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Lending Club releases compiled daily loan data to disclose risk metrics to potential investors. Here, we provide a few summary statistics, based on Markov chain models, that describe loan state transitions. We are interested in understanding, for example, how often a loan transitions from a late payment to a default.

Marginal Distribution

This table shows the marginal distribution of loan states for all loans, past and present.

Loan Status Distribution as of August 25, 2014 02:18
Current Grace Late VeryLate Paid Default
76.33% 0.67% 0.25% 1.13% 17.63% 3.99%

Conditional Transition Distributions

This table shows the transition probability matrix, that is the estimated probability of transitioning from a row state to a column state on any given day.

Conditional Transition Probabilities as of August 25 2014
from \ to Current Grace Late VeryLate Paid Default
Current 99.98% 0.01% - - - -
Grace 0.30% 99.38% 0.31% - - -
Late 0.15% - 99.37% 0.48% - -
VeryLate 0.02% - - 99.94% - 0.04%
Paid - - - - 100.00% -
Default - - - - - 100.00%

Note The 'Default' classification does not necessarily imply that such loans are worthless, only that they failed to pay off the entire obligation.

Limiting Distribution

Limiting distributions, or long run probabilities, combine the marginal probabilities with the transition probabilities to estimate an over-all, final distribution.

According to the Markov chain model, the interpretation is that, were the process to run indefinitely, the percentages reported above would reflect the relative number of loans in each of 'Paid' or 'Default' categories.

Limiting Probabilities as of August 25, 2014 02:18
Current Grace Late VeryLate Paid Default
- - - - 57.55% 42.45%

Note The 'Default' classification does not necessarily imply that such loans are worthless, only that they failed to pay off the entire obligation.

Disclaimer

The opinions and analyses presented here are entirely those of Inferentialist, LLC. They are intended to be an independent study of the data, and Lending Club has neither approved nor refuted this work.