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Transplant Athlete
Tuesday, September 14, 2010
  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):

Countrange
151000
302000
523000
404000
735000
536000
397000
768000
249000
7010000
2511000
4112000
813000
1214000
5315000
1916000
317000
818000
319000
3220000
821000
222000
323000
1224000
4525000
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:

Countrange
1511000
5572000
8193000
8454000
12635000
10176000
7277000
10148000
5169000
131810000
28111000
73512000
31913000
28114000
77415000
33716000
13117000
22618000
10419000
50720000
7221000
6722000
3423000
12424000
46225000

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.

 

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I've gone through kidney failure twice. The first time in 2000, my mother donated a kidney; and again in 2008, I'm on dialysis waiting for a breakthrough in immuno-suppression medicines before seeking a new kidney.

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