Saturday, July 7, 2007

Lending Club's Blog educates readers

Lending Club is challenging Prosper to become the leading peer to peer loan marketplace in the United States. They have been online since May 26th - just six weeks. I have not signed up as a lender or borrower yet, but I've been watching their blog pretty close. I've been very impressed with their communication with their community through the blog.

Of course they have the normal things you would expect on a corporate blog such as Lending Club announcements, but they also make a genuine effort to educate users on sound financial principles (mostly the perils of credit card debt). The posts are not overly technical or complicated. Most seem to be written for the average college age person. Someone who might be applying for their first credit card or taking out their first loan. They are clearly attempting to target the Facebook demographic. Here's a quick wrap up of the Lending Club Blog from the last six weeks along with some brief notes from me:


Good Credit Part 1 - The importance of good credit - aimed at college students; housing, job, car
Good Credit Part 2 - FICO Review - what is credit; also see Components that make up a FICO score
Good Credit Part 3 - How to maintain good credit
Investment Mistake 1 - Procrastination
Investment Mistake 2 - Money Ignorance
Financial Independence - develop financial plan, start now
P2P Lending 101: The C's of Credit - character, capacity to pay, capital, collateral
Beware of the credit card access check - don't use the blank checks that credit cards send you without reading all the fine print
Know where your money goes - basic budgeting
Keeping tabs on your credit - one free copy of your credit report per year
Three financial ships - work, investment, charity (receiving, not giving)
Students: Don't be afraid of student loans - difference between 'bad' credit card debt and 'good' student loan debt
Primer on debt reduction - pay of highest interest rate debt first, consolidate debt
What banks don't want you to know - explains the practice of "universal default"; how banks can change your rates if you are late with a payment on another account
Credit Card debt is not simple - minimum payment on a $1,000 credit card debt can be a 22 year commitment
How much profit do credit card issuers generate - $16 for every $100 in outstanding credit balance
Is FICO score a reliable indicator of credit-worthiness - broaches topic of social credit scoring, how someone is more likely to pay their debt on time when they borrow from a community of people they know
Read the fine print - how credit card companies deliberately deceive card holders; the make a pledge "Lending Club does not operate with small print"
Double-cycle billing. Say what? - double cycle billing is used by 1/3 of credit card issuers and significantly increases interest
Grace Period - difference between effective annual rate (ERA) and APR and credit card grace periods
Jargon Watch: Defining DTI - percentage of a consumer’s monthly gross income that goes toward paying debts
Jargon Watch: Defining FICO - stands for Fair Isaac Corporation and is the standard credit scoring system used today; Lending Club's minimum FICO for borrowers is 640

Lending Club Promotion

Why a personal loan from Lending Club makes the most sense - interest rate, fixed payments/term, unsecure loan
Lending Club: an alternative to credit cards

Lending Club News

Close rate: 71% - a sharp increase from the original reports that only 1/3 of loans were closing
LendingMatch: Diversification and Matching - Lending Club's technology that helps lenders build their portfolio with respect to their risk/reward profile and their social connections through Facebook; also read this about LendingMatch
One week on Facebook - the report from their first week (4,000 users signed up in the first week; they are at just over 10,000 now)
Lending Club: How do we make money? How are we different than a bank? - financial comparisons between Lending Club’s operating model and bank’s models are difficult

From all early indications, Lending Club clearly has the best blog among peer to peer loan networks. By providing good, common sense financial advice they will attract an audience that will likely turn into borrowers and lenders.


thisguy said...

So perhaps LC is funded my Democrats - you know, protect the people, give them info, don't let them invest in everything, shield them from the worst out there, provide a safety net.

And Prosper is funded by Republicans - you know, free market, learn for yourself, survival of the fittest, you reap what you sow, hand off, adjust the numbers to make the story work and make it look so much more appealing(ok that was a W/Cheney jab) ;)

Much like the political system, I wish there was some viable happy medium between the 2 extremes

Matt said...

The less financially educated an investor is the more important it is to have some safeguards. Looks like Lending Club doesn't assume lenders have very much financial knowledge, while at Prosper the assumption is that as lenders will better be able to fend for themselves. However, Prosper is also starting to slowly add in more safeguards and warnings.