Dataset
For this project I explored publicly available data from LendingClub.com. Lending Club is a peer-to-peer lending company. Lending Club connects people who are looking for a loan(borrowers) and people who want to lend money for the right return on their capital(investors). That data used has been refined to show data from 2017-2010. You can download the data here. The dataset used consist of data points from loans made to 9,578 anonymized borrowers.
Analysis
What was the most popular reason borrowers requested a loan?
Looking at a quick overview of the dataset we can see the majority of borrowers stated their purpose for the loan was debt consolidate- which accounts for 41% of the borrowers.
41% borrowers requested a loan for the purpose of debt consolidation. 3,957 of the 9,578.
In the chart below we can see the distribution of the FICO scores of the individuals who requested a loan for debt consolidation vs. those who did not.
The average FICO score for Non-Debt consolidation borrowers is 12 points higher than Debt Consolidation borrowers.
Debt Consolidation Average FICO Score
703.8713671973718
Non Debt Consolidation Average FICO Score
715.7564490304217
What percentage of total borrowers paid their loan off in full?
Of the 9,578 borrowers:
16% of borrowers did not pay their loan off.
0 8045
1 1533
What is the distribution of FICO scores observed?
The FICO score distribution is positively skewed.
How did the borrowers breakdown as far as the generally accepted credit score ranges?
The credit score range distribution is positively skewed.
Did the borrowers credit score play a factor in the interest rates they received?
Interest rates and FICO scores exhibit a negative correlation.
What was the density distribution of interest rates with respect to the FICO/credit score tiers?
Borrowers with higher credit scores received lower interest rates.
What was the trend observed with the debt-to-income ratio with respect to the FICO/credit score tiers?
Borrowers with Very Good and Excellent credit scores tended to have lower debt-to-income ratios.
What was the relationship between monthly installments and interest rates?
There was a high density area observed around 12% interest and $200 per month monthly installment threshold.
What was the breakdown for monthly installments with respect to the borrowers stated purpose of the loan?
Every loan purpose segment of the borrowers monthly installment distribution is positively skewed.
Did the credit card loan purpose segment, on average, have the highest credit utilization percentage?
No, borrowers who requested a loan for credit card reasons had the 2nd highest credit utilization percentage on average.
Did the credit card loan purpose segment, on average, have the highest revolving balance?
No, borrowers from the small business loan purpose segment had the highest revolving balance on average.
What was the observed distribution of the income of the borrowers?
The income of the borrowers is a normal distribution.
What was the observed distribution of the credit line history length of the borrowers?
The credit line history length distribution is positively skewed.
What what breakdown of borrowers who repaid their loan in full?
What was the relationship between interest rate and credit line history with respect to the loan repayment?
What was the relationship between FICO score and debt-to-income ratio with respect to the loan repayment?
What was the relationship between the amount of debt inquiries in the last 6 months and annual income with respect to the loan repayment?
What was the relationship between monthly installment and annual income with respect to the loan repayment?
What was the risk profile observed? Did investors get rewarded for funding/investing in riskier loans?
Yes, investors received higher returns on investment for investing in riskier loans, however, the average default rate outpaced the average interest rate in the poor to fair credit score ranges- which involves accepting a disproportionately higher risk of default.
Comentarios