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P2P King Has 'An Offer You Can't Refuse'
In “Presenting The $77 Billion P2P Bubble” we took a close look at the P2P lending market which is expanding exponentially amid Wall Street’s efforts to securitize the loans on the way to creating a market for P2P-backed ABS.
As a reminder, P2P lending allows borrowers laboring under high-interest credit card debt to essentially refi via loans from individual lenders, thus transforming credit card debt into unsecured personal loans. As we noted, this only works if borrowers do not subsequently max out the credit cards they just paid off:
Consider also that P2P loans create the conditions whereby borrowers can refi high-interest debt via personal loans, transferring credit risk from large financial institutions to private lenders in the process. It’s not entirely clear what the implications of that shift might ultimately be, especially if the market continues to grow rapidly, but one thing is clear: using a relatively low-interest P2P loan to pay off a high-interest credit card is no different in principle than using a new credit card that comes with a teaser rate to pay off an old credit card. The borrower will very often max out the old card again and thus end up with twice the original amount of debt.
We were also quick to remark that as long as investors are buying the P2P-backed ABS, demand for the loans will only grow, causing lenders to lower underwriting standards in a repeat of the dynamic that led to the housing crisis:
It's not difficult to imagine a scenario where this spins out of control as borrowers refi multiple credit cards with multiple P2P loans, only to run up still more credit card debt. Voracious demand for P2P-backed ABS will provide an incentive for P2P companies to ignore signs of trouble as they profit from providing the loans that feed lucrative securitizations.
If you needed proof of the above, we bring you the following mailer from the industry’s number-one player, LendingClub, which is now advertising the P2P-credit card refi opportunity to “pre-approved” borrowers who can get up to $35,000 with "no collateral required":
Whether or not this kind of aggressive advertising is the result of a push to stimulate more demand for P2P loans which will in turn feed Wall Street's securitization machine we can't say for sure but it certainly looks as though LendingClub is hunting for more business and it's probably fair to say that that means the race to the bottom is on in terms of recruiting underqualified borrowers.
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I just got $4000 from these guys. When the poop hits the propeller, I will default on all you ABS investin muthafu*kers! Ha, ha, ha.
I like this Canary. I will try for $10k and slow-pay it into default motherfucks!
"I'm a fully disabled African-American goddammit! You cannot treat me like this"!
Just take the money and don't pay from day 1. If everybody that read ZH did this, their stock would hit the fan in 30 days
It's a trap!
Make it 50k and I'll consider taking one out and defaulting.
Boys, boys, boys! You're all thinking way too small on this. Take a loan and use it to pay back some of the next loan, and so forth and so on. Just Ponzi the mothertrucker until you owe a billion or two. Then default all over the place. It's the American way, (or Italian. Was Charlie American or Italian?).
If you got the P2P loan from someone with a name like “Icepick Willie” it would be best not to default.
Soo.... Icepick Willie isn't a bartender.
Wall St casting wide another collateral net
Why would anyone trust borrowers that can't even manage to pay off their credit cards?
Why would anyone trust a lender who lends to people who cannot be either trusted nor capable of paying off their credit cards is beyond me.
I've used one before, it was great. It cut my interest rate in half, I had one monthly payment, and my credit score is fantastic. I still have zero balance on my cards. Use them for groceries and gas only for the cash back, pay off the bill with my phone literally on the way home. That being said, since I have used one before, I get offers in my inbox all the time that look just like that. And I know most people would just run up their credit cards again.
I just consider it a valuable lesson learned. I ran up credit card debt a few years back, and then went through the slow misery of paying it all off, using a loan like this one did help. Luckily I didn't have to ruin my credit or finances to learn this lesson about debt, so I consider myself one of the lucky ones. Owning someone money like that is also one of the reasons I continue to drive my 10 year old truck, and have put off buying a house, since i believe they are 30-40% overvalued , at least.
What's an interest rate?
I have no idea what my card's rate is. Could be 18%. Could be 22%. Could be 13%.
For all I know it's effectively 0%.
In a debt based economy, the debtors are the lifeblood, so if nobody is borrowing money, well there goes your fake GDP! :D
as borrowers refi multiple credit cards with multiple P2P loans, only to run up still more credit card debt.
I'm pretty sure that they will use the new funds to invest in the stock market. Everyone knows that it's very profitable nowadays.
thanks bernanke
Obama won't like the competition. Seriously, what can you do with a 35K at 125% balloon loan? Maybe you can pay off your college loan.
http://www.bankrate.com/finance/mortgages/do-you-qualify-for-refi-plan-1...
Refinance
Pay in cash, cut out the middleman. Why would someone finance, then refinance on a deprecated product obsolescence cycle?
You think these hacks will loan me money to pay my mafia (IRS) bill off?
It's bound to be a better rate...
The combined penalty for not paying on time and not filing on time: 47.5%.
http://www.howardlevyirslawyer.com/2012/03/06/irs-interest-and-penalty-f...
35K on CC's. Doomed.
Check kitting, refinancing credit cards are old scams. Use cash. Quit paying more for the purchased product under interest fees. Then swiping a rewards card to feel like you got bamboozled with saving a penny.
Banking is a art of deception.
What awfully nice men bailing out underwater serfs who'll be knee and not ankle deep in debt forevaaaaaaaaaaaaa! Loves me a happy ending me does.
Max that fucker out and throw it in the trash. Never pay. What difference does it make?
The next huge swarm of locusts will be...
... DEBTORS ...
They're coming, they're thoroughly addicted to debt, and they'll consume anything and everything that every prudent individual has saved... if they can find it, and get to it.
Better prepare now. Time is short.
So... get your money out of financial institutions and buy physical/productive assets?
Yeah like ammo.
Wish I had $35,000 in balance on Credit Card to flip over. Does that make me a deadbeat in credit terminology ???
Does that make me a deadbeat???
Just like the Bankster Jump, you never know for sure until it's too late and your head splits in two.
I can't shake the feeling that P2P is just another ponzi scheme. How do we know that the borrowers are real? How do we know that all the lenders are real?
Seems like P2P is a ponzi manager's dream.
Ahhhrrgggg
Listen up folks, Visa and MasterCard are behind this.
Look at their default rates now. Do you think they can easily offload a pile of stinking shit through Wall Street onto the fucking half wits.
This is fucking perfect for them, Shift the dross onto P2P then let Wall St flog it to the crazies.
No matter which way you look at it, they get inflow of cash and the crazies are the ones holding the dross.
Think about what a couple of billion flowing in settling cars will do the default rate and cash flow to finance the cards for the next generation of debt muppets.
A bit of financial fucking wizardry and hey presto, Valuations up another 15 X earnings and its stock goes into hyper-dive.
Seriously card company's are backing this to the hilt.
You know nothing can go wrong now.
What's the likelihood they come after you for non-payment in a collapse situation? Seriously considering it, even though I have very little debt at all other than 10 years left on a 15 year mortgage, and physical gold & silver piles. Take the free money and buy some ammo and build that garden I've been thinking about. When and how would they come after you, in a collapse scenario?
I invested with Lending Club a few years ago. They dangle the notion that you can earn 13% - 15% on your investment funding other peoples loans. But with each default on the loans I funded, the pecentage went down. In the end I earned about 2% after fees. Not really bad, but that was a hell of a lot of risk for a low percentage.
I agree with many on here. Look at your credit cards as a means to destroy the system. The greedy bastards made one crucial mistake, they trusted us.
Selectively default on every card you have. Buy new stuff, sell it on Ebay, transfer the funds off-shore, put it in metals or whatever but keep it out of the government backed currency.
Bottom line: You can wait for the system to fuck you (and it will), or you can help bring down the system with the very product they thought would keep us passive, meek, happy and stupid.
When honest people with savings, and I say honest, because there is nothing more beautiful, than a hard working honest person, are getting nothing from savings, and can't exactly stuff those savings in a matress, then best thing to put it in is other honest people. This is the closest you will get, imo, to the concept of trust, a mans word is his bond.. a 2 percent return is better than some .075 and a toaster. If you are looking for high returns forget it..The investors are looking for a solid dependable trickle .l This is a tiered system, and we the borrowers and our word..are the collateral..and ranked accordingly..and a smart borrower will promptly replace a 12 percent with with a 7 percent, as I did and literally cut the pay off time to 3 years, as opposed to six I had, This is freedom to me, if not a pass out of eternal debt slavery. I am paying less, and in less time.. and know when I am getting out. In the meantime..My mountain, is no longer an mountain, its a hill..I don't have to file bankruptcy
Barclays ring is another great tool..That I used to shift the 18 percent (thanx a lot Discover) remainders to an 8 percent, no balance fee transfer....all the while paying down my debt faster and faster..
I look at the p2p as a great step to controll and do just that.
But most important to me..I kept my word..
More importantly, you have self-discipline. As far as your creditors go, you aren't using the loans the "right" way...You were supposed to immediately run up your newly-freed credit again, as quickly as possible, thereby replacing 1 loan with 2. That was the plan, Stan.
But you didn't play. Good for you. I only hope more and more folks start using easy credit AGAINST the lenders.