Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: Amelia on August 27, 2013, 05:15:06 PM

Title: 6 loans fully paid since May
Post by: Amelia on August 27, 2013, 05:15:06 PM
Out of 256 notes, 6 that funded in May have been fully paid.  This seems kind of high and kind of curious.  A lot of work (not really) for $3.73 - 1%
Title: Re: 6 loans fully paid since May
Post by: Rob L on August 27, 2013, 05:27:39 PM
I've bought 1,800 notes since early May and 22 are fully paid. More than I would have guessed, but it is what it is. Not as bad as your luck though.
Title: Re: 6 loans fully paid since May
Post by: Fred on August 27, 2013, 05:28:04 PM
Fully prepaid loans, although not ideals, are much better than lates, defaults, or charged-offs.  ;)
Title: Re: 6 loans fully paid since May
Post by: New Jersey Guy on August 27, 2013, 06:02:08 PM
"Out of 256 notes, 6 that funded in May have been fully paid."

I agree.  That seems high.  It'll probably change.
Out of curiosity, were these higher grade loans (B3 to A1)?
Title: Re: 6 loans fully paid since May
Post by: Ran on August 27, 2013, 07:47:32 PM
Fully prepaid loans, although not ideals, are much better than lates, defaults, or charged-offs.  ;)

I will caution about this. Currently LC is charging 1% fee for payment and also issuing process is taking longer than thought. Prepay does not hurt your bottom line but does hurt investment return.
I actually restarted to model annual returns assuming 15~20% annual prepayment rate.
Title: Re: 6 loans fully paid since May
Post by: Rob L on August 27, 2013, 09:08:34 PM
NJ Guy mine were all over the map. A1 -> D3, no E or F.
Title: Re: 6 loans fully paid since May
Post by: Randawl on August 27, 2013, 09:21:37 PM
I have seen a moderate spike in fully paid loans as well.
Title: Re: 6 loans fully paid since May
Post by: 415ab on August 27, 2013, 09:53:27 PM
Similar story here, but more loans paid off.  Started investing in late April of this year.  I now have 243 loans, of those 9 have paid off after the first or second payment.  B3 : 2, C2 : 2, C5 :2, D4 : 1, D5 : 1, E2 : 1.   5 had already paid in full by the time that I had around 100 notes.
Title: Re: 6 loans fully paid since May
Post by: Amelia on August 27, 2013, 10:21:27 PM
"Out of 256 notes, 6 that funded in May have been fully paid."

I agree.  That seems high.  It'll probably change.
Out of curiosity, were these higher grade loans (B3 to A1)?

A = 2 [2,3]
B = 2 [3,4]
C = 2 [2,4]

Title: Re: 6 loans fully paid since May
Post by: Dennis on August 28, 2013, 02:24:52 AM
Out of 256 notes, 6 that funded in May have been fully paid.  This seems kind of high and kind of curious.  A lot of work (not really) for $3.73 - 1%

I've always thought that the number of early payoffs was way too high in my 2 year experience with P2P.  I know Prosper used to solicit borrowers who had made as little as a few payments, to refinance into a lower interest rate as their credit score increased (more origination money for Prosper), but I've not heard of LC doing that - if anyone knows different please post. 

I'm exactly at 2 years with LC, and of the 825 purchased notes in my main LC account (I also have an LC IRA with similar numbers), 148 notes to date have been paid off early.  Most of the early payoffs made fewer than 6 payments, and all of them together represent about 18% of the total notes I purchased, or in other words, almost 1 in 5 of my notes paid off early in the first 2 years with LC.  The numbers are even higher in my Prosper account.  It frustrates me to have to continually replace early payoff notes with new ones, especially now that notes are so hard to obtain.  But almost everyday now, between 3 P2P accounts, I have to deal with an early payoff.  Am I being irrational in my frustration?  Or should I just embrace it as a part of the P2P model???     
Title: Re: 6 loans fully paid since May
Post by: Fred on August 28, 2013, 03:27:01 AM
I actually restarted to model annual returns assuming 15~20% annual prepayment rate.

Or, you can treat P2P loans as callable bonds, and price them as such -- http://people.stern.nyu.edu/jcarpen0/courses/b403333/19callable.pdf.
Title: Re: 6 loans fully paid since May
Post by: core on August 28, 2013, 03:45:44 AM
I know Prosper used to solicit borrowers who had made as little as a few payments, to refinance into a lower interest rate as their credit score increased (more origination money for Prosper)

I didn't know they did that.  What I like about what Prosper does though, is if the borrower pays extra it just goes towards the next payment, unless they specify otherwise (apparently -- I never dug into the docs to find out why). The borrower ends up "pre paying" interest and it doesn't affect your return.  That's kinda slimy, but hey I'm not complaining.

It frustrates me to have to continually replace early payoff notes with new ones, especially now that notes are so hard to obtain.  But almost everyday now, between 3 P2P accounts, I have to deal with an early payoff.  Am I being irrational in my frustration?  Or should I just embrace it as a part of the P2P model???   

I doubt anybody's plan is to intentionally stay in debt for 5 years if they have the means to get out, and keep in mind we're raping these people on interest especially as their credit improves.  I don't think it's specific to p2p but I'm not in the banking biz so I wouldn't know.  Think about how the credit card companies feel when your debt consolidation loan was used to pay them off. 

But I think this whole discussion is similar to an undertaker complaining that not enough people died this week.
Title: Re: 6 loans fully paid since May
Post by: Amelia on August 28, 2013, 09:00:43 AM
Quote
But I think this whole discussion is similar to an undertaker complaining that not enough people died this week.

Now that's a phrase I've not heard in a long time and it made me laugh.  You're right of course!
Title: Re: 6 loans fully paid since May
Post by: cfb on August 28, 2013, 09:14:20 AM
Here's a fun stat: I've written about 2400 notes and 280 have paid in full, all early.  82 went to Charged Off.  BTW, the LC people I've talked to about this were fairly fascinated by the ratio of paid off early vs defaults.

My guess is I'm picking people that in many cases turn out to not need the money or they get it from somewhere else at better terms.

When I'm looking at a note and in the comments they say something like "I'll pay this off in less than a year!" I throw them back.  Given the time it takes for some notes to issue and how hard its been to find good ones, I'd prefer people who'll actually pay the full term and all of the interest...
Title: Re: 6 loans fully paid since May
Post by: gamassey on August 28, 2013, 10:25:12 AM
Could it be that paying the LC loan on time for 12 to 18 months boosts the credit score enough that they can borrow money at a much lower interest rate?
Title: Re: 6 loans fully paid since May
Post by: Amelia on August 28, 2013, 01:34:50 PM
Could it be that paying the LC loan on time for 12 to 18 months boosts the credit score enough that they can borrow money at a much lower interest rate?

When I look at the paid in full notes individually, it indicated that 3 scores had gone up, 2 had gone down and 1 had no change.  Do they do another credit pull when the loan is paid or are they making an assumption based on .... something?
Title: Re: 6 loans fully paid since May
Post by: edward on August 28, 2013, 04:54:08 PM
I think I read on this forum that LC actually sends out letters to borrowers with good payment history whose credit score has increased a soliciation to make a new loan with a lower interest rate and pay off the current loan at the higher interest rate. Can anyone else confirm this?
Title: Re: 6 loans fully paid since May
Post by: gamassey on August 28, 2013, 05:59:00 PM
I think I read on this forum that LC actually sends out letters to borrowers with good payment history whose credit score has increased a soliciation to make a new loan with a lower interest rate and pay off the current loan at the higher interest rate. Can anyone else confirm this?

I really hope that is not true, that would mean LC is reducing our returns to increase the origination fees they earn up front.  Seems like that would be a big conflict of interest.
Title: Re: 6 loans fully paid since May
Post by: cfb on August 29, 2013, 12:05:52 PM
I think I read on this forum that LC actually sends out letters to borrowers with good payment history whose credit score has increased a soliciation to make a new loan with a lower interest rate and pay off the current loan at the higher interest rate. Can anyone else confirm this?

From reading lots of comments, I have seen many people saying they were paying off an existing LC loan and further reducing debt or doing a home improvement.  I didn't know they were actively promoting this.  And I don't like it.  LC gets another origination fee and I get the shaft.
Title: Re: 6 loans fully paid since May
Post by: New Jersey Guy on August 29, 2013, 02:50:01 PM
"I think I read on this forum that LC actually sends out letters to borrowers with good payment history whose credit score has increased a soliciation to make a new loan with a lower interest rate and pay off the current loan at the higher interest rate."

That is absolutely untrue!
They send Emails on a frequent basis, not letters.
Title: Re: 6 loans fully paid since May
Post by: edward on August 29, 2013, 06:39:15 PM
NJG, thank you for pointing out the immense difference between letters and emails.
Title: Re: 6 loans fully paid since May
Post by: dontvote on August 29, 2013, 07:03:06 PM
Not sure I have an issue with this. Can't force peeps to keep higher interest rates loans than they deserve. Refi seems fine to me, as long as they aren't truly churning (applying higher interest rates with the INTENTION of refinancing later)...
Title: Re: 6 loans fully paid since May
Post by: Fred on August 29, 2013, 11:02:42 PM
From reading lots of comments, I have seen many people saying they were paying off an existing LC loan and further reducing debt or doing a home improvement.  I didn't know they were actively promoting this.  And I don't like it.  LC gets another origination fee and I get the shaft.

From their LC Loan Stats data (https://www.lendingclub.com/fileDownload.action?file=LoanStatsNew.csv&type=gen), I do not see any members with 2+ loans:

select memberid, count(*) from loanstatsnew group by memberid having count(*) >= 2

returned no results. :)
Title: Re: 6 loans fully paid since May
Post by: core on August 30, 2013, 02:31:22 AM
There are definitely members who have had more than 1 loan, but perhaps not both active at once.  If the Q+A can be believed.  I haven't poked around in that LoanStatsNew.csv file before so I cannot really comment on it.  It's possible that memberid is an auto increment field which doesn't remain the same for a given person necessarily.

Perhaps a more plausible explanation:  Don't you have to use a different email address to get a 2nd loan?  So you would be assigned a second memberid anyway.

Not sure I have an issue with this. Can't force peeps to keep higher interest rates loans than they deserve. Refi seems fine to me, as long as they aren't truly churning (applying higher interest rates with the INTENTION of refinancing later)...

There's a big difference between allowing someone to refinance and sending them emails ASKING them to refinance so LC can get another origination fee, not to mention 1% of both balances.  LC should consider waiving the 1% servicing fee on the lump sum payoff under these circumstances.
Title: Re: 6 loans fully paid since May
Post by: TonySaunders on August 30, 2013, 05:20:35 PM
There are definitely members who have had more than 1 loan, but perhaps not both active at once.

...


I personally have two active loans from LC, right now. They appear to limit it to two active loans.
Title: Re: 6 loans fully paid since May
Post by: core on August 30, 2013, 05:51:24 PM
I personally have two active loans from LC, right now. They appear to limit it to two active loans.

You might want to PM your loan IDs to Fred so he can investigate what's wrong with his query.
Title: Re: 6 loans fully paid since May
Post by: Fred on August 30, 2013, 06:15:34 PM
I personally have two active loans from LC, right now. They appear to limit it to two active loans.

You might want to PM your loan IDs to Fred so he can investigate what's wrong with his query.

Yes, that would be nice, if you don't mind.  I'd like to see how the Loan Stats data is populated; or at least get some kind confidence of its completeness and accuracy.