A new note-buying and selling platform has been incorporated by major peer-to-peer lenders Prosper and Lending Club.
Foliofn, a Vienna, Virginia-based online brokerage service provider, provides a new dimension to both the Prosper and Lending Club sites: a secondary market for loans. Through Foliofn, investors who decide to switch up their investment strategies can sell their loans. In addition, members whose state restrictions prohibit them from continuing to lend through these sites can cash out.
Prosper members wishing either to sell their notes or buy notes from other Prosper lenders can now use the Folio Investing trading platform, which requires registration. Additionally, investors on the Foliofn secondary market must pay a percentage of a note’s sale price.
Prosper’s site cites a variety of benefits of becoming a Folio Investing Note Trader, which include an increase in liquidity by selling notes purchased after July 13 of this year, the ability to invest in peer-to-peer loans with shorter terms than the typical three years, the ability to invest in loans that carry historical information such as payment history and credit, a second chance at buying notes that were previously missed, and a chance to pick and choose amongst competitively priced notes.
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Lending Club members can use Foliofn’s Note Trading Platform, which also requires registration and is not available in all states. Notes can be purchased with Lending Club account funds, and only notes that were purchased after Oct. 12, 2008 are eligible for trading.
The existence of a secondary lending market is a pertinent one for peer-to-peer lending websites, particularly when it comes to Prosper. After nine months of Securities and Exchange Commission scrutiny that shut down the website, Prosper came back to life in mid-July with Foliofn a prominent part of its revamped offerings.
Through Foliofn, Prosper as well as Lending Club, which received SEC approval in April 2008, can now provide an escape route to lenders who previously were stuck in these investments. Moreover, the option for shorter-term loans is a change from the typical three-year term previously faced by investors.
FolioFN offers more than a hundred of what the company calls Ready-to-Go Folios, each of which is specially designed around a specific investing strategy such as market sector or geographic region. Investors can also build their own Folios through a combination of stocks, ETFs, or mutual funds. Folios are customizable and can be bought or sold in fractions of shares.
In 2004, Forbes voted Foliofn a “Best of the Web” pick. The site called Foliofn a good cost-cutting balance between ownership of individual stocks and mutual funds, particularly for smaller investors.