prosper.com

Prosper secondary market

wiseclerk 1 Comment

If you invest at Prosper.com lenders should not need your money for the next 3 years. Because at the moment all loans have 36 month terms. And – apart from the chance that the borrower might select to pay back the loan early – lenders can not withdraw money still loaned early (this does not apply to interest and monthly repayments).

Lenders have called for a secondary market as early as February 2006.

What is "secondary market"?

The idea is that a lender can sell his investment in a loan to another lender who buys it. It could work similar to trading bonds.

Suppose a lender have invested $100 in a AA loan at 12% interest, it is current and has still 18 month to run. Depending on the assessment of the buyers it could sell for a premium, that means the buyer pays the lender a price above $100 e.g. $102 or it could sell at a discount below $100 e.g. $97.

A premium would occur if buyer demand is strong, assessing that the 12% (and the other loan specifics) are an above average market deal. A discount could occur if the loan is assessed by the buyers as below average (on interest rate or other loan specifics) or if the risk for default is impacting (e.g. the loan is already late).

Advantages

Aside from liquidity advantages a secondary market would offer more options for lenders. Since some loans fail first payment a lender might choose to build his portfolio by buying loans that have made their first three payments and are current. It even seems possibly that loans would be packaged (like mortages) and auctioned off. This way a lender could specialize in picking loans and then reselling them after several month – reselling risk (and living of his reputation as in delivering good picks – okay sounds a little farfetched, I admit).

Will the Prosper secondary market launch?

In a webinar in June 2007 there was the first mention by Prosper, that they are working on a secondary market. (Source: Tom)
However this could happen soon … or in x years as far as I can tell.

Zopa confirmed that a secondary market is in their decelopment plans.

The other (international) p2p lending platforms are not even close to implementing secondary market functions.

Communication approaches of P2P lending services

wiseclerk 2 Comments

Today I will take a look at the communication approaches of Prosper, Lendingclub, Zopa and Smava. Since it is hard to judge the individual customer support these companies offer, the focus of this post is on the mass communication channels. To communicate their services to the lenders and borrowers the services can use the website's FAQ/tutorials, a forum, blog(s) and newsletter(s).

Prosper.com
Prosper has very detailed FAQs, which leave no aspect open. There are tutorials, videos and webinars. The Prosper forums are very active. While Prosper announce changes to the service in detail (here), the policy usually seems not to comment on individual users questions (except for the bug report section). Prosper seems to rely on users to communicate and educate each other in the forums. There has been criticism about censorship and deleted posts in the forums which led some users to set up an prosper independent forum.
As far as I can tell Prosper has no blog of its own, but there is a personal blog of the CTO John Witchel. But it is not very active and will probably not be found by the average Prosper user.

Zopa
The Zopa FAQs are detailed, too. The Zopa Forum is quite active with Zopa staff members responding to posts and questions. Zopa has a company blog which has a leisurely tone and often is offtopic. In my opinion it could get more informative for lenders or borrowers.
The same applies to the newsletters Zopa sends out.

Smava
Smava maintains a very detailed and good FAQ. The Smava forum is pretty quite, but Smava staff usually is responsive to user questions. There is no blog. Smava is only 3 month old and so far there have been only 2 or 3 newsletters, which were mainly a summary of developments.

Lendingclub
Lendingclub communicates very different from the others. Mainly it relies on it's blog which is in fact directly on the Lendingclub.com homepage. The blog is very active with up to 2 or 3 posts per day. Not only does it explain details of the lendingclub service but also has general advice on personal finance, e.g. on obtaining and maintaining good credit. Lendingclub has lots of guest authors contributing to the blog. The FAQ are somewhat hidden and only available to logged in users (unless you know the direct link). The information, when located, is detailed (e.g. states). As far as I am aware there is no Lendingclub forum.

My impression is that Prosper and Smava communicate in a style that appears more corporate and 'old fashioned' always pondering what information can be released and what for. Prosper has occasionaly received rather aggresive feedback of users, citing them of being non-responsive to the wishes of their users.  Zopa has a more buddying tone – hey take it easy. Lendingclub sounds educational to borrowers, aiming to help them by supplying them information. On the other hand Lendingclub's approach seems a little marketing driven, because their approach gains them search engine and blog visibility.

Prosper loan figures

wiseclerk

Prosper loans have meanwhile surpassed 66 million dollars loan volume. A look at wiseclerk's prosper loan aging table shows that Prosper.com succeeds in increasing originating loan volume nearly every month. Currently new loans for about 8 million US$ originate each month.

However the figures also show an alarmingly high volume for late and defaulted loans. Especially when looking at older loans (the new ones do not have aged enough to be technically able to default). For example of 2.1 million dollar loan value that originated in June last year, $177,000 loan value has defaulted and another $105,000 are 3 or more months late. The default rate for loans from June 2006 will therefore be well above 10 percent at the end of the 36 month term. And this is no execption. For March and April 2006 defaults are already higher than 10 percent of originating loan value.

prosper loan aging