In one sense, much of Internet commerce is largely a matchmaking service, connecting people looking for relationships, taxis or spare bedrooms. One of the hottest areas is the market for personal loans, which is attracting money from venture capital investors, spurred by the fast growth of the largest online platform, Lending Club, and the paper profits for its early backers.
In their simplest form, these marketplaces link borrowers who want to refinance high-interest credit card debt of 20 percent or more with investors looking to beat paltry bank savings account yields of less than 1 percent.
At Lending Club, borrowers obtain three- or five-year personal loans and pay annual interest of about 14.5 percent, depending on their credit scores, which can lift it to as much as 30 percent, with fees. Investors can earn interest rates of about 8.5 percent, the company says. The difference from the average comes from defaults, which cut annual returns by 3.5 percent, and the company’s annual fees of 2.5 percent.
Peter DaSilva for The New York Times
Renaud Laplanche is the chief executive of Lending Club