Lending Club, formerly called LendingClub, is a peer-to-peer lending company based in Sunnyvale, Calif. It officially opened its doors for borrowing in all 50 states Dec. 13. Previously, Lending Club was available in only 40 states because of state regulatory constraints. Lending Club has partnered with WebBank to offer borrowing throughout the country. As a result of the partnership, Lending Club will share a portion of loan origination fees with WebBank in exchange for licensing.
Renaud Laplanche, founder and CEO of Lending Club, said he believes the nationwide system will help Lending Club work with some of their state-straddling social networks. Previously, individuals in states where lending was unavailable were not able to leverage their social networks to borrow.
“The University of Michigan is one of our partner alumni associations,” Laplanche said. “When you’re a student there, you’re a resident of the state of Michigan, but you graduate, go and live life, and take a job elsewhere in the country. We were limited by state regulations and couldn’t offer nationwide lending and borrowing to University of Michigan alumni who might now reside in a different state.”
Borrowers in Michigan, as well as borrowers in California, Idaho, Illinois, Iowa, Nevada, North Dakota, Oregon, Rhode Island and South Dakota, will now be able to take advantage of Lending Club’s growing network of lenders. These additions to the Lending Club network are a way in which the company hopes to compete with per’s peer-to-peer lending community.
Laplanche said that he has been surprised by the number of lenders added to the Lending Club community, which has doubled its membership every month since Lending Club launched in May.
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Lending Club’s growth is partially because of its low default rate of less than 1 percent. The community only accepts borrowers with a credit score higher than 640, whereas its competitor Prosper accepts borrowers with credit scores as low as 520. Lending Club has originated $2.9 million in loans and delivers an average 12.23 percent return to lenders. Lending Club’s top 100 lenders all make returns of more than 14 percent.
Lending Club, which launched its beta version on Facebook, assists borrowers by facilitating connections and leveraging social networks.
“We’re mostly based on affinities among members,” Laplanche said. “Lenders tend to lend money to borrowers who they’re connected to and have a bond with, and those little connections are either discovered through social networks like Facebook, or soon through our OpenSocial application, or some of the alumni or professional associations we work with.”
Unlike its British predecessor Zopa, Lending Club does not working through credit unions, nor does it require waiting for individual auctions as Prosper does.
To continue connecting people, Laplanche said Lending Club will soon be offering an application via Google’s OpenSocial application programming interface (API), which may be able to leverage social networks such as LinkedIn, Plaxo, Orkut, MySpace and Friendster.
“It’s very important…to be able to remain a community and take advantage of the community and the bond among the members wherever they now reside,” Laplanche said.
