I spoke today with Renaud Laplanche, CEO and co-founder of Lending Club. It was a fascinating discussion -- we hope to hear more from his team in the future.
We covered his company yesterday, as they announced that Lending Club is now doing $10 million in new loan funding per month... A pretty big number, and a sign that peer lending is here to stay as an alternative to the traditional bank lending model.
Why has peer lending, and Lending Club in particular, taken off?
"All of it is very logical," Laplanche explained.
Lower interest rates for those looking to borrow -- perhaps to pay off an outstanding higher interest credit card debt, pay down a student loan, to fund a home improvement project, inject additional capital into a small business, or just about any other conceivable purpose.
And for those looking to invest their money, Lending Club is tempting as well: as of today (June 4, 2010), investors have earned an average return of 9.64%.†
Obviously, that is a far higher return than you would make in other "hands-free" investments, such as a high-yield online savings account or certificate of deposit. Plus, there is a moral component to investing with Lending Club, perhaps: you are funding your peers, individuals with good credit (in most cases) who need additional capital.
You aren't just another faceless shareholder in a multi-billion dollar global company.
Laplanche said that investors are flocking to the service -- Lending Club now has several investors (some individuals, some professional money managers) who have invested more than $1 million each. It's "an easy investment process," according to Laplanche, and many investors choose to start with a small initial amount, gauge the results, and then invest more.† Investments are not FDIC-insured and can lose value; average returns are not a guarantee of future performance -- your results may vary.