From Nov to Jan, consumer borrowing increased at the fastest rate in a decade, driven mostly from a combination of auto and student loans. During that same period, auto loans represented 5.0% of all loans originated on Prosper, or 3.4% of the value of all loans issued, and on Lending Club auto loans represented 2.46% of all loans issued or 1.44% of the value of all loans issued.
TransUnion released an updated study on the latest consumer “payment hierarchy” trends, which is the order of priority in which borrowers give their existing debt obligations when they begin having trouble making payments. Before the financial crisis in 2008, consumers paid their largest debt payments first, giving preference to keeping up with their monthly mortgage payments. Since then the trend has shifted where now 40% of consumers are paying their auto and credit-card obligations on time, but are delinquent on their mortgages.
Leading peer to peer lenders Prosper and Lending Club experienced record setting levels of loan initiations in March 2012, totaling $11.2m and $39.5m in value, respectively. Prosper seems to be struggling a bit with the fast growth rate, falling behind on their ability to verify borrower documentation within the allotted 14-day listing time.
Federal reserve data shows that between 1986 and 2011, the average return on consumer credit card debt was better than 10%, never producing a negative return during that timeframe. Forbes contributor Marc Prosser ran into this statistic, did some analysis on peer to peer lending’s entrance in the industry, and is bullish on the future returns for investors.
Prosper added thirteen new loan categories, which should provide investors more capability in seeing the performance of more specific types of loans, but will challenge them in the short-run due to lack of historic data.