Lending Club - Some Surprising Findings
Update: Now that Lending Club has raised their loan limit, these numbers have all changed. So, please don't rely on these results. You can follow the methodology to perform your own analysis on the new data.
Once again, past performance is not indicative of future performance, invest at your own risk, etc. etc.
I was looking at the data and wondering how best to analyze 14,000 records. I decided to look at charge-offs and defaults (since that's what we're trying to avoid). Most people assume that smaller loans are more likely to be paid back. Slicing and dicing the data into ranges, (for example: 0 to 1000, 1001 to 2000, 2001 to 3000, etc.) and counting the number of loans that defaulted or were charged off in each of those ranges, we get a graph that looks like this:
And the data (via OPENOFFICE Frequency Function):
| Count | range |
| 15 | 1000 |
| 30 | 2000 |
| 52 | 3000 |
| 40 | 4000 |
| 73 | 5000 |
| 53 | 6000 |
| 39 | 7000 |
| 76 | 8000 |
| 24 | 9000 |
| 70 | 10000 |
| 25 | 11000 |
| 41 | 12000 |
| 8 | 13000 |
| 12 | 14000 |
| 53 | 15000 |
| 19 | 16000 |
| 3 | 17000 |
| 8 | 18000 |
| 3 | 19000 |
| 32 | 20000 |
| 8 | 21000 |
| 2 | 22000 |
| 3 | 23000 |
| 12 | 24000 |
| 45 | 25000 |
These results are pretty intriguing. If our hypothesis is that smaller loans tend to be repaid, this chart seems to indicate the opposite. Before you go investing in loans of $21,001 to $23,000 though, we need to check the fully paid and current loans to see what that chart looks like.
Slicing and Dicing, we get this chart:
And the data:
| Count | range |
| 151 | 1000 |
| 557 | 2000 |
| 819 | 3000 |
| 845 | 4000 |
| 1263 | 5000 |
| 1017 | 6000 |
| 727 | 7000 |
| 1014 | 8000 |
| 516 | 9000 |
| 1318 | 10000 |
| 281 | 11000 |
| 735 | 12000 |
| 319 | 13000 |
| 281 | 14000 |
| 774 | 15000 |
| 337 | 16000 |
| 131 | 17000 |
| 226 | 18000 |
| 104 | 19000 |
| 507 | 20000 |
| 72 | 21000 |
| 67 | 22000 |
| 34 | 23000 |
| 124 | 24000 |
| 462 | 25000 |
The distributions are similar which probably says more about the loans on Lending Club than the performance of those loans. I think there's some useful information here, but let's keep digging to see what we find.
