Seeking Alpha

Low returns on stocks and bonds is helping LendingClub - an online financial startup - attract...

Low returns on stocks and bonds is helping LendingClub - an online financial startup - attract investors who buy loans in the company's online marketplace with rates ranging from 5.4% to 25% (depending upon a borrower's credit score). The latest to step into social lending is Thomson Reuters (TRI) with a reported $25M investment.
Comments (8)
  • Great concept on paper. The actual results will be certain to disappoint investors. It is not a compelling investment to take equity risk for debt returns.


    Only winners here will be LC and the sales folks. You can do far better with less risk with a firm with a long track record-NLY.
    8 Sep 2011, 08:29 AM Reply Like
  • Do you have experience with this Lending Club thing? I haven't seen bad press on it - yet.


    It's own advertising:
    8 Sep 2011, 09:57 AM Reply Like
  • FYI it looks capped at $35,000 to boot -
    8 Sep 2011, 10:00 AM Reply Like
  • A friend asked me to review the program and after reading the prospectus and 10-K the advised against.


    Among my concerns:


    Limited borrower verification including income.
    High effective costs to service and enforce.
    Management team biased to marketing/sales/promotion skill set. Headcount is weighted to marketing/sales/customer service.
    Unknown credit culture.
    Limited operating history raising doubts about future loan performance, delinquencies and losses. From 5/07 to 3/11, only 11% of the loans have been fully repaid.
    The recovery rate on charge offs was $56,000 or about 6%. All loans 120 days past due are charged off. Also, if there is ever a future recovery past the original note maturity date, the investor will NOT receive the monies-LC retains it.
    Review the risk listing-hard to find the rationale for accepting those risks.
    You are dependent on LC to manage your investment. LC is unprofitable.


    I stand by my conclusion.
    8 Sep 2011, 11:30 AM Reply Like
  • I have personally invested money in lending club. Seems legit to me and I looked into the loan performance. Don't take my word for it - go check out their website and talk to their people (I did). Invested chump change. So far, I'm earning north of 8% APR. It's fun and I'm helping my fellow American get out of debt. It's not always about the money. Have a nice day.
    8 Sep 2011, 02:57 PM Reply Like
  • Good luck. I wish them no harm just didn't fit my risk parameters.
    8 Sep 2011, 04:16 PM Reply Like
  • I've got a tiny portion of my investment portfolio in LC, about $5,000. Haven't been that crazy about the results. I'm only averaging around a 7% return and the investment isn't remotely liquid. I've had several defaults and I've ceased any additional investment unless there is a radical change.
    26 Mar 2012, 10:09 AM Reply Like
  • zmahlum,


    Not at all surprised by your report. Lending is one of the oldest businesses and certain risk will never be completely avoided. After the recent financial market meltdown, one needs a return far greater than 7% to compensate for limited track record, no liquidity or secondary market and questions about the sponsor's profitiabilty and ability to scale the platform.


    LC is a promoters dream-great sales pitch-helping the neglected consumer obtain needed loans a social platform and progressive use of IT platforms to scale the business. You know what they say? Too good to be true.
    30 Mar 2012, 12:28 PM Reply Like
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