PeerCube Thoughts

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

FICO Score Trends and Defaults for Lending Club Loans

Lending Club Loan Default Rate and Returns: Two Years is a long time in the life of a Loan

My prosperous Prosper experience

Posted by Anil Gupta | Tuesday March 4, 2014, 10:35 am | Categories: Prosper PeerCube

Note: This post is written by my wife. In this post, she is sharing her personal experience lending on Prosper Marketplace.

My P2P lending experience started as lender for Lending Club with my husband. As I became familiar with P2P lending, I also started to lend money on the Prosper platform. Besides, my husband “hacked” my Lending Club account and he has been using that account to test out his lending strategies. So, I started to invest in Prosper by myself.

The advantage of Prosper was that they used to offer one-year term loan till March 2013. Such loans were attractive to me as I was still a bit skeptical about the P2P lending. I also thought the shorter term loans were less risky. Now that I have become more familiar with investing P2P lending and the P2P lending industry has become more mature and widely known, I’m comfortable with investing in longer terms loans.

Portfolio Performance

Over 18 months of my Prosper investment, I can proudly say that there’s no charged-off note among 130 notes issued so far. According to the Prosper calculation, annualized return is 9.75% and seasoned-only return (annualized return for notes aged 10 month or more) is 11.13%. I am very pleased with this result comparing with the bond or interest rate these days. My goal or hope was that the P2P lending portion in my portfolio should surpass bond and saving account interest rate. My expectation was pretty low in the first place, yet, I think the return is good and I’m very happy that I have not bought any notes that later defaulted.

Filter Criteria and Tips

I use PeerCube to filter loans available on the Prosper platform. My filter criteria have been evolving as PeerCube adds filters and features. I was also trying to narrow down appropriate criteria to meet my goals. Here’s the list of criteria I have been using on PeerCube to select notes:

  • Employment Status: Employed, Full-time, Self-employed, Other, Part-time. I’m excluding Not employed and Retired borrowers.
  • Prosper Risk Score: 5 and above
  • Delinquencies Last 7 Years: Up to 2
  • Inquiries Last 6 Months: Up to 2
  • Now Delinquent Derog: 0
  • Public Records Last 12 Months: 0
  • Public Records Last 10 Years: Up to 1

Not so many loans are available after applying the filter. I would say usually about 20 or so notes meet my filter criteria. In PeerCube, I sort filtered notes from higher interest rate and review individual notes. That’s when my own filtering selection process starts in my head, which adds a few spices to my standard recipe.

  • I tend to avoid older borrowers. I check the credit age and the length of months employed to estimate approximate age. Especially if borrower still has pretty high balance of real estate, there is no way for me to lend money to such a borrower. Sadly, I’ve been noticing this type of borrowers more and more these days.
  • I check the frequencies of delinquencies information. Borrowers with more than a few delinquencies are removed from my selection.
  • I’m ok to lend money to a borrower with high Debt to Income Ratio as long as the monthly income is high. By the same token, I don’t select loans with high Debt to Income Ratio when a borrower’s income is low.

Using the same criteria, I review three-year loans first (I still prefer shorter term loans), then five-year loans. I rarely review the grade AA loans for my own "greed". Usually once or twice a week, I review loans and reinvest available cash in my Prosper account.

That’s all I can share as tips for selecting Prosper loans using PeerCube. I’ll definitely continue this process...

Comments: (0)

Be the first one to comment.

Join the Conversation

Trading Delinquent Notes, Part 2: Needle in the Haystack

September 5, 2016, 3:20 pm

Selling Delinquent Notes on Lending Club Folio Secondary Market, Part 1: Loss Aversion

August 27, 2016, 1:56 pm

Six Steps to Automated Selling on Lending Club Folio Secondary Market

August 7, 2016, 2:00 pm

Enhancements to Automated Note Selling on Lending Club Folio Secondary Market

July 31, 2016, 6:59 pm

Reading List: Securitization, Forecasting, and Food

July 24, 2016, 4:26 pm

Predicting Demand on Lending Club Retail Platform from Loan Availability Data

July 8, 2016, 9:25 am

Loan Supply and Demand Information for Lending Club Retail Platform

July 5, 2016, 10:58 am

What is your Loan Selection Strategy?

June 21, 2016, 3:13 pm

Automated Buying of Notes on Lending Club Folio Secondary Market

June 12, 2016, 7:05 pm

How to automate Note Selling on Lending Club Secondary Market with PeerCube?

April 2, 2016, 9:55 am

Chart of the Day: Seasonal Trend in Lending Club Charge Off Rate

December 16, 2015, 2:50 pm

Chart of the Day: Lending Club Charge Off Rate with 2015 Payment Month by Credit Grade

December 7, 2015, 11:25 am

A Decision Tree Approach to determining allocation to P2P Lending in your Portfolio

October 12, 2015, 11:14 am

Lending Club FOLIOfn Secondary Market: Penny Note Strategy based on Lowest Ask Price

March 5, 2015, 10:16 am

Lending Club FOLIOfn Secondary Market: Distribution of Available Attributes for Listed Notes

February 23, 2015, 10:39 am

Lending Club Secondary Market: Profitability of Trade and Recovery Rate with Loan Status at Listing

February 16, 2015, 11:04 am

Best Practices for Automated Lending on Lending Club and Prosper Platforms through PeerCube

February 9, 2015, 10:40 am

Prosper Loans Historical Listings: Prosper Ratings, Charge Offs and Performance

February 2, 2015, 11:57 am

Lending Club Secondary Market: Loan Vintage and Loan Status at Listing

January 26, 2015, 2:11 pm

Prosper Loans Historical Listings: Default Rate, Originations, Rating and Days Past Due

January 19, 2015, 1:39 pm

Credit Scoring and Models: Decision Trees

October 2, 2014, 11:35 pm

Lending Club Portfolio Analysis: Updated for Trading Notes

September 26, 2014, 1:03 pm

Cognizant Report on Marketplace Lending: A Critical Review of the Study

August 18, 2014, 11:52 pm

A Conversation with PeerCube User: Getting Started, Experience, and Strategy

August 10, 2014, 9:47 pm

Guest Post: Statistics and Emotions in Selling Lending Club Notes

August 3, 2014, 10:24 pm

Introducing Self-service Past Performance Data Analysis Tool

July 28, 2014, 10:45 pm

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

July 14, 2014, 12:01 am

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

June 30, 2014, 12:59 am

Mad Rush at Lending Club Loan Release Time: Part III - Delinquency Rate and FICO Score Change

June 22, 2014, 10:09 pm

Mad Rush at Loan Release Time: Part II - Loan Performance with Time to Fund

June 15, 2014, 11:20 am

Mad Rush at Lending Club Loan Release Time: Part I

June 8, 2014, 10:11 pm

Lending Club Loan Listings, Issuance, and Impact on Yield from Non-performing Period

May 31, 2014, 2:49 pm

Early Repayment of Loans and Impact on Lenders' Yield at Lending Club

April 28, 2014, 12:00 am

Lending Club Loan Default Rate and Returns: Two Years is a long time in the life of a Loan

March 24, 2014, 9:43 am

My prosperous Prosper experience

March 4, 2014, 10:35 am

FICO Score Trends and Defaults for Lending Club Loans

February 17, 2014, 10:43 am

Lending Club Loan Availability in Second Half of 2013

January 5, 2014, 11:53 am

PeerCube Update

December 2, 2013, 9:36 pm

Lending Club Loans - Positive ROI for Two-third of All Loans

July 7, 2013, 6:54 pm

Impact of Changes in Lending Club Credit Criteria on Credit Grade - Six Months After

June 30, 2013, 11:11 pm

Is Lending Club still self-funding loans?

June 23, 2013, 10:49 pm

Lending Club Loans - What difference a year of maturity makes?

June 16, 2013, 6:32 pm

Lending Club Loans and Credit Cards Default Rate

June 9, 2013, 3:31 pm