Author Topic: The great loan drought of October 2012  (Read 10146 times)

FrankieC

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The great loan drought of October 2012
« on: October 18, 2012, 10:59:34 AM »
It seems that about a month ago, we frequently had 1200+ loans on the platform, with at least 1/2 dozen approved loans matching the typical tight filters we savvy investors use at any given time.

In the last couple weeks, the total has dropped to 500ish, and I'm having to invest in non-approved so-so loans. Most good loans seem to get fully funded before they're approved, and before the borrower answers a single question.

What the heck?!?!

Maybe it's just a coincidence, but the shift seems to have occurred right around the time LC announced large-investor-only-loans.

Anyone else noticed?

Peter

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Re: The great loan drought of October 2012
« Reply #1 on: October 18, 2012, 11:37:08 AM »
Hi Frankie,

I have noticed this as well. This is the one thing I warned Lending Club about - I said when they make the change to taking 20% of the loans off the platform for large investors, even though it is only temporary, they need to flood the market with good loans so small investors will still be happy. They haven't done that - a couple of days ago there were only 450 loans available.

Today, there are signs it is improving - I invested in about 12 loans this morning out of 707 loans on the platform. But the trend is certainly towards the loans staying on the platform for less time.

Many investors, myself included, don't wait for a loan to be approved or for an investor to answer questions. I invest as soon as the loan meets my credit criteria because I know it can disappear from the platform quickly. Some loans that I invested in came on the platform this morning and were already 80% funded.

The only solution is many more loans to choose from, I hope we get back to 1200+ loans on the platform again here soon.
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rajuabju

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Re: The great loan drought of October 2012
« Reply #2 on: October 19, 2012, 04:12:16 PM »
The situation is MUCH more acute then that for me.

My very strict criteria used to produce roughly 40-80 available notes to choose from at any given time.

Lately, I am seeing only 6-12 notes using the very same filters as I have been for months.

Its actually to the point where just reinvesting the proceeds from monthly loan payments is difficult, nevermind adding in more funds (I have a biweekly recurring $500 transfer setup).

If this keeps up for any serious period of time, I'll have no choice but to open an account /w Prosper and start diverting some of my potential investing funds there instead of LC, because I am not willing to invest above the $25 per loan amount whatsoever.

Peter

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Re: The great loan drought of October 2012
« Reply #3 on: October 19, 2012, 07:06:19 PM »
I invest with a few different filters and it is interesting to see the differences in loan volume with each one. My favorite filter which I reference in this post: http://www.lendacademy.com/investing-in-lending-club-and-prosper-in-2012/ (it is Lending Club Filter 1) is not down to just 2-4 loans available at any one time. But I remember back in June when they got to over 2,000 loans there were something like 15-20 to choose from. My LC Filter 3, though, has still plenty of loans to choose from - usually 12-15 at any one time. Overall I am able to stay almost fully invested.

You have a few choices:
1. Wait and out and see if the number of loans improves.
2. Create some new criteria to provide more choice.
3. Increase your per loan investment beyond $25, but I know you have already said you are dead against that.
4. Open an account at Prosper.

Good luck and check back in to let us know what you decided.
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Lovinglifestyle

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Re: The great loan drought of October 2012
« Reply #4 on: October 19, 2012, 07:17:06 PM »
I'm choosing #1:  Wait.  Meanwhile, money is coming in faster than it is going out. 

Judging by the high number of "removed" notes (which I am grateful for, considering the alternative!), LC is doing its best to keep up the quantity.  Hopefully this too shall pass!

FrankieC

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Re: The great loan drought of October 2012
« Reply #5 on: October 19, 2012, 09:41:06 PM »
4. Open an account at Prosper.

I thought I heard complaints of an ever worse drought at Prosper recently. Is it the case?

Peter

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Re: The great loan drought of October 2012
« Reply #6 on: October 19, 2012, 10:20:57 PM »
That is the case. September was the low point at Prosper when most of the month they were under 100 available loans. This month they have bounced back with 250+ loans on the platform but still less than the 500+ of a few months ago.
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brycemason

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Re: The great loan drought of October 2012
« Reply #7 on: October 20, 2012, 11:59:40 AM »
I'd have to crunch the data to be sure, but total volume looks to be good for Oct. So, an important part of this discussion is whether this is a drought (fewer loans at a higher average amount) or just perceived as a drought (loans on platform are getting funded at a faster rate).

People with filter strategies have to accept the downside of it, which is treating each criterion as a complete black mark. Move to a multidimensional analysis method and assign a degree of grey to each criterion, and you will have a much richer set of acceptable loans from which to invest.

supergeek62

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Re: The great loan drought of October 2012
« Reply #8 on: October 20, 2012, 02:17:55 PM »
Well, as annoying as it is to have money sitting around and not enough notes to invest in, I think it is important that Lending Club is sticking to their strict loan criteria.  I wouldn't want LC to start lowering their standards in order to make more loans available.

Honestly, I think it is a simple supply and demand scenario - as the popularity of P2P lending grows, and more big-money investors come on board, it takes more and more loans to meet that demand.  Personally, I don't think enough borrowers are aware of companies like Lending Club and Prosper.  For anyone with good credit and a substantial credit card balance, it's a no-brainer to consolidate their debt with a P2P loan, but most people I've talked to haven't heard of this option.....  Just my 2 cents worth........


Peter

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Re: The great loan drought of October 2012
« Reply #9 on: October 20, 2012, 07:46:49 PM »
I'd have to crunch the data to be sure, but total volume looks to be good for Oct. So, an important part of this discussion is whether this is a drought (fewer loans at a higher average amount) or just perceived as a drought (loans on platform are getting funded at a faster rate).

That is a very good point Bryce. At both Lending Club and Prosper it is not so much of a drought but a perceived one. Prosper has the problem of many loans disappearing from the platform within 15 minutes thereby increasing the idea that there are fewer loans available. But even with the 80-100 loans I mentioned above for the whole month of September it was still their best month. The same is true at Lending Club. There are fewer loans on the platform but total loan volume is still on pace for a record month.
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Peter

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Re: The great loan drought of October 2012
« Reply #10 on: October 20, 2012, 07:48:52 PM »
Personally, I don't think enough borrowers are aware of companies like Lending Club and Prosper.  For anyone with good credit and a substantial credit card balance, it's a no-brainer to consolidate their debt with a P2P loan, but most people I've talked to haven't heard of this option.....  Just my 2 cents worth........

Most borrowers only discover Lending Club when they go looking for a loan. The vast majority of potential borrowers do not know Lending Club exists. This will change slowly but they are still relying for the most part on people who are actively looking for loans.
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rajuabju

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Re: The great loan drought of October 2012
« Reply #11 on: October 24, 2012, 10:49:55 AM »
Well, I've decided to finally try my hand at Prosper. I know there is a loan drought going on over there, but for my last $500 transfer this week, I only found a total of 6 loans so far. So I have too much $ sitting unused. And I dont want to start checking the platform multiple times a day for loan opportunities.

So I've opened an account at Prosper and plan to transfer $1000 there as an initial test. If I can find some decent loans, I will probably split future investments, $250 to each platform, going forward every 2 weeks.

Peter

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Re: The great loan drought of October 2012
« Reply #12 on: October 24, 2012, 11:24:53 AM »
Prosper's loan volume has been increasing steadily all month but they still suffer from the problem of good loans disappearing from the platform quickly. With my criteria I can still find more loans at Lending Club than Prosper but Prosper has started to get a bit better in the last week or two.
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investforfreedom

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Re: The great loan drought of October 2012
« Reply #13 on: October 24, 2012, 01:10:01 PM »
I don't know if this is a mere coincidence or something else is going on.   The pickup in loan volume on Prosper coincides with a loan drought on LC.  I have accounts on both platforms, so it doesn't matter too much to me in that regard.  The borrowers and the loan sizes are different anyway on the two platforms.  So are the risks involved.  Even though the data available doesn't show much of a difference in terms of risks associated with loan sizes--especially for high income earners, I can't help but balk at the idea of loaning $35,000 to folks with F and G grades on LC.  (But I admit I have invested in a tiny number of these loans.) In that respect, I like Prosper better.  But loan quality seems to be generally higher on LC. 
« Last Edit: October 24, 2012, 01:13:20 PM by investforfreedom »

Peter

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Re: The great loan drought of October 2012
« Reply #14 on: October 24, 2012, 01:59:25 PM »
You know if you go and sort the the browse notes file on Lending Club by time left you can see the loans that have stayed on the platform the longest. I have noticed in the last few weeks these are almost all F-grade 60-month loans with a high loan amount. Mind you they all fund eventually using with LC Advisors batting clean up for them.
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