As a followup to yesterday’s post about Lending Club reducing their rates for borrowers, I reached out to Rob Garcia, who is the Senior Director of Product Strategy at Lending Club. Here’s what he had to say:
As you know, we constantly monitor our marketplace to provide better rates to borrowers and great returns to investors. We keep an eye on our own market dynamics as well as the overall economy trends.
This time, we observed that defaults continue to trend lower, which gave us the opportunity to decrease rates to borrowers while preserving investorsâ€™ net returns (rate minus defaults & fees). Also, lower interest rates help attract higher quality borrowers, leading to less defaults, so it is a virtuous circle.
So there you have it… Lending Club has been able to drop their rates because borrowers have been behaving themselves. It’ll be interesting to see how the “virtuous circle” plays out in the coming months.