Comments on: My Lending Club Portfolio

By: Dylan

Dylan — Fri, 27 Feb 2009 14:59:58 +0000

I was one of the early “movers” from Prosper to Lending Club. I saw the writing on the wall for Prosper, and like some of the other examples here, a high % of my loans went deadbeat. I’m still breaking even there though. Some differences:

1) You can’t compare credit ratings or borrower quality. AA at prosper is A and Bs at Lending Club, and A B C at Prosper are equivalent to C D E F G at the Lending Club. Lending Club is more strict on FICO qualification (660 vs 520 at Prosper) and has a max DTI requirement (30% before, I think it’s lower now)

2) Even though you’ll experience defaults at the Lending Club too (I have about 4% of my loans in default after a year), the collections effort are more obvious and transparent. You can see what the Lending Club is doing at any point by looking at your loan status details. I have made about 7% after defaults and fees after a year.

By: Cajun Fusion

Cajun Fusion — Thu, 26 Feb 2009 04:05:59 +0000

Prosper lets you choose among 3 collection agencies. I chose the one with highest recovery rate, 60%. I think my first charge-off occurred more than a year ago, but I have yet to see any of it getting recovered. My guess is that the borrowers declared bankruptcy and Prosper loans are low on payback seniority.

By: Sun

Sun — Wed, 25 Feb 2009 22:16:08 +0000

It’s true that one default will screw up all the money made before. I am not sure about Prosper, but Lending Club seems to have collection agencies to recover the money after a default because on their Rates & Fees page, they list attorney fees etc. so I assume that they do go after default borrowers. It’s a risky business, not doubt about it. I just hope it won’t happen to me.

By: E. S.

E. S. — Wed, 25 Feb 2009 21:30:53 +0000

Like Cajun, I too took the bold move and invested a small amount in Prosper. However, my portfolio was grades “C” and above with the majority of the loans falling in the “B” category. 55% of my loans have charged off with another loan 2 months past due. Ironically, one of my strongest applicants, an “A” rated borrower, has defaulted. To sum it up, I have lost completely in this venture with no intention of ever going back. It seems there is no recourse at all if these loans default as Prosper does not have the resources nor does its partnered collection company too fight bankruptcy courts. I have lost all faith in this process and do not see a future in this unless the system is radically changed to give lenders more reassurance and options to collect atleast back their investment.

By: Cajun Fusion

Cajun Fusion — Wed, 25 Feb 2009 08:33:44 +0000

I was comparing Lending Club to Prosper and came to your informative (on top of Lending Club article) site.

I started lending on Prosper back in 2006 and had approximately similar loan choices as you have. Mostly C, some B and some D. Prosper issues 3 year loans. I had a chance to summarize the “investments” this year, a staggering 75% of them have defaulted and are in “charge off”, with recovery rate estimated to be 60%. That means the interests earned were not even enough to cover the loss in principle collections. Those people have bad credits for a reason.