Monday, August 20, 2012

Lending Club Loan Amount: Defaults for Credit Grade B Loans


Loan Volume

The chart below shows the loan volume for grade B loans in relation to loan amount buckets and listing date since 2009. I decided to exclude 2007 and 2008 as volume for these years was very small. Among all credit grades, loans with credit grade B have the largest volume.

Most 36 month grade B loans are issued for loan amount between $5,000 and $20,000. Most 60 month grade B loans are issued for slightly higher loan amount between $10,000 and $25,000.


36 Month Loans

The chart below shows the loan status for grade B 36 month loans in relation to loan amount buckets since 2008. Similar to the credit grade A loans, the 15.3% default rate of credit grade B loans doesn't appear too bad compared to performance of stock market in 2008.


Considering that 36 month loans issued in first six months of 2009 have matured, we can expect to have 12 to 14% of credit grade B loans defaulting till maturity. The default rate for credit grade B loans is almost twice that for credit grade A loans as discussed in previous post Lending Club Loan Amount: Defaults for Credit Grade A loans. Loans in the lowest loan amount bucket (up to $4,999) and in the highest loan amount bucket ($25,000) appear to have the worst default rate in both 2009 and 2010.

60 Month Loans

The chart below shows the loan status for grade B 60 month loans in relation to loan amount buckets since 2010. Such 60 month loans issued in 2010 are just reaching half way mark to their maturity date. The default rate for credit grade B loans is much worse than compared to that for credit grade A loans. Also for 60 month loans issued in 2010, the default rate is rising with the loan amount. Compared to 60 month credit grade A loans, credit grade B loans don't appear to be as good of a deal.


Key Takeaways

  • 36 month Grade B loans for lowest and highest amount appear to have higher default rate.
  • Unlike 60 month Grade A loans, 60 month Grade B loans don't appear to be a good deal.
  • The default rate for Credit Grade B Loans appear to be almost twice of similar Credit Grade A loans.


No comments:

Post a Comment