BankTech

Decoding Lending Club Loan Data, Insights from 4 Mn+ Data Points

MEDICI

In this exclusive in-depth analysis, a loan expert sat down with our analytics team and analyzed the loan data of Lending Club to gain insights on the company's lending services. In a previous article, we had covered certain aspects of loan applications in Lending Club, especially with respect to acceptance and rejection of loans. In this article, we bring insights on more factors attributed to loan applications.

What was the official grading of accepted loan applications?

The loan grade allotted by Lending Club to loan applications is the result of a formula that takes into account not only the borrower’s credit score, but also a combination of several indicators of credit risk from the borrower’s credit report and loan application. The assigned loan grades vary from A to G with a common “Lending Club Base Rate” but vary according to “Adjustment for Risk & Volatility”. Grade A is the least risky, while Grade G is the most risky. The Adjustment for Risk & Volatility is designed to cover expected losses and provide higher risk-adjusted returns for each loan grade increment from A to G. The following interactive chart depicts the distribution of approved loans by grade allotted:

The status (fully paid/charged off) of graded loans over the period 2007 to 2014:

Over the past 8 years, among all the loans graded from A to G, a certain number of loans were either fully paid or had to be charged off.

The illustration below shows the percentage of loans, graded from A to G that had to be charged off in 2014. As the illustration shows, 14% of loans graded as D were charged off in 2014.

23 jan chart 1

Note: Click here to access the interactive chart which can be used to observe the trend over the specified timeline.

The illustration below shows the percentage of loans, graded from A to G that were fully paid in 2009. As the illustration shows, 82% of loans graded as D were fully paid in 2009.

23 jan chart 2

Note: Click here to access the interactive chart which can be used to observe the trend over the specified timeline.

How the interest rate for loans varied from 2007 to 2014:

The following illustration of a linear chart represents the various interest rates for loans in the range of 5% to 26%. For example, the illustration below shows that 10,252 loans were allotted in 2013 at an interest rate of 14%.

23 jan chart 3

Note: Click here to access the interactive form of the chart above.

How the interest rate for loans varied, by grade, from 2007 to 2014:

The following illustration of an interactive chart shows how the interest rates changed for the specified duration and how it varied by the grade allotted to loans. The interactive chart shows that interest rates have increased for lower grades (like G) and decreased for upper grades (like A). Also the number of people getting loans in grade A has increased faster than in other segments.

The Average Interest Rate trend from 2007 to 2014:

The following illustration shows a simple chart with average interest rates by grade and year. The average is calculated as the weighted mean of the number of people taking loans (not the sum of loans).

23 jan chart 4

Note: Click here to access the interactive form of the chart above.

Note: The charts and graphics in this article have been taken from a series of studies prepared by our Data Sciences team. In this particular case, the Data Sciences team worked on datasets of Lending Club's loan data to come up with the insights and charts. If you have a custom requirement to gain further insights into Lending Club's lending services, please use this form. You can also reach out to us for any other custom analytics requirements.

MEDICI Team

MEDICI

MEDICI Team is a group of content writers, bloggers, journalists, researchers, and editors from the MEDICI who collaborate to create FinTech insights.

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