By Leah Zitter

Online P2P lending platforms are, generally, profiting from advances in technology, with some companies doing better than others. Here is the most recent comprehensive review of the top five platforms in the United States.

LendingClub

Founded in 2007 and headquartered in San Francisco, LendingClub Corporation (NYSE:LC) is one of the world’s largest P2P lending platform with over $20 billion in loan issuance. It offers both consumer and small- and medium-sized enterprise (SME) loans over fixed periods of three to five years. Their personal loans range $1,000- $40,000 and terms vary from two to five years, after which the client’s debt is totally paid. Business loans range $5,000-$300,000 with terms from one to five years. Lending Club also provides auto refinancing and so-called “patient solutions”. The latter provides loans for medical procedures that are not covered by health insurance, such as fertility treatments and hair transplants.

Rates of interest range from 5.32% APR. to 34.68% APR for customers with excellent credit. Credit level is calculated according to credit score, credit history, desired loan amount and the borrower’s debt-to-income ratio. Clients repay at fixed monthly payments.  There are no application fees and no prepayment penalties.

Lending Club operates on a notary business model, meaning it acts as an intermediary between borrowers and investors. Once a loan has been funded, the money is released to the borrower by a partner bank. Investors have to have a gross annual income of at least $70,000 to apply.

The application process is convenient and fast, nor does it affect the applicant’s credit score.

Lending Club makes money by charging borrowers an origination fee and by charging investors a service fee. The size of the origination fee depends on the credit grade and tends to range between 1% and 5% of the borrower’s loan amount.  The company’s service fee is 1% on all amounts the borrower pays. For non-performing loans, Lending Club charges investors 18% of any amount collected if no litigation is involved. If litigation is needed, investors must also pay 30% of hourly attorney fees.

Products on Lending Club’s technology stack include: Adobe Target, Apache Ambari, Atlassian JIRA, Dyn DNS, GitHub, Hortonworks, Invision, jQuery, MongoDB, New Relic, SignalFX, and TRUSTe. For a complete list of software used by Lending Club, check out Lending Club’s Stack at Siftery

Lending Club has grown exponentially and, as of March 3, 2018, has a market cap of $1.54 Billion. In 2015, Lending Club became the first publicly traded online lender in history. Since 2016, the company dropped more than 40 points due to a scandal over loans, competition, and the company’s own inability to request customer deposits, among other issues. Although volatility is a common factor in P2P lending, LC seems to have more of this problem than most of its competitors, and some investors consider the company’s long-term growth outlook in question. Stock News Journal gives the company a mean recommendation of 2.50. (A rating of less than 2 means buy, “hold” within the 3 range, “sell” within the 4 range, and “strong sell” within the 5 range).

David Weliever, a Lending Club investor for over seven years, reports that Lending Club investors typically earn between 5% and 9%, depending on their amount of risk.

Lending Club

Launched in 2014 by three ex-Googlers, Upstart has amassed more than $300 million worth of loans and is considered the best P2P lending company for young adults.

Upstart’s target niche is young professionals and small-business start-ups. Over 90% of its borrowers are college graduates. The platform reports that its average borrower has a FICO score of 691, an average income of $106,000, is 91% likely to be a college graduate and is 76% likely to refinance credit cards.

Upstart offers loans between $3,000 and $35,000 for fixed periods of three to five years. Interest rates range from 4% to 26%, depending on grade. The company’s personal loans have fixed APRs that start at 7.43%.  There are no prepayment penalties. The website claims that its rates are 30% less than those of other lenders.

While Upstart takes credit and income into consideration, it also considers the applicant’s educational history, area of study, academic performance, and work experience. The company’s primary focus is on whether the applicant is a “future prime” borrower, namely on his, or her, potential for financial success.

The company’s application process is quick and easy. If approved, borrowers can receive their money by the next business day.

When compared to other lenders in this review, Upstart’s rates are similar to those of SoFi, but Upstart has more flexible credit score requirements. The company has both lower rates and a faster lending process than Prosper and Lending Club.

The company makes its money solely from origination fees that range between 1% to 6% of the loan. (In 2016, Dave Girouard, Upstart’s CEO and co-founder, calculated that Upstart makes around 5% off the principal of every loan). If a client defaults, Upstart refunds the investors using the origination fee. As January, 2017, article in Forbes reports, Upstart employs a modeling system that has so far been remarkably accurate at predicting defaults and returns.

Less in the news than our other reviewed competitors, Upstart augurs a promising future with its artificial intelligence and machine learning capacities. The company also provides technology to banks, credit unions, and other partners via its SaaS offering, called Powered by Upstart. The company plans an IPO in the indefinite future. As testament to its reliability, Upstart is also the first company, to date, to receive a no-action letter from the Consumer Finance Protection Bureau (CFPB), which means that the CFPB trusts Upstart to operate under certain circumstances as proposed by the company without CFPB supervision. In fact, Forbes reports that the firm has the lowest default rates across the industry thus far. Over 94% of loans are on track to be repaid in full.

Upstart’s technology stack has 20 products. These include: AdRoll, Ruby, AdRoll, Bugsnag, CloudFlare, Google Analytics, Highcharts, Marketo, Mixpanel, Rails, Optimizely, G Suite, and Salesforce Sales Cloud. Check out Upstart’s Stack at Siftery for a complete list of software.

Stay tuned for PART 2 of Analysis of the Major U.S. Based Marketplace (P2P) Lending Platforms of 2018, coming March 29th.