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Opinions and analysis of Marketplace Lending, Online Lending, and Peer to Peer Lending.

Lending Club Loans - What difference a year of maturity makes?

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Is Lending Club still self-funding loans?

Posted by Anil Gupta | Sunday June 23, 2013, 10:49 pm | Categories: Lending Club

As I have been analyzing the Lending Club historical data and sharing my observations for over a year, I often receive queries about the explanation for different fields in the historical data file. I typically refer the person to Lending Club website that provides a basic data glossary for most of the fields in downloadable data.

Funded Amount and Funded Amount by Investors

One of the most often asked question is "What is the difference between funded amount and funded amount by investors?".

Best to my understanding, the "funded amount" is the total amount funded for the loans issued and the "funded amount by investors" is the amount that was funded by investors on Lending Club (LC) platform. Basically, the difference between these two values is the amount that Lending Club provided from own funds (self-funding) to fully fund the loan.

This explanation makes sense as with new business model of peer to peer lending, to make the market someone has to fund the loan amount requested by a borrower. As typically happens with new business model and during startup phase, the operating company sometime will take the one side of the two-sided market to make the transaction happen. This is what I believe was happening during the early startup phase of Lending Club.

Recently due to the whole loan program and institutional participation, this question has expanded along the lines whether one of these two fields represent the amount provided by the institution. Though, I don't have any official insight from Lending Club, I decided to review the historical data to find whether over the years these fields may have morphed into something else than originally intended.

Loan Funding by Lending Club

The two charts below show the LC self-funding as a function of loan issued year.

The first chart shows the total LC self-funding amount (difference between total funded amount and total funded amount by investors) on left Y-axis and LC self-funding amount  as percentage of total amount funded on right Y-axis as a function of loan issued year as X-axis.

As the chart indicates almost 3/4th of the loan funds in 2007 were provided by Lending Club and only about 1/4th were provided by other p2p investors on LC platform. Since 2008, the fraction of funds provided by Lending Club has dropped rapidly. In 2013 to date, less than 0.03% of total loan funds are provided by Lending Club. On dollar amount basis also, the amount of funds provided by LC has dropped from high of about $7.6 million in 2008 to $544,989 in 2012.

The second chart is similar to first chart except the right Y-axis shows the number of loans for which Lending Club provided at least a dollar from its own fund. In 2007, Lending Club provided on average about $7,000 for each loan from its own fund. By 2013, this average has dropped to about $50 per loan. For the curious minds, LC partially funded 99% of all loans issued in 2007 and 97% of all loans issued in 2008 on its platform. This number has dropped to about 12% in 2012 and 8% to date in 2013.

Key Takeaways
  • The answer to original question is that Lending Club continues to provide partial funding for some loans albeit at minuscule basis.
  • There doesn't appear to be any change in meaning of "funded amount" and "funded amount by investors."
  • The lenders analyzing historical loan data may be better off focusing on funded amount and ignoring funded amount by investors.

Comments: (1)

Karen | Saturday June 29, 2013, 11:27 am
Very interesting and well done charts--thanks! Appreciate that you added the % of all loans partially funded by LC in your explanation just above "Key Takeaways". It's a treat to see charts with clear titles and self-explanatory marked data bars. Nice work!

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