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Opinions and analysis of Marketplace Lending, Online Lending, and Peer to Peer Lending.

Mad Rush at Lending Club Loan Release Time: Part IV - Interest Rate with Time to Fund

Introducing Self-service Past Performance Data Analysis Tool

Mad Rush at Lending Club Loan Release Time: Part V - Loan Term with Time to Fund

Posted by Anil Gupta | Monday July 14, 2014, 12:01 am | Categories: Lending Club


This post is continuation of the Mad Rush at Lending Club Loan Release Time series. In this post we review loan term with time to fund.


Loan Volume

Lending Club issues loans with two different maturity lengths - 36 months (3 years) and 60 months (5 years). Initially, Lending Club issued loans with 36 month term only. On May 11, 2010, Lending Club introduced loans with 60 month term. In 2013, about 25% of all loans issued by loan volume and 35% by amount lent at origination were with 60 month term.

Figure 1 shows the loan listing volume by loan term and delinquency rate with time to fund. There is consistent increase, from 23.9% to 32.7%, in the percentage of 60 month loans in loans funded within first 60 minutes of being listed. It appears that more than three-fourth of the loans funded within a minute of being listed are with 36 month loan term. The big jump in percentage of 60 month loans for loans that took more than 12 hours is due to fewer loans being available during that time period.

With increasing time to fund, the delinquency rate declines from high of 4.13% for loans funded within a minute to low of 1.53% for loans that took more than 32 hours to fully fund. The delinquency rate declines as the percentage of 60-month loan rises with time to fund for loans funded within 60 minutes of being listed. This relationship doesn’t appear to hold for loans with longer time to fund after 60 minutes.


Figure 1: Lending Club Issued Loan Volume by Loan Term and Delinquency Rate with Time to Fund

Credit Grade

Table 1 below shows the Loan volume by loan term and credit grade groups and the delinquency rate by credit grade group. Loan term plays an important role during assignment of a Credit Sub-Grade by Lending Club. See Interest Rate and How We Set Them for more information. Table 1 clearly shows such influence of loan term on credit grade. Only 9.5% of grade A and B loans carried 60 month term while only 6.0% of grade F and G carried 36 month term.


Table 1: Lending Club Loan Volume by Term and Credit Grade
Loan Term Credit Grade
A & B C, D, & E F & G
% of 36 month Loans 90.5% 58.9% 6.0%
% of 60 month Loan 9.5% 41.1% 94.0%
Delinquency Rate 1.3% 4.0% 7.9%

Figure 2 shows the three panels, one each for grade A & B; C, D & E; and F & G displaying percentage loan volume by loan term and delinquency rate. All three panels show the preference for 36 month loans by the lenders who invest within few minutes of loans being listed. The delinquency rate for grade A & B; C, D, & E; and F & G loans appears to be declining with increasing time to fund. Also, delinquency rate seems to decline while the percentage of 60 month loans increases for loans.


Figure 2: Lending Club Issued Loan Volume by Loan Term and Delinquency Rate by Credit Grade with Time to Fund

Delinquency Rate

In light of potential relationship between delinquency rate and loan term with time to fund, it will be prudent to plot delinquency rate for 36 month and 60 month loans separately with time to fund.

Figure 3 shows the loan volume and delinquency rate for 36 and 60 month loans by credit grade groups and time to fund. For all credit grade groups, early lenders seem to prefer 36 month loans. For example, while 90% of listed Grade A & B loans carry 36 month term (Table 1), 99% of Grade A & B loans funded within a minute of being listed carry 36 month term (Figure 3). The delinquency rate for 36 month loans declined with time to fund for practically all credit grade groups. The delinquency rate for 60 month loans increased with time to fund for practically all credit grade groups.


Figure 3: Lending Club Issued Loan Volume and Delinquency Rate for 36 and 60 month Loans by Credit Grade with Time to Fund

Key Takeaways

  • The lenders who invest in loans quickly after being listed seem to prefer 36 month loans over 60 month loans.
  • Delinquency rate for 36 month loans declines while delinquency rate for 60 month loans increases with increasing time to fund.

Comments: (2)

JJ Hendricks | Tuesday July 15, 2014, 3:26 pm
Why do you think there is a difference between time to fund and loan performance for 36 month and 60 month terms? I can't think of any good reasons why this would be the case.
Anil Gupta | Wednesday July 16, 2014, 9:05 am
@JJ, I am also not sure why delinquency of 36 month loans decline with time to fund.

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