Author Topic: Fully Paid Loan Percentage  (Read 2038 times)

FollowTheBasics

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Fully Paid Loan Percentage
« on: February 18, 2016, 10:00:57 PM »

To date I have invested in 418 loans.  A total of 81 of those loans have become Fully Paid early.  As a percentage it comes to 19.37% and I am curious if my results are some sort of aberration or within a normal range.  I have had the account open for about 10 months now and invest primarily in higher risk loans.  Strangely enough, charged off loans only represent about 4.2% of the portfolio which seems low. 

Thanks in advance for any observations or input.

michael

lascott

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Re: Fully Paid Loan Percentage
« Reply #1 on: February 18, 2016, 10:12:07 PM »
On my oldest account almost 2 years old, I have had 1196 notes fully paid which calc's to 14.89%.
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

Rob L

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Re: Fully Paid Loan Percentage
« Reply #2 on: February 18, 2016, 10:31:31 PM »
My account is just shy of 3 years old and all notes are 36 months term.
Fully paid is 26.9% of 8574 notes. Charged off is 7.04%.
« Last Edit: February 18, 2016, 10:35:07 PM by Rob L »

Fred93

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Re: Fully Paid Loan Percentage
« Reply #3 on: February 18, 2016, 11:07:04 PM »
To date I have invested in 418 loans.  A total of 81 of those loans have become Fully Paid early.  As a percentage it comes to 19.37% and I am curious if my results are some sort of aberration or within a normal

That's similar to what I see.

Quote
I have had the account open for about 10 months now and invest primarily in higher risk loans.  Strangely enough, charged off loans only represent about 4.2% of the portfolio which seems low. 

Not strange at all.  There's a five month skew.  Charge off can only occur (in most cases) after a loan is 5 months old.  If a loan is 10 months old, it has only had 5 "chances to charge off", in other words there have only been five months in which if the borrower stopped payment, you would see a chargeoff by now.  Your oldest loans are only just now 10 months old, and you probably have some much younger.  Your charge off fraction is still ramping up.

No payment is due until 1 month goes by.
After 2 months go by, a loan can be late by 1 month.
After 3 months go by, a loan can be late by 2 months.
After 4 months go by, a loan can be late by 3 months.
After 5 months go by, a loan can be late by  4 months.
Four months late is when they go into default.  They get charged off some time after that.

So your loans haven't had very many chances to charge off yet.  Your fraction of chargeoffs will be larger after a few more months.  When loans are 12+5 months old, you will have had a year's worth of chances (for a borrower to stop paying and the loan to subsequently charge off), and will have a substantially higher chargeoff fraction than you do now.

FollowTheBasics

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Re: Fully Paid Loan Percentage
« Reply #4 on: February 19, 2016, 09:46:55 AM »
Thanks for all the responses.

I have been trying to decide whether to continue with LC or not and consider what I am currently doing to be a sort of Beta program.   I should have also mentioned that roughly 50% of my loan portfolio is comprised of mature Folio purchased loans with the remaining 50% being newly issued loans.

Again - thanks to those who responded.

michael   

SeanMCA

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Re: Fully Paid Loan Percentage
« Reply #5 on: February 19, 2016, 02:09:39 PM »
My account is around 2 years old as well. Out of a total of 2,938 loans, 17.59% have paid in full and 5.7% have already charged off. The thing I want to know is why so many have paid off in full early. Is Lending Club refinancing them into another loan?
« Last Edit: February 19, 2016, 02:19:54 PM by SeanMCA »
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lascott

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Re: Fully Paid Loan Percentage
« Reply #6 on: February 19, 2016, 02:50:58 PM »
My account is around 2 years old as well. Out of a total of 2,938 loans, 17.59% have paid in full and 5.7% have already charged off. The thing I want to know is why so many have paid off in full early. Is Lending Club refinancing them into another loan?
They did make a change related to the service fee charged if it is within 12 months as I recall.   As well since it is amortized we get the most interest payments in the first part of the loan so we do OK.
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

Rob L

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Re: Fully Paid Loan Percentage
« Reply #7 on: February 19, 2016, 03:51:32 PM »
Is Lending Club refinancing them into another loan?

As lascott mentioned above LC only charges its 1% service fee on the principal due for payments made in the first 12 months. This was a change they made quite some time back and was not their original policy. Before the change it was shown that lenders could actually lose money on prepaid loans because of service fees (particularly on low interest rate loans). Very decent thing for them to do. There was a lot of discussion about this here at that time.

On the other hand LC makes the bulk of their revenues from originations, not service fees. So, they have every incentive to go back to current borrowers and offer them better rate loans. A while back I looked through my pre-paid loans to see if they suddenly ramped up after the 12 month period had passed and could not find any evidence of it. The graph of percent of prepaid versus loan age was pretty much a straight line if I remember correctly.



rawraw

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Re: Fully Paid Loan Percentage
« Reply #8 on: February 19, 2016, 07:18:44 PM »
If you look at internet reviews from LC (Core used to post them), it's pretty clear LC sends refi offers to at least some customers

SeanMCA

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Re: Fully Paid Loan Percentage
« Reply #9 on: February 20, 2016, 12:24:51 AM »
If you look at internet reviews from LC (Core used to post them), it's pretty clear LC sends refi offers to at least some customers

I think we deserve to know if the LC note we invest in is a refi of another LC Loan.
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nonattender

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Re: Fully Paid Loan Percentage
« Reply #10 on: February 20, 2016, 10:05:45 AM »
I think we deserve to know if the LC note we invest in is a refi of another LC Loan.

Why do loan/note purchasers "deserve" to know?

Honestly, I could go either way on this one.  It is handy to know, as an investor, as refi or repeat borrowers, as Prosper showed years
ago, have a better(*) repayment profile, and it's likely that LC has a lot of data on this, too, and is pricing accordingly.  But I don't think
we "deserve" to know or have a right to know or anything like that.  Let's say LC expands into more product categories, do we have a
compelling interest in knowing whether or not the mortgage/SL/installment/CCs/etc in the anonymized data is via LC or JPM/WFC/BAC?

I think this issue may go a little deeper into LC's core customer relationship data - and borrower privacy - than it appears on first pass.

*Prosper had positive loan performance studies for "repeat" (or "return") borrowers - though not, necessarily, on refi of existing loans.

I think the real motivation when people bring up the "refi" issue is that they don't want LC to refi borrowers at a better rate, at a later
date, and somehow perceive this as LC acting against their interests as an investor - by indirectly "causing" existing notes to pay off...

I don't see that as an incentive misalignment.  The borrowers are free, if their credit has improved, to move on to a better offer.  If LC
happens to be the one to make them that offer (and then offers the new securities to its investors), the net is that LC has retained a
customer (borrowers) and investors will have the opportunity to buy the new notes.  To me, this is just a healthy repricing of risk, for
borrowers whose risk profiles have improved.  I understand that the initial note investors won't like that, but I don't know how often
such things occur, nor do I really think this is substantially different than the usecase where a borrower consolidates non-LC debts...

So... dunno.  Not a big deal, to me, as this is just speed of market, but maybe a nice-to-have datapoint, but, then again - "deserve"?
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SeanMCA

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Re: Fully Paid Loan Percentage
« Reply #11 on: February 27, 2016, 05:24:34 PM »
I think we deserve to know if the LC note we invest in is a refi of another LC Loan.

Why do loan/note purchasers "deserve" to know?

Honestly, I could go either way on this one.  It is handy to know, as an investor, as refi or repeat borrowers, as Prosper showed years
ago, have a better(*) repayment profile, and it's likely that LC has a lot of data on this, too, and is pricing accordingly.  But I don't think
we "deserve" to know or have a right to know or anything like that.  Let's say LC expands into more product categories, do we have a
compelling interest in knowing whether or not the mortgage/SL/installment/CCs/etc in the anonymized data is via LC or JPM/WFC/BAC?

I think this issue may go a little deeper into LC's core customer relationship data - and borrower privacy - than it appears on first pass.

*Prosper had positive loan performance studies for "repeat" (or "return") borrowers - though not, necessarily, on refi of existing loans.

I think the real motivation when people bring up the "refi" issue is that they don't want LC to refi borrowers at a better rate, at a later
date, and somehow perceive this as LC acting against their interests as an investor - by indirectly "causing" existing notes to pay off...

I don't see that as an incentive misalignment.  The borrowers are free, if their credit has improved, to move on to a better offer.  If LC
happens to be the one to make them that offer (and then offers the new securities to its investors), the net is that LC has retained a
customer (borrowers) and investors will have the opportunity to buy the new notes.  To me, this is just a healthy repricing of risk, for
borrowers whose risk profiles have improved.  I understand that the initial note investors won't like that, but I don't know how often
such things occur, nor do I really think this is substantially different than the usecase where a borrower consolidates non-LC debts...

So... dunno.  Not a big deal, to me, as this is just speed of market, but maybe a nice-to-have datapoint, but, then again - "deserve"?


As long as Lending Club and Prosper sell notes to unaccredited investors, then yes, buyers deserve to know.

I'd be more than happy to have my notes pay off early. I just don't want to be the guy buying a refi'd note. Or if I were to be that guy, I'd like to know and decide for myself if it's something I want to do. Maybe I want to know what rate they were paying before with Lending Club. Is the borrower kicking the can down the road or really doing something strategic to save money? Is Lending Club churning an account for origination fees?

I perceive not knowing this in that of itself to be acting against my interests.

Unaccredited investors are entitled to visibility where Lending Club has an inherent and obvious conflict of interest. "Deserve" is definitely the right word. 
« Last Edit: February 27, 2016, 05:27:22 PM by SeanMCA »
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nonattender

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Re: Fully Paid Loan Percentage
« Reply #12 on: February 27, 2016, 06:57:07 PM »
I think we deserve to know if the LC note we invest in is a refi of another LC Loan.

Why do loan/note purchasers "deserve" to know?

Honestly, I could go either way on this one.  It is handy to know, as an investor, as refi or repeat borrowers, as Prosper showed years
ago, have a better(*) repayment profile, and it's likely that LC has a lot of data on this, too, and is pricing accordingly.  But I don't think
we "deserve" to know or have a right to know or anything like that.  Let's say LC expands into more product categories, do we have a
compelling interest in knowing whether or not the mortgage/SL/installment/CCs/etc in the anonymized data is via LC or JPM/WFC/BAC?

I think this issue may go a little deeper into LC's core customer relationship data - and borrower privacy - than it appears on first pass.

*Prosper had positive loan performance studies for "repeat" (or "return") borrowers - though not, necessarily, on refi of existing loans.

I think the real motivation when people bring up the "refi" issue is that they don't want LC to refi borrowers at a better rate, at a later
date, and somehow perceive this as LC acting against their interests as an investor - by indirectly "causing" existing notes to pay off...

I don't see that as an incentive misalignment.  The borrowers are free, if their credit has improved, to move on to a better offer.  If LC
happens to be the one to make them that offer (and then offers the new securities to its investors), the net is that LC has retained a
customer (borrowers) and investors will have the opportunity to buy the new notes.  To me, this is just a healthy repricing of risk, for
borrowers whose risk profiles have improved.  I understand that the initial note investors won't like that, but I don't know how often
such things occur, nor do I really think this is substantially different than the usecase where a borrower consolidates non-LC debts...

So... dunno.  Not a big deal, to me, as this is just speed of market, but maybe a nice-to-have datapoint, but, then again - "deserve"?


As long as Lending Club and Prosper sell notes to unaccredited investors, then yes, buyers deserve to know.

I'd be more than happy to have my notes pay off early. I just don't want to be the guy buying a refi'd note. Or if I were to be that guy, I'd like to know and decide for myself if it's something I want to do. Maybe I want to know what rate they were paying before with Lending Club. Is the borrower kicking the can down the road or really doing something strategic to save money? Is Lending Club churning an account for origination fees?

I perceive not knowing this in that of itself to be acting against my interests.

Unaccredited investors are entitled to visibility where Lending Club has an inherent and obvious conflict of interest. "Deserve" is definitely the right word.

Ok, what I heard:  "Yes, I deserve it, because I want it" (x3 or x4)  :)   I get that you want it, and I agree it'd be nice-to-have data.

But I don't think you hit the "deserve" bar.  So, let's go one by one on the points I raised and walk through the logic in baby steps:

1)  How is a borrower refinancing existing debt, which happens to be issued by LC, materially different than a borrower refinancing
existing debt that is not issued by LC?  Something like 65% of the notes are refi/consolidation of some debt owed to some entity...

We are not currently told "borrower is refinancing $5000 (amt) of their 29.99% (rate) CapOne (issuer) credit card (acct type, in this
example revolving)" - we're getting told "this note is for an (amt), at (rate), for N months (term) with a grade (y) + anonymized (for
borrower privacy) snapshot credit + income data."  And somehow this has worked.  What is it about "issuer" = "LC" that's 'magic'?

I don't think there's sufficient 'magic' in the issuer of the refinanced debt happening to be LC that we get to pierce borrower's veil.
I get that you'd like to do so; you're data-hungry and looking for edge; welcome to the club - but I don't think it's a legitimate ask.

Clearly, you're already willing to accept notes (and believe it to be "fair") where LC doesn't say: "$5k, on CapOne CC, @ 29.99%".
Right?  So why is it exactly that just because the "Issuer" field may state "LC" that you think you need/deserve to know that info?

I'm reminded of when you first showed up on the forum - with an MCA background - and wanted to mine borrower checking accts!

I told you then - and I'll say it again - "consumer" is different... :)
A little nonsense now and then is relished by the wisest men.