Background

－ Lending Club is a NYSE-listed peer-to-peer lending platform. Its business is entirely in the US and offers personal loans, auto-financing loans, business loans, medical loans and other loans. Loan limits vary according to the type of loan one is applying. As a P2P lending company, it is crucial for Lending Club to understand the risk profiles of its outstanding loans. This report intends to provide an overview to the senior management of Lending Club so they could have a better understanding of their risk profiling.

The overall loan quality of lending club is considered good, especially in the 36 months repayment schedule category. The risk associated with low quality of loan is mitigated by having a higher interest rate. There is also a steady interest income flow.

A majority of distributed loans are in Grade A and Grade B. A negative correlation between loan amount and loan grade can be observed. Most of the loans have an annualised interest rate lower than 16%, except those with lower loan grade. The interest income flow is steady, although the majority of them will end in 36 months.

Most people applied loans from Lending Club for debt consolidation and credit card refinancing purpose, and this phenomenon is consistent across states.

We note that providing loans to customers for debt consolidation and credit card refinancing have strongest market demands and this is consistent across states. These loans are considered as Lending Club’s core businesses. In states where no significant differences between LC’s core businesses and the rest of loans are noted, LC should put more resources in promoting as this implies its core competence has not been fully utilized.

Apart from that, LC should also consider diversifying its loan types, as debt consolidation and credit card refinancing are considered with higher credit risk.

Most loans are disbursed to Southern states with New York and New Jersey as an exception. However, the average loan size in Southern states are not the highest

The beklow graphs provide an overview to the geographical distribution and quality of loan disbursement. Total disbursed loan amount reduces when going north and inland, but the loan size in southern states are not as high as those in the north, such as Wyoming and Nevada.

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