Posts Tagged liquidity

P2P Liquidity Concerns at Prosper and Lending Club - No Problem for YadYap

Posted by YadYap in Payday Lender, Peer-to-Peer Lending on October 21st, 2008

In an online Wall Street Journal article titled “Peer-To-Peer Lenders Get Into Secondary Market” Arden Dale discusses the reasons for, and benefits of having a secondary market is association with peer-to-peer lending platforms. Here are the main take-aways from the article as well as how YadYap’s system differs.

Prosper and Lending Club both saw the need and demand from current lenders to have a secondary market to create liquidity.
A secondary market is a great option to give lenders, but overall costs to lenders will rise.
Yadyap’s model creates almost instant liquidity by offering short term 2-4 week payday loans. No secondary market is needed to achieve liquidity for lenders.

I am sure it was apparent to the founders of both Prosper and Lending Club before they launched that there would soon be a need for liquidity. The lenders within both platforms have now shown a demand for it and both companies have responded well. There just simply are not too many people out there that want large amounts of money tied up for three years. We commend both Prosper and Lending Club for taking the initiative and paving the way for liquidity in the new world of P2P lending.

The secondary market is critical for the growth of these traditional P2P platforms (assuming P2P has been around long enough to use the word traditional). With this new addition, however, will come more expenses for lenders. Currently there is a 1% fee to sell a note on Lending Club. These fees are necessary and in relative terms small, but none the less, they are costs that will reduce lenders overall returns.

YadYap offers short term (2-4 week) payday loans. This model provides almost instant liquidity for lenders. Active lenders with multiple loans outstanding will have the luxury of seeing loans turn over daily and will have those funds available in their account to fund new loans.

We are excited to see our system play an important role in the peer-to-peer lending world. We believe that lenders will experience the excitement of the YadYap model within weeks of placing their first loans!