[balto21]

For Lending Club Filters, what is the difference between Credit Card and Debt Consolidation???

Looking at NSR historical data, there are major differences in returns depending on your filter criteria but I don't understand from an individual borrower perspective...How does LC define a Credit card loan, which I assume is used to pay off credit card debt and debt consolidation?

Thank you

[Fred93]

from: balto21 on March 10, 2016, 03:03:24 PM

[TravelingPennies]

So, in my filter, a check of the debt consolidation box would be a negative of almost 2% when compared to credit card.

Also, more people choose Debt Consolidation.

@Fred93 - I have seen your other answers here and I know that you know the game but a 2% hit seems more substantial to me than your explanation below.

[TravelingPennies]

from: balto21 on March 10, 2016, 06:45:14 PM

[RT45]

@Fred93 I've seen comparable data on credit card vs. debt consolidation which seems to hold true.

Generally, the logic is that credit card consolidation is a more specific action, where the borrower has a known thing they are paying off which has an immediate cost savings to their personal balance sheet.

Debt consolidation is more ambiguous, and can lead to excess borrowing and therefore higher chance of default. LC also upsells people to borrow more at these stages (e.g. take out an additional $5k for a slightly higher rate).

Most financial institutions who conduct credit card refinancing will require the borrower to pay off credit cards by only releasing funds to the credit card companies.

[TravelingPennies]

Fred, thank you very much for the advise on how I should look at my filters...that is a great idea. >1000 and nothing that was originated within the last 5 months.

I have seen this large discrepancy in other filters where there was over 1000 loans for credit card and debt consolidation so RT45 thank you for weighing in and giving your thoughts on the subject. Much appreciated.

[Fred]

Here is what LC says in  https://www.lendingclub.com/info/statistics.action

Quote

[TravelingPennies]

LC saying that we should rely on loan grades takes away from the "real data" to show us results.

Either way, i see it a lot that the CC filter shows a much better return than a Debt Consolidation Filter in certain scenarios. I think that you and RT45 are correct in that it is in the mindset of the borrower and in these particular overall filters, the mindset of the borrower who chooses Credit Card and not Debt Consolidation will perform better over time.

I wonder what psychological studies will come out of this historical data one day.

[fliphusker]

On my back testing filtering, loan consolidation beats CC by .2% going back to 2011.  Not saying that anyone else filters will show the same, just saying mine does.  With my filter i use at LC to look through notes, I have both listed, and take both as long as they meet the rest of my criteria.  Guess my filter is probably too stringent, so have to stop someplace. 

[rawraw]

I don't spend much time in the data like I used to, but I always though CC refi outperformed if you made sure the revolving loan balance was within 20% of the loan amount. 

[dompazz]

from: rawraw on March 13, 2016, 12:45:06 PM

[RaymondG]

I am updating my filters after having not touched it for 2 years. In the three filters I backtested in NSR platform on loans issued from 3/2014 to 3/2015, comparing ROI of CC to ROI of Debt Cons, it's +0.7% for Grade C, 0.03% for Grade D, -1.19% for Grade E.

[PhilGD]

from: RaymondG on March 14, 2016, 01:39:40 AM

[TravelingPennies]

from: PhilGD on March 14, 2016, 08:19:22 AM