Poll

What TERM loan do you invest in?

36-month only
17 (30.4%)
A mixture, but prefer 36-month
22 (39.3%)
A mixture, but prefer 60-month
6 (10.7%)
60-month only
0 (0%)
It doesn't matter
11 (19.6%)

Total Members Voted: 56

Author Topic: What TERM loan do you invest in?  (Read 16857 times)

brother7

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What TERM loan do you invest in?
« on: July 17, 2014, 06:40:51 PM »
When I first started investing, it didn't matter.
After more research, I learned that 60-month loans have a greater chance of default so I started to favor 36-month loans.
Now, all of my new note purchases are 36-month only.
« Last Edit: July 17, 2014, 06:45:06 PM by brother7 »

rawraw

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Re: What TERM loan do you invest in?
« Reply #1 on: July 17, 2014, 07:08:42 PM »
When I first started investing, it didn't matter.
After more research, I learned that 60-month loans have a greater chance of default so I started to favor 36-month loans.
Now, all of my new note purchases are 36-month only.
Of course they do, because they have more time.  The question is whether the increased rate they have is enough to mitigate this risk or not.

I'm about 70% 36 and 30% 60.  P2P Picks is all 36 months and then I do some filters on 60 months.

Emmanuel

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Re: What TERM loan do you invest in?
« Reply #2 on: July 17, 2014, 09:11:31 PM »
It's not so much that the default rate is higher, since rates can compensate for that, but that the defaulting loans stop paying comparatively sooner..

The graphs below show the probabilities of defaulting loans to stop paying, for each month until maturity. Highest risk is at the 11th month for 36-months loans and 13th month for 60 months loans, so respectively at around 1/3 of maturity for 36-months loans but only 1/5th for 60-months loans. Therefore if a 36-months and a 60-months loss both default, the loss will be greater on the second one.
« Last Edit: July 17, 2014, 09:16:05 PM by Emmanuel »

Fred

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Re: What TERM loan do you invest in?
« Reply #3 on: July 17, 2014, 09:21:47 PM »

Peter

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Re: What TERM loan do you invest in?
« Reply #4 on: July 19, 2014, 08:58:39 AM »
I am about the same ratio as Rawraw. I prefer 36-month but we need to keep in mind that the first 60-month loans won't reach maturity until early next year. So, it will be a while before we will be able to compare apples with apples.
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lascott

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Re: What TERM loan do you invest in?
« Reply #5 on: July 19, 2014, 10:20:12 AM »
I'm current in 36 mo @ 87.6% and 60 mo @ 12.4% per https://www.lendingclub.com/account/lenderAccountDetail.action pie chart using the TERM option.

I'm mainly done P2P-Picks for the 36ers and LendingRobot for the 60ers.

A couple older articles about this:
Title: Lending Club Loan Length and Default Rate - Posted by Anil Gupta on June 21, 2012
http://andirog.blogspot.com/2012/06/lending-club-loan-length-and-default.html?_sm_au_=iVV0FRJfT30QRPjr
Title: Lending Club Loan Length: Best 60 month spread with B4 Grade Loan - Posted by Anil Gupta on June 25, 2012
http://andirog.blogspot.com/2012/06/lending-club-loan-length-best-60-month.html
Title: Lending Club Loan Length - Credit Grades and Default - Posted by Anil Gupta on June 28, 2012
http://andirog.blogspot.com/2012/06/lending-club-loan-length-credit-grades.html


Title: Balancing Your Portfolio by Loan Term 36/60 Month - Posted by Nickel Steamroller on June 7, 2012
http://www.nickelsteamroller.com/blog/2012/06/balancing-your-portfolio-by-loan-term-3660-month/

LendingClub page, https://www.lendingclub.com/public/60-month-notes.action , states 60s are good because of higher interest and lower fees.
« Last Edit: June 21, 2015, 06:41:27 PM by lascott »
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SBryantMS

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Re: What TERM loan do you invest in?
« Reply #6 on: July 19, 2014, 11:53:29 AM »
I am 86% (36 month) and 14% (60 month) notes.

I stopped buying 60 month notes as my loss rates were triple my 36 month note per Interest Radar. 

My early defaults in the 60 month notes increased my principal loss to unacceptable levels.

I don't believe that the higher interest rate on 60 month notes properly compensates for the additional principal loss. 

I ONLY buy 36 month notes now.

AnilG

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Re: What TERM loan do you invest in?
« Reply #7 on: July 19, 2014, 12:22:10 PM »
My current portfolio split is 54% 36 month (age 15.12  months) and 46% 60 month (age 5.31 months) loans. Earlier this year, I switched to buying 60 month loans or to put more appropriately ignoring loan term in my loan selection.
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alimoyni

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Re: What TERM loan do you invest in?
« Reply #8 on: July 19, 2014, 12:27:30 PM »
I very recently started to buy notes on Folio that have < 15 months remaining on the loan term and they have had perfect loan payments during the loan.    This has given me a mixture of 36 and 60 month loans and typically in the B/C range. 

lascott

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Re: What TERM loan do you invest in?
« Reply #9 on: July 19, 2014, 12:30:49 PM »
My current portfolio split is 54% 36 month (age 15.12  months) and 46% 60 month (age 5.31 months) loans. Earlier this year, I switched to buying 60 month loans or to put more appropriately ignoring loan term in my loan selection.
What?!?!  Had you done further research ... because your 2012 findings were not that favorable (I pointed to above)?
Since I haven't been around that long I'm guessing that LC has changed how they assign grades and interest to 60's since they first started.
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AnilG

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Re: What TERM loan do you invest in?
« Reply #10 on: July 19, 2014, 05:53:29 PM »
I did some research earlier this year for an institutional client. I don't believe LC has made any adjustments between 36 and 60 month loans. The high interest rate loan pool is primarily made of 60 month loans so it is very difficult to avoid them if you want to play in high interest rate loan sandbox.

My current portfolio split is 54% 36 month (age 15.12  months) and 46% 60 month (age 5.31 months) loans. Earlier this year, I switched to buying 60 month loans or to put more appropriately ignoring loan term in my loan selection.
What?!?!  Had you done further research ... because your 2012 findings were not that favorable (I pointed to above)?
Since I haven't been around that long I'm guessing that LC has changed how they assign grades and interest to 60's since they first started.
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turing

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Re: What TERM loan do you invest in?
« Reply #11 on: July 21, 2014, 12:57:24 PM »
I am 60% 60 month and 40% 36 month.

The model I am working on shows that the higher interest rate you earn with 60 month notes more than compensates for any risk.

rockinray

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Re: What TERM loan do you invest in?
« Reply #12 on: July 24, 2014, 08:42:06 AM »
Currently, I am 90% 36 and 10% 60.

I am considering an 80/20 split to see how the allocation will perform.

Ray

JoeB

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Re: What TERM loan do you invest in?
« Reply #13 on: August 10, 2014, 01:53:10 PM »

I'm about 70% 36 and 30% 60.  P2P Picks is all 36 months and then I do some filters on 60 months.


I am about the same ratio as Rawraw. I prefer 36-month but we need to keep in mind that the first 60-month loans won't reach maturity until early next year. So, it will be a while before we will be able to compare apples with apples.

Question: in all of your writings and filterings, you do not sort for term. 60 month notes are probably 2/3 of the platform and therefore around the same for your filters. How can it be that you are at 70% 36 month notes? Did I miss something?
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rawraw

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Re: Re: What TERM loan do you invest in?
« Reply #14 on: August 10, 2014, 02:08:00 PM »

I'm about 70% 36 and 30% 60.  P2P Picks is all 36 months and then I do some filters on 60 months.


I am about the same ratio as Rawraw. I prefer 36-month but we need to keep in mind that the first 60-month loans won't reach maturity until early next year. So, it will be a while before we will be able to compare apples with apples.

Question: in all of your writings and filterings, you do not sort for term. 60 month notes are probably 2/3 of the platform and therefore around the same for your filters. How can it be that you are at 70% 36 month notes? Did I miss something?
P2P picks only selects 36 months. So my automated investments through that service ignores the 60.  It's a built in filter. Then I randomly turn on my filter for sixty month only