Comments on: Prosper versus Lending Club

By: Save and Conquer » Blog Archive » Lending Club

Save and Conquer » Blog Archive » Lending Club — Sat, 08 Mar 2008 21:29:55 +0000

[...] Prosper. His conclusion was that Lending Club is better for lenders. Pinyo at Moolanomy wrote an article about Lending Club and why he likes it better than Prosper. On the con side against tying any money [...]

By: MoneyBlogga

MoneyBlogga — Sun, 02 Mar 2008 21:45:32 +0000

Wow. You guys are certainly a savvy bunch. I’ve never heard of these P2P sites but my interest is piqued. Thanks for the very interesting article

By: Weekly Round Up - Thanks For Visiting!

Weekly Round Up - Thanks For Visiting! — Sun, 02 Mar 2008 14:48:02 +0000

[...] – LendingClub Highlights and Giveaways. Pinyo gives some insight into lending with Lending Club and is offering free t-shirts if you sign [...]

By: Prime Time Money March Madness Roundup | Prime Time Money

Prime Time Money March Madness Roundup | Prime Time Money — Sun, 02 Mar 2008 00:24:25 +0000

[...] coupons available today. Millionaire Money Habits answers a readers question about Roth IRAs. Moolanomy discusses the two major lending clubs and gives away some stuff. Mrs. Micah has some thoughts on [...]

By: Pinyo

Pinyo — Sat, 01 Mar 2008 04:50:32 +0000

@OneCheapChick – Agreed. It’s hard to find ideal loans. I am in a similar situation. I only lend to high credit rating borrowers with low DTI and no delinquencies. I guess patience is the key.

@Patrick – Great mind.

@Lazy Man – That’s one way of doing it, although I like to keep my money separate — bad habit.

I am an XL man myself, but medium is all I have…sorry. I’ll just have to send them to Lazy Man and Health.

@Mark – Lending through 2 networks is not about diversification, it’s about learning and experimentation. Beside, it’s basically free to start the first loan on LendingClub, so that’s what I did.

Better credit means less chance of delinquencies and defaults. With Prosper bidding system, you could end up with lower grade loan at lower interest rate. However, this is not possible on LendingClub

@OneCheapChick – Exactly. Also, don’t forget about the sub-prime mess. I am not intending to have that happens to my P2P portfolios.

By: OneCheapChick

OneCheapChick — Sat, 01 Mar 2008 03:38:47 +0000

I decided to try both sites not to add additional risk diversification, but just to see which one I liked better, since there are some key differences. Once I give this a little time to simmer, I will likely pick one (right now, I’m leaning toward Prosper) and stick with it for future investments.

As far as the credit rankings go, when I looked into the various risk/reward scenarios, historical data seemed to indicate that the higher interest rates paid with the lower grades would offset the increased incidence of default, and so the “smart” money is probably on the lower grades. But there is a worry factor for me with loans like these, and it goes up when I see a past history of delinquincies or poor credit. So I chose the “sleep well at night” option over the “smart money” option. When I get a little more money to play with, I will probably roll the dice with a few lower-grade loans and see what happens.

By: Mark @ TheLocoMono

Mark @ TheLocoMono — Sat, 01 Mar 2008 01:18:32 +0000

Also, how is having a better credit ranking system a means of reducing risk? Unsecured credit is still unsecured credit regardless of credit scores. It’s funny because I have 10 loans at Prosper and the ones with the higher interests are actually B credit grades whereas the ones with lower interest are C grades.

Only A grades have the most consistently lowest rates. And yes, they are still unsecured and at some degree of risk. It is really a good learning experience.

By: Mark @ TheLocoMono

Mark @ TheLocoMono — Sat, 01 Mar 2008 01:08:41 +0000

Sounds like you have done some research into this. I guess my only thought is what is exactly the point of lending through two separate and yet similar P2P programs.

You are not really spreading the risk, P2P is still has an inherited risk (unsecured loans are still unsecured loans) so my question is this why diversify across more than one program?

I guess I am old school, Peter Drucker preaches about learning one subject as well as you can so I guess in this case, I want to learn as much as I can about Prosper (based on my lending experience) as well as keep it simple. Think about how much work you have to do already to set up an exit strategy, ie. your death and instruction your executor to contact multiple P2P programs.

By: Lazy Man and Money

Lazy Man and Money — Fri, 29 Feb 2008 21:02:59 +0000

Prosper addressed the issue of interest of idle funds at their recent annual conference. It’s a fairly complex regulatory issue. Their CTO brought up a great point… wouldn’t you rather be able to link your bank account (earning 3% interest) in a way that you can instantly and freely transfer funds when you bid on a loan vs. making 1% from Prosper? They said they are exploring both options since it’s the second “bug” ever inserted in their system. It’s not really a “bug”, but a feature request.

Does a medium t-shirt fit anyone nowadays? I have problems even with the large sometimes. I’m not a big guy either – 5′9″, 170lbs…

By: Patrick

Patrick — Fri, 29 Feb 2008 19:06:39 +0000

Great article. I’ve noticed the same differences between the two companies, and was actually planning a similar article. (currently in draft as we speak!)