Fred,
Good point. I should clarify that my chart is based on a straight count of "troubled loans", and not intended to calculate a rate of return. It's intended to reflect the likelihood that a loan could have problems before being fully paid. Of course, some of these "troubled" loans may have made 2 payments then defaulted, other could have made 35 payments, then defaulted, and some late and grace period notes may bounce back, and those factors would, of course, affect your return on investment. I was looking for a quick way to determine a relationship between monthly payments, monthly income, and the likelihood that the borrower was overextending themselves. I always thought that the ratio of payment to monthly income was an important factor, but LC doesn't have that filter, and I really had no idea where the "breaking point" was. Like some others, I arbitrarily picked 10% as my cut off, but since it's one of my main criteria, I thought it would be a good idea to test my theory.
When I did my count of "troubled loans", I included any loans not listed as Current or Fully Paid, so the count in the table includes any "Late, Grace Period, Default, and Charged Off" loans. As "mitgib" pointed out, my percentages are higher than those stated by LC, but I'd assume that is because LC only counts Charge Offs in their stats. If I had only counted Charge Offs, my count of would have been much lower, and therefore the ratio of troubled loans to the total would have been lower.
Author