Lending Club, the newest entrant in the emerging person-to-person lending market, is launching tonight on the Facebook platform.
The Sunnyvale, Calif. company has raised $2 million in angel funding to join the handful of companies that aim to cut banks out of the personal loan market. These companies have an edge because they offer lower rates to borrowers and promise lenders higher rates than they’d otherwise get in a savings account.
Online peer-to-peer lending services, Prosper, Zopa and CircleLending all have significant lead time and lots of venture backing; Zopa, for example, has raised around $34 million. But Lending Club is the first of its kind to integrate its services into a social network.
The social networking angle allows Lending Club to leverage trust. Though not a social network, CircleLending, which Virgin USA just bought, nevertheless positions itself as an intermediary for loans between relatives and friends. Both Zopa, based in the UK, and Prosper, of San Francisco, facilitate loans between complete strangers. Lending Club sits somewhere in between: According to CEO Renaud Laplanche, the goal is not to get friends to lend to friends, but to use the Facebook platform to enable lenders to find borrowers within shared networks, like groups or schools.
Lending Club’s process is quite similar to those of its competitors. Would-be borrowers go to the Lending Club application within Facebook and enter in their personal information and the amount they’re looking to borrow–a minimum of $1,000 and a max of $25,000.
Lending Club analyzes their credit rating and suggests an interest rate — between approximately 7 and 12 percent, at which they should expect to get a loan. They then choose a screen name to protect their privacy. If they want, they can put a line on their profile page that lists the amount they want to borrow, the interest rate they’re willing to take, and the percentage of the loan they’ve amassed so far.
Lenders who sign up enter in the amount they’re willing to loan and the interest rate they want. Then the Facebook platform gives Lending Club a boost: Lending Club uses what it calls “LendingMatch” technology to pair the two parties based on shared connections it finds. While it currently only uses criteria like shared schools or groups or geography, Lending Club plans eventually to link people through friends of friends. It does this without giving lenders direct access to borrowers’ Facebook profiles.
The company has 18 employees, including former executives from Mastercard, Wells Fargo, and eBay. The sources of the angel funding are undisclosed.
27 Comments
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Dan Freeman said:
Zopa has not yet launched in the U.S. and CircleLending has an absolutely different model (lots of offline interaction is required). LendingClub appears to be the 2nd entrant in p2p market in the U.S. and the key would be to see how good is LendingMatch to simplify borrowing experience (currently takes many logins and searching on Prosper)
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Ann Wilser said:
Launching on 30+ million user platform is HUGE. If this gets enough traction, person-to-person lending will become much more mainstream.
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Liz Leblanc said:
I think it’s a good idea to use Facebook for person-to-person lending. Facebook has so many groups and networks that help understand relationship among people. I disagree with Lending Club that friends won’t lend to friends though.
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Kai said:
I believe the ZOPA System of lending to many borrowers instead of single p2p transactions is far superior! Integrating a Social Network is a great idea, though!!
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WTF said:
LC needs to start a SocNet for poker players, and open their platform to them. The amount of moneylending in the poker community is insane. if LC charged just a fee, they’d make a ton of cash.
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Joaquin Delgado said:
Hi, I’m the CTO of Lending Club. I would like to clarify that we do enable lending to many borrowers. As a matter of fact, LendingMatch is our proprietary search and recommendation algorithm that automatically creates and suggests diversified loan portfolio, given a level of risk aversion, thus simplifying the lending process. Individual lending, including to friends, is not banned either. We allow users to “browse and search” for loans if they want to pick and choose from the crop.
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Alex said:
So normally when I put the money in the bank, which then goes out and loans the money to people, my deposits are covered by the bank, and I have their and FDIC’s word on it that I would get the cash back in case something drastic happens.
Let’s say I do a $5,000 loan through LendingClub, and the borrower declares bankruptcy few months later. What happens to my money?
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raj said:
too much risk…why anyone want to lend to friends for 1-2% more interest than banks which are backed by FDIC
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Dale Rogers said:
Good luck to all the individual lenders, borrowers and these match makers. Fountain Partners is made up of high net worth entrepreneurs lending to other entrepreneurs once they have grown out out of seed stage. We lend to businesses (not individuals) who will require $100,000 to $10 million in financing in their next 12 months of operation.
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Patrick Gannon said:
I work at Lending Club as well. Let me try to answer the two questions from Alex and Raj.
Alex: you would not lend to a single borrower - you would lend to a portfolio of borrowers. By constructing a diversified portfolio of many borrowers, we reduce the overall portfolio risk.
So, if one of the borrowers declares bankruptcy and defaults on the loan, the lender would be exposed only to a small portion of that loss. The rest of your portfolio (with dozens more borrowers) would not be affected.Raj: Our lenders specify their risk tolerance and then we use our proprietary technology to construct a portfolio for them. The expected returns on these portfolios vary with the risk of the portfolio.
For the lowest risk portfolios, the expected returns are higher than CD rates and money market rates. For the higher risk portfolios, the expected returns are significantly higher. -
Niki said:
While Facebook has a large user base, it consists mostly of college students. Surely, a group of people who are often already in debt (student loans), with no jobs and limited or no credit history is not the ideal place to lend money to?
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Shawn said:
This is just another way to get more money to BK attorneys.
(BK) Bankruptcy
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Mark said:
Interesting comments from all - have been watching this space (and blogging about it) at my site, http://www.bankerinindia.typepad.com in the context of microfinance. I work in India for a microfinance VC and was first introduced to the concept by Kiva. The comment from Niki does seem particularly important - 30 million users but how many of them with extra cash lying around that they feel like investing instead of spending.
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ejlspwujuk said:
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Jame Willow said:
Lots of progress since launch:
http://www.techcrunch.com/2007/06/20/lending-club-passes-100000-mark-in-loans-to-facebook-users/
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Ira Machefsky said:
HaHaHa. Can you spell C-o-u-n-t-r-y-w-i-d-e F-i-n-a-n-c-i-a-l for the masses? There’s a reason banks exist and why you avoid seeing your friend who was looking for that small loan he needed.
/Ira
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Christina said:
Would some one please contact me about your program at truchrissy@yahoo.com
Thanks
Christina
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kay said:
I am interested in talking to someone about a consolidation loan before,I lose my house and vehicle. I live in North Carolina
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c curry said:
searching for home finance. is this a site for such registration?
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maribel marquez said:
I have been trying to get a loan to get my credit back up, but i keep getting denied because of my credit. How can this help anyone like me? I am a working disabled person who is trying to get everything back on track.
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travesti said:
Facebook and loans? Interesting.
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hosting said:
I just heard this from you. It is good for facebook.
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medyum said:
ı am turkey good site and thank you medyum
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travesti said:
very good admins thanks renkarenk turkey
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Sharon McNary said:
Hello from Sharon McNary of Marketplace Money, the personal finance show on public radio. I’ve just heard of peer-to-peer college loans and am looking for students who are considering this option. If you’re willing to share your take on this new phenomenon, you’ll find my questions at http://tinyurl.com/5774nm
A reporter may follow up with questions for a future report on Marketplace Money. Thanks in advance for your help.Sharon McNary
Analyst, Public Insight Journalism
Marketplace | Marketplace Money
American Public Media
smcnary@marketplace.org -
travesti said:
Good job. Thank you.
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morenews said:
Seems good. Thanks.
9 Trackbacks
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Prosper group news » Blog Archive » Lendingclub to introduce p2p lending to Facebook members said:
[...] The founders of Lendingclub, one of them has a background at Mastercard, raised $2 million in angel funding (source: VentureBeat). [...]
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[...] Article in Venture Beat about person-to-person Lending Club launching their platform on [...]
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[...] The founders of Lendingclub, one of them has a background at Mastercard, raised $2 million in angel funding (source: VentureBeat). [...]
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Social Lending Watch » Blog Archive » LendingClub.com said:
[...] The founders of Lendingclub, one of them has a background at Mastercard, raised $2 million in angel funding (source: VentureBeat). [...]
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TechCrunch en français » Bay partners investit dans des applications dédiées uniquement à Facebook. said:
[...] parait que Lending Club un service de prêt de particulier à particulier ne va pas trop mal et je verrais bien un service de fleurs virtuelles se développer sur [...]
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VentureBeat » Lending Club raises $10.26 for social lending — joins crowded field said:
[...] a young company with little track record — especially when there’s so much competition (see our coverage). Prosper and Zopa both do something similar, and have raised much more cash. CircleLending, Wonga [...]
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VentureBeat » Lending Club raises $10.26 for social lending — joins crowded field said:
[...] a young company with little track record — especially when there’s so much competition (see our coverage). Prosper and Zopa both do something similar, and have raised much more cash. CircleLending, Wonga [...]
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lending club said:
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