Is anyone consolidating private student loans
When I spoke to Rob about this he assured me that Lending Club was solid. They have an arrangement with a large established debt collection firm (Portfolio Financial Servicing Co) that would step in should Lending Club step off.
That was also reassuring to me but you never know if it’s going to work until show time. I was worried about having to do a lot of work to find good loans.
I brought this up with Rob and he made a pretty convincing argument.
First, he told me that in order to even be considered for a loan, borrowers have to have at least a 660 credit score or higher. Next, potential borrowers can’t have any late payments on their credit report for the last year. In all, Rob told me that only 10% of the people who apply for a loan at Lending Club actually get funded.
Loans are ranked “A” through “G” to approximate the risk of default.
Some time ago, I read on the site that the default rate for Lending Club is averaged for all loans 120 days or older.
(I looked on the site and couldn’t see any details about default rates per se other than that the overall default rate is 3%.) Most Lending Club loans are for 36 months (minimum) and they have far more new loans than old. Lending Club is doing a good job of growing the company.
Here’s why: Say I open an account and make 100 loans in my first year, 200 loans in my second year and 500 loans in my third year.
I “invest” as little as per loan so I can easily get lots of diversification. If those defaults are all from the first batch of loans, we’ve got a real problem.
As I said, they issued over 0 million in loans last month alone.
So my fear was that the actual default rate may be different than the 3% the site reports.