A Wall Street analyst summed up the collapse in online lending in 2 brutal sentences

The peer-to-peer lending industry is in a tailspin.

Leading players, many of which are valued at $1 billion or more, or cutting jobs. Loan volumes are plummeting.

One Wall Street stock analyst summed it all up in two brutal sentences.

"I used to think that online lending startups would explode when the credit cycle turned," the stock analyst told Business Insider.

"Now it looks like they won't even make it until the market turns."

The point here is that many people expected online lenders that started during the period of zero interest rate to struggle when rates started heading north. It's now clear that they're started suffering before we've even got to that point.

Chicago-based online lender Avant is laying people off and expects originations to be cut in half, according to Dakin Campbell and Matt Scully at Bloomberg. That follows news earlier this week that LendingClub, a rival online lender, is planning to cut 12% of staff amid dropping loan volumes.

The slowdown has come as the market for bonds backed by these kinds of loans has waned, and concerns have grown over lending standards. The number of loan delinquencies also appears to be on the rise.

"Delinquency rates for subprime and near prime personal loans originated by fintech and finance companies were as much as double those originated by banks for recent vintages," UBS analysts wrote in a recent note. "This illustrates the point that nonbanks are making riskier loans, even when one normalizes for credit scores, relative to banks."

LendingClub has encountered a number of problems since its CEO, Renaud Laplanche, unexpectedly resigned in May.

His departure followed an internal investigation that found the company had changed the dates on $3 million of loans sold to Jefferies in a "violation of the company's business practices along with a lack of full disclosure during the review," according to a statement.

Goldman Sachs and Jefferies, which had been buying Lending Club's loans and packaging and selling them as bonds to investors, have both stopped doing deals with the startup.

And federal and state regulators have since subpoenaed the company, which was already facing two class-action lawsuits in the US.