Peer-to-Peer Lending Company, Lending Club, Passes $1 Billion in Loan Demand

Lending Club, the a peer-to-peer lending company in the United States, has surpassed $1 billion in loan demand from borrowers and has hit a new monthly record for loan demand during the truncated month of February.

The California-based peer-to-peer lending company recently issued their 10,000^th loan and has now originated more than $95 million in loans as of the middle of March.

Lending Club is one of a few companies taking advantage of depressed loan activity on the part of traditional banks. Large financial institutions in the United States are being pressured by regulators to increase their capital levels. They are cutting back on their lending activities with unsecured loans such as personal loans and student loans often being the first type of loan to get cut.

As a result, Lending Club, its competitor Prosper Marketplace, and a new class of fledgling student loan-focused peer-to-peer lending companies are enabling borrowers to take out loans with other individuals serving as the creditor. Investors looking for an alternative investment can opt to partially fund loan listings from borrowers and then receive payments with interest from the borrower overtime.

Prosper Marketplace, the company that popularized peer-to-peer lending in the United States, has learned many lessons for the peer-to-peer lending industry the hard way and is now in desperate need of another major round of funding to continue operations. Prosper recently took out a $2 million bridge loan to pay for its operations, but the loan is due on April 1^st if the company does not receive another round of funding by the date according to an SEC filing made by Prosper.

Lending Club appears to have avoided many of the problems that Prosper faced by making more stringent requirements from borrowers from the get-go. This is why Lending Club has seen $1 billion in loan demand but has originated only $95 million in loans—most borrowers on the site get rejected because of insufficient credit.

Lending Club also reported on a blog post on their website that the average interest rate that their borrowers are now paying is 11.95%. 60% of Lending Club borrowers use their loans as a balance transfer for their credit card debt or to consolidate other debts.