Posted by Mike Smith :: October 3, 2007 @ 6:40 am

One of the most unique features of Lending Club is the way it connects lenders and borrowers together with its Lending Match™ technology. By leveraging existing relationships, or affiliations, it not only helps P2P loans get funded, but it also makes them more likely to be repaid. It’s one of the factors that sets Lending Club apart and creates a win-win situation for lenders and borrows.

Traditional lending is purely a numbers game. It rates people based on their credit scores and assigns an appropriate risk. Lending Club starts in this way, but then goes a step further. By using factors like where you live, work, went to school, or your connections in a social network, Lending Club chooses a balanced mix of risk and relationship to find the ideal match between lenders and borrowers.

Lenders always have the option to hand pick which loans their money will go to. They also have the option of using Lending Match™ to present them with an optimized portfolio recommendation based on their affiliations and risk preferences. Some lenders may feel most comfortable with loans that have a high level of connectivity to borrowers. You can imagine how you might feel the same way, knowing that you’ll be loaning money to someone like yourself with a related job field, alma mater, hometown, or similar affiliation. The lender comfort most likely comes from knowing that borrowers may feel more of an incentive to repay their loans to people connected to them.

The comfort that lenders feel in loaning money to people with whom they are affiliated benefits borrowers as well. The more comfort lenders have with a potential borrower, the more likely they will be to lend. That means that affiliations help loans get funded more quickly and makes complete funding more likely. These are both great benefits from a borrower’s perspective.

We here at Lending Club believe that existing relationships will yield stronger loan performance for both sides of the transaction. Borrows will see their person-to-person loans funded more often and more completely, while lenders will see those loans repaid in higher percentages. By removing the bank, which doesn’t have a personal connection to the lender or the borrower, Lending Club facilitates a direct connection that can be mutually beneficial.