Author Topic: Idea: LC but with partially secured consumer loans  (Read 7481 times)

HalfABubbleOff

  • Newbie
  • *
  • Posts: 14
    • View Profile
Re: Idea: LC but with partially secured consumer loans
« Reply #15 on: July 30, 2016, 07:09:11 PM »
It's been frustrating to see a loan with the purpose of "credit card payoff" and see the amount requested far in excess of the revolving balance (example below):
https://www.lendingclub.com/browse/loanDetail.action?loan_id=84135735&previous=browse
Just who's getting the extra 8k?

I understand your line of thinking, however...  Every revolving loan is not reported to every credit reporting agency.  Therefore, there may well be loans which don't show up on the particular credit report that LC pulls.  There is therefore no certainty to this sort of calculation.

On the other hand, you are free to choose which loans to invest in, and some investors do use the criteria of loan amount matching up with revolving balance shown. 

As long as you are free to choose, why is this "frustrating"?
It would be nice to see loans with purposes such as payoff credit card & consolidate debt go directly to the debt holders from LC without stopping in the borrower's checking account first.  So, it is better known that the money being lent is going for the stated purpose instead of a hope and a prayer that it is being used as intended. 

AnilG

  • Hero Member
  • *****
  • Posts: 1123
    • View Profile
    • PeerCube
Re: Idea: LC but with partially secured consumer loans
« Reply #16 on: July 30, 2016, 07:42:13 PM »
DIRET_PAY loans http://kb.lendingclub.com/investor/articles/Investor/Learn-more-about-Direct-Pay/

It would be nice to see loans with purposes such as payoff credit card & consolidate debt go directly to the debt holders from LC without stopping in the borrower's checking account first.  So, it is better known that the money being lent is going for the stated purpose instead of a hope and a prayer that it is being used as intended.
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

SLCPaladin

  • Full Member
  • ***
  • Posts: 202
    • View Profile
Re: Idea: LC but with partially secured consumer loans
« Reply #17 on: August 03, 2016, 12:31:04 PM »
I love this discussion. While I'm not sure secured consumer loans are feasible and scalable on a platform such as LC, the subject of how to reduce borrower default is top-of-mind for me. Everyone here hopes their custom filter is some sort of "secret sauce" that will somehow juice returns by lowering default rates. Whether they hand-pick notes or rely on a subscriber service, I think we all are searching to reduce risk and increase return.

One of the only innovative ideas I've heard of in the fintech space is what SoFi is doing when one their borrowers loses her job. Since job loss is one of the primary reasons for a loan default, this intervention strikes me as attacking the problem head-on. Apparently SoFi has some sort of professional network that can match borrowers career services team to get them re-employed in job placement programs. I don't have any visibility into whether this is successful, but SoFi's incredibly low default rate is impressive.

This whole idea seems quite appealing to me, much more so than taking any one's children hostage or hiring the repo man to nab a car. What if LC has some similar service? I don't know how it would exactly work, or even if it would be feasible, but if we're truly interested in this being "peer-2-peer", I'd love to help those borrowers I've lent to find a way to pay their obligations. If the lending community of a specific note could collectively leverage their personal network for employment opportunities, that might prove to be a win-win for both the lenders and borrower. Sure, this is a pipe dream. But one can always wish, right?
« Last Edit: August 03, 2016, 12:34:41 PM by SLCPaladin »

rawraw

  • Hero Member
  • *****
  • Posts: 2795
    • View Profile
Idea: LC but with partially secured consumer loans
« Reply #18 on: August 03, 2016, 04:33:49 PM »
Back in the old school days before this stuff was popular, there was a service some question askers required borrowers to use. It verified outstanding debts to us investors and showed how much. I think it even showed when it was paid off. I wrote LC once telling them they should buy the website and implement it. They never did but prosper bought something kinda similar a while back. I still think it could help turn LC from a commodity provider to a relationship business

Sent from my SAMSUNG-SM-G935A using Tapatalk


Larry321

  • Jr. Member
  • **
  • Posts: 57
    • View Profile
    • Email
Re: Idea: LC but with partially secured consumer loans
« Reply #19 on: August 03, 2016, 07:11:15 PM »
I love this discussion. While I'm not sure secured consumer loans are feasible and scalable on a platform such as LC, the subject of how to reduce borrower default is top-of-mind for me. Everyone here hopes their custom filter is some sort of "secret sauce" that will somehow juice returns by lowering default rates. Whether they hand-pick notes or rely on a subscriber service, I think we all are searching to reduce risk and increase return.

One of the only innovative ideas I've heard of in the fintech space is what SoFi is doing when one their borrowers loses her job. Since job loss is one of the primary reasons for a loan default, this intervention strikes me as attacking the problem head-on. Apparently SoFi has some sort of professional network that can match borrowers career services team to get them re-employed in job placement programs. I don't have any visibility into whether this is successful, but SoFi's incredibly low default rate is impressive.

This whole idea seems quite appealing to me, much more so than taking any one's children hostage or hiring the repo man to nab a car. What if LC has some similar service? I don't know how it would exactly work, or even if it would be feasible, but if we're truly interested in this being "peer-2-peer", I'd love to help those borrowers I've lent to find a way to pay their obligations. If the lending community of a specific note could collectively leverage their personal network for employment opportunities, that might prove to be a win-win for both the lenders and borrower. Sure, this is a pipe dream. But one can always wish, right?

While the ide aof providing social work and career counseling services to borrowers who have lost their jobs sounds very Scandanavian socialistic and idealistic, the expense of providing those services and the infrastructure is way beyond what I would expect from any sort of financial loan company.

It would be better to send a person to do a home interview on the front end before approving the loan, but obviously, that would be too expensive. 

The key to reducing defulats, I feel, is still in using statistics to better predict who will default.

LC notes investor for 3 years

Bitcoin speculator

bdonovan

  • Newbie
  • *
  • Posts: 36
    • View Profile
    • Email
Re: Idea: LC but with partially secured consumer loans
« Reply #20 on: August 05, 2016, 03:17:21 AM »
Since I temporarily work at a loan company at a branch, I can say that the process is pretty easy for loans w/ collateral with only a few extra steps added. Basically pictures are taken of the car for proof of milage and condition and obtaining the title to transfer title of the vehicle. All underwriting is done at headquarters so cost is centralized. Filing this paperwork should not add any significant cost to the application process.

Interesting.  That sounds fairly straightforward & standardized.  Perhaps with some local partnerships this could be feasible, or at least for borrowers within a reasonable radius of major cities.  Some bring up legitimate arguments about LC's differentiation vis-a-vis the local bank by offering unsecured loans (which certainly helps with loan origination); but I would think LC is now further along, their models are reasonably solid to bring people to the site already.  There they wouldn't replace the unsecured model, but simply add partially secured as an option with a lower rate.  For investors, it would likely be a slightly less return, less risk model for those who are are tired of defaults.