Lending Club vs Prosper — The First 100 Days Take 3

Yesterday and the day before, in reaction to Lending Club’s post 100 Days and a Million Dollars in Loans! I did a straight comparison on loan volume during the first 100 days and a loan volume comparison with similar scoreX scores (>640). My apologizes for needing a 3rd post to get it right, but yesterday I left out debt to income ratio in my comparison… So to be completely fair I thought I would rerun the comparison with debt to income ratio being less than 20%.

As a reminder Lending Clubs claims for the 1st 100 days…

Loans issued

172 for $1,046,000

Here is Prosper’s loan volume for AA-C credit grades and less than 20% DTI from 2/16/2006 through 5/27/2006 (1st 100 days)…

CreditGrade	LoanCount	LoanAmount	AvgRate
AA	97	$696,798	8.66%
A	87	$621,260	10.66%
B	97	$699,937	12.97%
C	141	$641,676	15.68%
	422	$2,659,671

Want to discuss this and other Lending Club, Prosper, or any other p2p lending site issues? Join me at the P2P No Bank P2P Lending Forum. Registration is free and easy, here is the link to register: register.

Here is the sql you can use on ProProsper to verify the Prosper numbers…

select CreditGrade, count(loanid) LoanCount, sum(amountborrowed) LoanAmount, avg(borrowerrate) AvgRate
from loan
where originationdate>=’02/16/2006′ and originationdate<(cast('02/16/2006' as datetime)+100) and debttoincomeratio<.2
group by creditgrade

September 19, 2007 | Filed Under Lending Club, Prosper.com

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14 Responses to “Lending Club vs Prosper — The First 100 Days Take 3”

Joaquin Delgado on September 19th, 2007

You may need to write a 4th post
To account for the first 100 days of Prosper, you need to include all the way back to November 2005 (see http://www.lendingstats.com/loansFunded) when loans
first began originating. Cutting that off at the beginning of February 2006 for 100 days, the total loan volume was:
30 days in November 2005: $47,800
31 days in December 2005: $30,887
31 days in January 2006: $40,120
8 days in February 2006: $113,509.43 **assumes 8/28 times monthly total
Prosper’s first 100 days: $232,316

It is clear that Prosper did a Beta before the date you took as start date; LendingClub didn’t launch immediately to the general public either. It opened up its door just last week (it was limited to Facebook users only prior to that)

Second, as you have stated in posting 3 and 4, we need to consider the credit quality of the loans originated.
Lending Club has approved something like 20% of the loan applications because of their credit policy cutoffs. Prosper effectively approved everyone. By February 2006, they already had 35,851 in defaults (according to http://www.lendingstats.com/loansFunded), meaning that the default rate was around 15% for loans originated the first 100 days compared with Lending Club, who has had none so far.
Kevin on September 19th, 2007

LendingClub thanks for stopping by!!! I am glad to have you as a reader.

Let me start with the easy one…

The Prosper beta was closed (friends, family, and investors I was told). Doors were opened to the public on 2/16/06. The fact that they give us the data from the beta is a bonus to the community.

Facebook was a public launch for Lending Club.

I think it is fair to start the clock on Prosper at 2/16/06.

Second from here (Lending Club Credit Grades) I see in table 5 that you don’t decline until 25% DTI. Now that I have found your criteria I will readjust my sql and re-post. I don’t think the results will be much different than my most recent post.

In this post for Prosper I am using >640 and <20% DTI. And I give the sql you can run on ProProsper to verify. From the previous link I see that some are approved more liberally and some less.

Lending Club where is the transparency? Give me data and I will put the ProLendingClub schema side by side the ProProsper schema.

I am simply responding to your propaganda. I am trying to get the right answer and I am trying to do it openly. Thanks for your help in sorting out this problem.
pjz on September 19th, 2007

Did you know that, unlike Prosper, the LendingClub DTI does not include the requested loan?
Kevin on September 19th, 2007

I did not… So that would push the real DTI even higher. Correct?
Joaquin Delgado on September 19th, 2007

Some remarks about your reply:
1)Due to the Facebook membership requirement and their demographics (mostly young folks with limited credit history) I wouldn’t consider Lending Club’s Facebook presence equivalent to Prosper’s “public” launch.
2) Our DTI requirements were initially 20% and then was adjusted to 25%. Our min FICO score continues to be 640. All this is openly published on our website.
3) We are working on exposing data via an API, while trying to respect our members privacy. In the meantime here is some data you can work on:
- Loans and Lenders Data that powers the Map on http://www.lendingclub.com:
https://secure.lendingclub.com/extdata/Map.xml
- Lenders’ Top Ranking:
https://secure.lendingclub.com/lender-ranking.action
Please see the “how do I use this page?” that explains this dataset and how we calculate ROI. The XML file containing this data can be found here:
https://secure.lendingclub.com/extdata/LendersRanking.xml

These files are usually updated on a daily basis.

J.D.
Kevin on September 19th, 2007

Thanks again for your time in response… I will try to summarize tomorrow.

p2p lending will change the world, banks make too much money.
pjz on September 19th, 2007

Correct. Lendinclub publishes the prefunding DTI and as far as I can tell they have no post funding DTI limit.

A currently listed loan has 24% DTI listed. So much for the 20% limit. With the loan the DTI would top 30%.

See example here.
pjz on September 19th, 2007

Just noticed that their (Lending Club Credit Grades) do indicate that they do go to 25% DTI.
Jon Russell on September 19th, 2007

As Kevin mentions, Prosper didn’t launch publicly until Feb. ‘06. I don’t remember any announcements or press at all until the New York Times featured a story on the 5th. That’s the launch date mentioned here: http://www.prosper.com/help/topics/whats_new.aspx. That should bring the numbers down a bit, but they’re still over $2.3 million (2/5-5/16; AA-C; less than 20%)

One of the benefits of Prosper’s marketplace having been around as long as it has is that there is a wealth of publicly available data to wade through. Some of that, like the default amount Joaquin mentions, includes loans with lower credit scores and larger DTIs. It also looks like he’s misreading the table at Lending Stats. The amount is listed by origination date, irrespective of when the default happened. There were no defaults in Prosper’s first 100 days, because they just don’t happen that quickly. Interestingly, it looks like no comparable Prosper loan made prior to 2/23/06 has defaulted to date (11/15/05-2/22/06; AA-C; any DTI).

I don’t think I’m alone in hoping Lending Club’s eventual default rate turns out to be quite small. It’ll further validate P2P lending to see new sites like Lending Club build upon the lessons and insights Prosper has to offer. I think it would also illustrate how early adopters are getting better at making investments in this new asset class.

As a Facebook developer, I think launching there makes it a public launch. Sure going Facebook-less can speed things up, but anyone can sign up for Facebook. Not to mention it is one of the 10 most trafficked sites in the US—over 39 million users, over 60% outside of college, 25 years old & up is their largest growing demographic. The most successful Facebook applications which launched the same day as Lending Club registered more than 100,000 users, and in some cases millions of users, within the first month.

I don’t have any numbers about the average credit score of Facebook users, though. It’d be interesting to see some stats on that.
Joaquin Delgado on September 20th, 2007

Interesting discussion. It has been mentioned that Lending Club risk grades (A1-G5), correspond to Prosper loans AA-C with less than 25% DTI (pre-loan). That is actually incorrect as our loan classification depends on multiple factors, DTI just being one of them. As you can see here DTI is NOT the only risk modifier. The amount requested is also considered. So for example, someone with 660 Scorex Plus (632 FICO), with 20% DTI, asking for $15k would be considered a C in Prosper, while in Lending Club would not meet the minimum requirements. If you want to compare apples-to-apples the query to Prosper’s data needs to be revisited.
onthefence on September 21st, 2007

Joaquin - It’s great to hear you have not had any defaults yet. But I really wouldn’t expect any at this time either. What we REALLY want to know is stats on your lates. That is what will help give us an indicator as to how you are doing.
pjz on September 21st, 2007

lendingclub really needs an advanced search to filter out listings. It is to time consuming to have to look at each loan.

For my part I do not plan to lend there since I do not do Auto Fund listings and they are all Auto Fund at lendingclub.
Patrick Gannon on September 21st, 2007

PJZ -

Thanks for the comment. Advanced search is something we do plan to develop in the next few months. As you indicated, the emphasis has been on the use of LendingMatch, which simplifies the portfolio selection process for most lenders. For those who want more specific control over the loans in their portfolio, we will offer advanced lender tools, including advanced search capabilities.

Patrick from Lending Club
P2P-Loans.com on September 21st, 2007

Very interesting discussion. I’ve been monitoring LendingClub from afar and will consider lending there once things mature a bit. I, too, am hopeful that LendingClub will learn from Prosper’s fumbles and bumbles. As we’ve all seen mny times in technology history, it is not always best to be the pioneer since those that follow can learn from the pioneer’s mistakes without all the baggage. Good luck - I am strong believer in P2P Lending and I hope this effort succeeds.