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We would like to extend a very warm welcome to Zopa, which launched in the US this past week. The Zopa team did a great job with the new US site, which looks great and contains lots of informative content. Borrowers can apply for a loan at interest rates ranging from 8.75% to 16.99% and lenders can invest in a CD and earn up to 5.1%. A feature we really like is the ability for lenders to waive part of their interest to help lower the borrowers’ payments, a great way to help friends and family. We believe the launch of Zopa in the US and the upcoming launch of 2 new players (GlobeFunder and Loanio) in the next few weeks will continue to establish person-to-person lending as a mainstream alternative to banks and credit cards.

Welcome, and congratulations!

When a group of major social networks - pretty much all those that matter other than Facebook - announces the adoption of open standards, that is effectively good news for all parties involved: good news for users, for developers and for the networks themselves.

We can debate how “open” the standard really is in this case, and how deeply the OpenSocial APIs will let application developers reach into the social graph, as compared to the Facebook API. Looking beyond the initial uncertainties, however, it is fair to say that open standards are generally good news, and the quasi-anonymous support for OpenSocial will help social networking sites and application developers offer applications that are not only easier to develop, but truly more useful for their members.

Take Lending Club for example: OpenSocial offers the ability to retrieve information about a user, and get distribution, across many social networks. What it means is that Lending Club borrowers will be able to leverage their network of connections more broadly, that lenders will be presented with better opportunities to invest in people they trust and feel more comfortable with (such as friends of friends), and that a broader distribution will help find better matches between lenders and borrowers.

(click graphic to enlarge)

The user profiles of both lenders and borrowers will also be more complete and accurate: there is a lot of information in my Linkedin profile for example (such as my work history) that is not in my MySpace profile.

We believe person-to-person lending will grow faster and become a credible alternative to banks more surely in an environment where people feel connected to each other. That was the main reason for launching Lending Club on Facebook last May, and another good reason to announce our extension to universities and alumni associations last week.

This morning we announced our commitment to build a person-to-person lending application that leverages the OpenSocial APIs. By doing so, we are hoping to contribute to making social networks more useful, by helping users leverage their existing social-network relationships at the time they need them the most: to cover medical expenses, finance a new business venture or take advantage of an investment opportunity.

Not as entertaining as sharing pictures, but possibly more useful.

“It's only when the tide goes out that you discover who's been swimming naked.”

-- Warren Buffett

Disciplined lending is about adopting credit standards and enforcing them with very little or no exceptions. Disciplined lending is hard. Lenders are businesses, and businesses need to grow. There is often pressure, and temptation, on lenders to make all kinds of exceptions and lower credit standards, particularly at times when the economy is doing well and defaults are generally below historical average levels. Lack of discipline is one of many factors (including the housing slow down) that contributed to the situation that the subprime mortgage industry is facing today.

The temptation to approve a loan application or issue a loan could be even higher in the case of person-to-person lending, where the originator (such as Lending Club) is financially rewarded for every loan that is being issued but does not bear the credit risk.

At Lending Club, we strive to maintain a solid credit standard that reduces the credit risk for our lenders. This means adhering to our promise of accepting only prime borrowers, verifying income when such a verification is necessary, reducing the amount of a loan listing when credit utilization is too high, and cancelling a loan listing when income cannot be verified or high credit utilization puts repayment at risk. All of these additional precautions are taken to protect lending members from risky loans and to keep our borrowing members from being associated with bad loans, as well as to keep defaults low and interest rates attractive to the borrowers.

Our vigilance sometimes results in loan listings being delayed or canceled when borrowers are unable to provide us with the requested information. In such cases, the loan listings go from an “In Review” status to a “Removed” or “Expired” status. It might be frustrating for lenders when their money is not put to work and instead comes back into their accounts for reinvestment in other loans. We believe, however, that this frustration is a small price to pay in exchange for the removal of loans listed by borrowers who might have trouble making payments and could eventually default.

This discipline is all the more important as the Lending Club community is growing fast. Our coverage on National Public Radio yesterday helped us pass the bar of 6,000 unique daily visitors for the first time! Going forward, lenders should remain confident that our credit team is diligently working to protect their interests and to keep the community a safe place to transact.

Better Rates. Together.

As announced yesterday, we will be performing routine maintenance and upgrade on the secure site http://secure.lendingclub.com tonight at 8pm Pacific time. The site will be available again by 9pm Pacific.

Lending Club Members Speak Out Series

We continue to receive many comments from our members. This weekend, we would like to share a few more comments from Lending Club borrowers, who often focus their remarks on Lending Club’s better interest rates, convenience, and more responsible approach to credit.

“It was very easy and straightforward, and I received my loan within the same week that I applied for it. I used the money to consolidate my credit cards into one easy monthly payment, which makes them easier to pay off coming out of college.”
-- Brian, 22, from South Boston, MA

“I loved how quick and easy it was to get a loan, I really enjoyed that I got to track how many people were able to help me out up to minute since it is all done online. The site also sent me updates while everything was going on so I didn't have to worry. Being a just out of college adult and having student loans, I wasn't able to get such a great rate with anyone else. The rate I got was at least 5% less than my other options.”
-- Stephanie, 24, from Atlanta, GA

“I used Lending Club to get a better rate and pay off my credit cards. I had $5,000 on credit cards with an average APR of 20 %. I paid off the amount in full and I just have one Lending Club bill per month. I am saving 50 % on interest every month which I used to pay to my credit card companies.”
-- Sharad, 25, from Syracuse NY

"Lending Club made it possible for me to get the money I needed without a ridiculous rate. With credit cards, you'll bury yourself with service fees and cash advance fees. Glad I chose the better route. Thanks, Lending Club!”
-- Jim, 22, from Austin, TX

These and other testimonials will soon be available on our secure site at http://secure.lendingclub.com. If you are a lender or a borrower on Lending Club and have your own success story to share, we’d love to hear from you. Leave a comment on this blog or write directly to feedback@lendingclub.com.

We had a busy week here at Lending Club, so we’re going to enjoy the weekend, watch a few videos and relax until tomorrow’s upgrade at 8pm Pacific.

Renaud