Peer to Peer Lending is Giving Banks a Run For Their Money
People usually think of going to bank when they need to take out a loan. Banks may give people who are already their customers certain discounts on interest rates, which is a major factor we look at when choosing a lender so that we can go with them.
Banks are usually hesitant to give small business loans because of their lack of financial history. They would rather avoid having any risky investments into their portfolios. Because of that it has been quite hard for small business owners. Normally, getting approved for loans can take a long time. On top of that, consumers have to worry about the high costs of advanced underwriting and understanding their interest rates.
However, banks are in losing out to competitors recently with a company that is giving them a run for their money. Lending Club has been grabbing business from banks quite aggressively, and they are on the verge of reducing loan portfolios from balance sheets.
The Lending Club is positively altering the financial sector to make financing for consumers more gratifying and making advances much more affordable. The company matches investors with borrowers that are based on their risk appetite. The Lending Club is involved with rendering an online market that matching investors with borrowers. The platform lets members join in to trade standard or customized program loans.
Their model is a peer-to-peer lending platform. It’s a practice of delivering cash to certain consumers and all without the need of a financial intermediary. The Lending Club, in particular, is posing a real threat to most banks. According to Lending Club, the borrowers who come to them get almost 33% off the typical interest rates most credit card companies charge.
The latest quarterly results showed that the Lending Club Corporation experiences a whopping 92% year-over-year increase in regards to loan origination. As of now, the primary loan they make is for personal loans. They’re also pushing to help small businesses out as well.
The good thing about Lending Club is that they are not obligated to follow this kind of strict rules that the banks also do, thus creating a gleaming window of opportunity for them to grow their business. A vast majority of analysts look optimistically at the Lending Club’s prospects in the long run. Nine out of the nineteen analysts that covered the Lending Club stock recommended buying it. Seven of the nineteen suggested that there be a hold. At the end of October, the Lending Club stated that their earnings for the third quarter fiscal year for 2015. They happily announced that they were able to surpass even what analysts originally suspected to be both their earnings and revenue. Their earnings per Share, or EPS, came in at $0.04, which was double the amount the consensus estimated to be $0.02. On top of that, their revenue currently stands at $116.3 million, against the analysts' predicted amount of $108 million.
The Lending Club stock traded up 3.11 at $12.58 at this past Wednesday's close. During the same trading session, the S&P500 index rejected around 1.3%. Still, they experienced a slight increase of 0.08%. It proves that the Lending Club Corporation can do better in the market.
The Lending Club is currently well-positioned to report both fabulous operating and financial results. The Lending Club should continue to focus aggressively on marketing activities to make use of any opportunities in the future. While they are currently giving their customers a huge discount on the interest charge of a loan, it’s likely the company will continue to be successful in creating a low-cost platform that will have the ability to generate enormous earnings for them and savings for their customers.