ago. They are doing too much to advertise loan-refinancing to their existing borrowers so a high percentage of good notes get fully paid off at the 7-8 month mark now too. I actually prefer the Prosper platform and customer service to LC, so I hate that I am saying that.

came across ratesetter.co.uk the other day, they have a system where a small %age of each loan goes into a 'provision fund' that covers any defaults. for this reason no lender has ever lost money investing through the platform, plus it has benefits in that defaults mess up the rate of tax you pay on other platforms.

their '5year bond' is currently delivering 6.6% after all fees (before taxes), am considering it as an extra form of savings after my ISA.

when you say covers any defaults, does that mean the entire principal amount defaulted is paid back to the investor? if that's the case, wouldn't everyone just invest in the most high risk notes?

high risk borrowers put more into the fund.

Yes but that doesn't change that people would still be incentivized to take the higest risk. All they are risking is opportunity cost so why not.

there is no incentive.

Borrowers pay 'marketrate to lender + creditworthyness penalty to provision fund'. you earn the same market rate no matter what the credit penalty is of who you invest in. Consequently, there is no picking and choosing of notes like lendingclub/prosper. for lenders/borrowers its more like buying/selling stock in that it doesn't matter who you buy from, just the price you get, so you can place market orders (gimme $5k at whatever the current market rate is, suppose 6.4%) or a limit order (gimme $5k at 6.5% and hope the rate rises so the order fills).

So if you settle at 6.5% - you receive 6.5% irregardless of whether the reliable borrower is paying 6.5%+2% to provision fund or a risky borrower is paying 6.5%+8% to provision fund.

Bump.

I'm actually curious about the borrowing aspect, because it strikes me that you can get small personal loans for very cheap (6%), if you have good credit. Even a small HELOC would be 7.7%+ with good credit.

I'm thinking of using it to finance cheap money for short term business projects, and paying them off early when they're done. Would that be +EV?

Where are you located? You probably need to shop around more for HELOC. For example, take a look at this: 60 month HELOC up to 400K, 80% LTV for 1.99% APR.

Your estimate of what it costs people with good credit to get credit is way high. I know someone who got a unsecured loan $25k loan this week for less than half what you think HELOCs go for.

What do you guys think about lendingclub offering IRA's now? Liquidity is a nonfactor, but maybe the long term solvency of LC itself is an issue?

Okay yeah, 60 month 1.99% home equity loan is ridiculously sick. I'm going to milk that for all it is worth. Guess I should've looked more carefully.

I think lending money in lending club is just bad, for reasons previously stated in this thread and others; you are giving an unsecured loan to someone over the internet, when you don't have nearly the information needed to make a good judgement on that, other than lendingclub's assessment.

But you can diversify by spreading your investment out through hundreds of notes ($25 each). Am I missing something?

I gave it a try a few months ago and it's working out well so far but I'm curious what ppl have to say against it before I put more in. I have a bunch of $25 notes with very high interest/risk, expecting a few to default of course.

This is pretty much the same argument people used to describe online dating 10 years ago. Its bad to give somebody your phone number over the internet cause you don't know anything about them and they could be a stalker who's just gonna rape and kill you. But now everybody does it and its just as safe and normal as any other alternative method.

what information do you think you need to make a good judgement about a borrower that isn't available to you via lendingclub?

I put some test money on prosper in December. So far, it's going ok. I've got a bunch of $25 notes spread across the spectrum of risk. It's not shocking that some of the higher risk ones are late in payment. I'll reserve judgement though for a couple more months.

The reason people are skeptical of online dating is much broad than that. If you are under 27-30 and using online dating then there is likely something wrong with you. The same applies here. If you need to borrow money this way there is likely something wrong with you. The only people going to p2p to borrow are people who can't get credit though traditional avenues.

You are grossly underestimating the number of people involved by choice (for both), which illustrates my point pretty well. Its a common misconception that people only participate due to necessity.

Leaving online dating for a different topic why exactly would someone want to pay 5%+ for funds if they can get them for considerably less than that from a traditional source?

Because they cannot get them through traditional sources, duh.

With all this time you spend posting all day, have you read about the economy at all in the last 5 or so years?

I started this thread, and the reason I took a small loan through this avenue was after my small credit union and my other large bank turned me down.

This was for a whopping $3,000 personal loan I wanted as partial funding for a new business.

Realizing quickly nobody would give me anything for a new business venture (and I had no time to go through 10 to find the 1 that would), I soon realized not even a personal one for any XYZ reasons, without guaranteeing it with collateral. I could have gotten $X money to purchase a vehicle or something, but nobody was handing out any cash.

At the time, I had right at 2+ years of current employment on file with tax proof, making $40K+ over those last few years at that job, and my credit score was a 695 at the time I believe.

My father who has a fairly substantial net worth and salary was put through the ringer on a small construction loan we took out to do a project.

I don't think you understand just how tight the climate has been until you've actually swam in it or swallowed some....but typical, you will continue to talk out your ass and continue playing an internet know-it-all.

There is a reason this avenue exists and it is not just because they are horrible, terrible, financially crippled homeless deadbeats who can't pay their bills, and yes, some people are earning a very nice return on investing in these loans.

As usual you were too dumb to understand the conversation but choose to jump in anyway. The point I was making is that the only people who use p2p to borrow are people who can't get funds from traditional sources. Thank you for confirming my position I guess.

I have not had the same experiences. My experience has been that for people who are not **** ups getting credit is quite easy.

No, I understood you just fine.

You are for whatever reason, are not discounting the fact that the economy recently melted, and for a long time (possibly still) credit is ridiculously tight and banks were not lending money.

Do you not understand this?

Do you not understand that this is a catapult and reasoning behind this being such a growing avenue and even existing?

Get off the internet and go outside in the real world.

Not fukk ups, normal average people with decent wages and decent credit as well as people with great salaries and net worth's having a hard time getting credit.

As usual, you just do not know what you are talking about.

You are in Canada, what makes you on expert on the lending climate or environment in the states for the last 5 years?

Canada and the States are not significantly different but if we were to say they are then it has always been harder to get credit here than in the States simply because of regulation and the fact that the Bank Act gives a small number of intuitions a monopoly.

The reason you couldn't get a loan for $3000 to start a business rests in the fact that the amount you wished to borrow is ridiculously low and at least in Canada below the $5000 minimum that most banks will even consider lending. Further the idea that someone who doesn't have $3000 wants to start a business is a a huge red flag and an even bigger red flag is the idea that any real business can be started with such a small amount of money.

LOL...oh man, I love these ******ed arguments of yours.

Ok, so I could not get a loan for $3K, but would have been able to for $5,001?

Do you not think the multiple loan officers I sat down with at a bank I had been a member of for over 17 years with previous loans both cash and auto with which I had an impeccable record were not really wanting to give me a loan and detailing options?

What percentage do you ever give yourself that you are just flat out wrong on any given topic Henry?

My only problem was actually in the fact that I was in a sales based commission job of just barely over 2 years (self employed basically) and lending was very, very tight, and unemployment was climbing. Take away the economy and I am more then fine, I assure you.

Further, you assume that the $3,000 was all the cash in the world going into the business. Honestly it wasn't a significant amount more, but this is irrelevant.

I could of told them I wanted $3,000 to buy hookers and cocaine, or buy a house from a rich uncle worth millions that I planned on selling....didn't matter unless I was financing an auto purchase or putting up collateral.

Look, you are constantly wrong even when staring in the face of the facts.

I am not alone, and there were/are thousands of people who legitimately could/cannot get funding for various cash reasons such as home improvements, weddings, schooling, whatever they wanted who previous to the collapse would have been courted by multiple banks for lending.

There are businesses with real contracts and purchase orders for tens of thousands of dollars that couldn't get a bank to give them a nickel.

The business I am discussing I started is doing over $200K in (contracts) revenue this year. I probably would have a hard time getting much money even though the outlook looks great, all around. I paid off this intial loan on Prosper and immediately went back for a $15K loan from them again....I didn't even bother going into a bank and they discounted their upfront fee's and offered a competitive rate vs. traditional. I am actually going to walk into a bank here in the next few months and explore some options, so we'll see.

Are you really going to deny that this is or has not been the recent situation for a lot of people, and if so, what experience or knowledge do you have that tells you this?

How do you over and over again repeatedly argue facts staring you in the face?

Yes. There is a 0% chance of me walking into any bank and not being able to get a small personal loan.

Have you consider that possibly the problem is that you went into a bank and told them you needed $3000 to start a business?

In this particular case zero. I've lived my entire life without credit. February 2010 I decided I wanted a credit score so I decided to get a bunch of credit. Having read that your score is a function of both term and revolving lines I got both. I went from having $0 credit to $28000 and could have gotten more but since my goal was credit score establishing rather than a need for credit I declined. An adult with absolutely no credit history into his mid-30s suddenly deciding to engage in what normally appears to be credit seeking behavior looks sketchy and even more so given my unique employment status and I still got approved.

Again not at all my experience. I could make a list a mile long of people I know who have managed to get credit in the last five years for both personal and business needs all for considerably more than $3000.

Anyway returning to the original topic I was pitched an idea for starting something like Prosper in 1998. My objections then were that the only people who would use something like this are people who can't get credit from traditional sources. That defaults would be insanely high which turned out to be exactly what happened with version 1.0 of p2p lending. I haven't really bothered familiarizing myself with p2p lending 2.0 but I don't believe it is going to be much better. As an investment this is not something I would ever expect anyone serious to even consider.

2 cents:

Was working on a project out west that needed 475k loan. Was turned down because the amount was too small for most of the lenders in this field. Had we needed 2M, we would have gotten it, and they told us to come back if we ever scaled up.

Henry may be as bit OTT but anyone who thinks that just because some perfectly creditworthy people cant get credit means that perfectly credit worthy people will be anything like the norm for more expensive credit schemes are on very dangerous ground.