As of December 9, 2013, the average Lending Club borrower shows the following characteristics:
- 702 FICO score
- 16.3% debt-to-income ratio (excluding mortgage)
- 15.1 years of credit history
- $71,377 personal income (top 10% of US population) 1
- Average Loan Size: $13,625
See also: http://www.cbsnews.com/news/the-lending-club-a-critical-review/ - a reviewer notes that his annualized rate of return of 11% was wiped out when two notes defaulted.
"What I suspect was happening here, was that Lending Club was not marking down delinquent notes, recognizing that the value was impaired. Sound familiar? It ought to, since it was the same failure to "mark to market" that the big banks were doing on their real estate loans until the near financial collapse in 2008."Interesting... As the company is growing rapidly, they are signing up a lot of "new" loans. There are not a lot of older loans in the portfolio - the type of loans more likely to go into default, according to one analyst. So, on paper, they have all these new loans paying high interest. And since they show interest payments from delinquent loans on your "profits", it makes the rate of return appear higher. If a lot of loans default, down the road, it could spell trouble - unless of course, they keep taking in more and more money and loaning out more and more money (which would mean chasing worse and worse credit risks - already average FICO score has dropped from 706 in one article to the 702 shown here).
In other words, it is, in a way, a pyramid scheme - so long as they can keep the ratio of "new" loans higher than older ones, it will show spectacular growth. But if growth plateaus (which it will, as they run out of borrowers, eventually) the rates of return could plummet, as older, more deliquent loans load up the portfolio. Interesting perspective.
ONE FINAL NOTE ON LENDING CLUB: When you Google "Lending Club Sucks" or "Lending Club Complaints" you come up with these weird cheerleading sites which appear to have no other function than to groom the image of Lending Club. Pay no attention to the man behind the curtain, Dorthy! These are legitimate, impartial websites and blogs! For Sure! For example, this blog-like site concludes with the comment, "Lending Club Rocks!" (note: since removed) which is sort of embarrassing. No one talks that way anymore. Not since 1989 anyway.
Over-grooming your image on the Internet has a backfiring effect. It comes across as too Stepford-Wife creepy, mind-control, Socialist State weirdness. I mean, you have to see some real complaints and critical analysis out there to make something "real". When all you see are rah-rah postings, beware!
**Well, there may be a free lunch - for people who use kickstarter to raise funds.
According to a recent article on NBC News, a movie that was funded in large part by kickstarter contributors, is now making millions for its producer. What do the "backers" get? A free ticket to the movie or other such nonsense. Turns out, Kickstarter won't let backers profit from anything they back:
"Because Kickstarter and other crowdfunding sites do not allow investors to earn profits, project leaders offer rewards as incentives for contributions. Braff essentially offered his investors behind-the-scenes or VIP access, including personal copies of the script, roles as unpaid extras, screenings in 11 cities with Q&As with Braff, and on-screen credits. "So what is the point of giving your money to a commercial enterprise like a movie? It would be like giving money to GM or Exxon.
People are idiots, I'll say it again and again. Note the comment from one LOSER who can't remember how much he donated ("20 or 30 dollars, I can't remember). Gee, if you have $20 to just throw away, I hope you're fully funding your 401(k)!
Or is there a kickstarter for that?