Author Topic: My ANAR is down over 1% in less than a month...  (Read 10958 times)

Larry321

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Re: My ANAR is down over 1% in less than a month...
« Reply #30 on: June 24, 2016, 04:48:01 PM »

only a small % of my charge off's are related to actual Bankruptcy filings (based off the collection notes).  Most are straight rollers/fraud, call it what you want.

I think a very small percentage of loans are charged off because of fraud or intending to stop paying. I believe the vast majority of loans are charged off because the borrower REALLY INTENDED to pay off those credit cards...and probably did...but as any financial debt counselor will tell you the biggest problem with consolidating debt is that the borrower fixed the symptom rather than cured the problem. They pay off those high interest card balances but don't modify their spending habits. They still spend as much as before...charging their now 0 balance credit cards. They feel breathing room because their monthly payments went down so that breathing room makes them feel richer so they might even think they can spend more. Eventually they find themselves paying both a Lending Club consolidation payment AND are right back paying the minimum on credit card payments. And now they are really messed up because where else can they go? Before getting to LC they probably played with the system and transferred their balances to new cards that let them have reduced or 0 percent interest for a year. Can only play that game so long...so they then go to LC. Once they have LC and high minimum payments on their credit cards again what can they do?  They just give up and then your loan goes into Charge off.

I think LC should have a blurb (they maybe do...but since I never applied for a loan I don't know) that states the borrower REALLY SHOULD talk to a debt counselor to keep from making the same mistake again.

Anabio,

I think you are right. I don't think any borrower is intentionally scamming or planning to get the loan and then not pay at all.  We have to remember, if someone is borrwing money at 20% or higher, they are doing that because they had problems financially, either through impulsive spending, or just plain bad luck. Since the best predictor of future behavior is past behavior, why should we expect someone's financial behavior to change just because they took out a loan? That is why the key to LC investing success is always going to be to rely on statistics and spreading out risk over many, many loans. 
LC notes investor for 3 years

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