Steadfast FinancesP2P Lending Strategy: Older Borrowers Mean Safer Loans?

P2P Lending Strategy: Older Borrowers Mean Safer Loans?

Filed in Economy , Infographics & Chartology , Investing 101 , Peer to Peer Lending 6 comments

One static component of my constantly evolving Lending Club investment strategy is identifying borrowers who have a fairly long history of employment. In other words, that means:

  1. the older the better (but not at or beyond retirement age).
  2. 10 years plus with a single employer.
  3. decades of experience often imply management material.

As the above graphic shows, there seems to be something to my original hypothesis:

The Labor Department’s household survey in December found that 28.2 million people over 55 years of age had jobs, an increase of 7.6 percent from three years earlier, when the recession was beginning.

By contrast, there were fewer jobs held by people in all age groups under 55, as can be seen in the accompanying charts. Over all, the number of people working was down by 4.9 percent.

As a P2P lending investor, this lends additional evidence that the older a borrower might be (within reason of course), the more likely they’re going to hang on to their job during a downturn in the economy. And why not? If you’ve worked 20-30 years in a chosen field, chances are you’re more experienced, more seasoned to the tasks at hand, etc., and senior management (of whom the 55+ is largely composed), the more likely you’ll be able to retain one or more sources of income.

People who have income generally pay their bills, and thus, making you a prime P2P lending loan applicant in the eyes of my loan filters where I’m earning 15.6% NAR at Lending Club.

Source
Floyd Norris
New York Times
Older Workers Are Keeping a Tighter Grip on Jobs

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Posted by CJ   @   4 February 2011 6 comments
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6 Comments

Comments
Feb 4, 2011
1:51 pm
#1 J.M. :

Hmm, perhaps a statistical analysis of past lending club performance is due? To see the correlation between stated job length and default rates.

Feb 4, 2011
4:31 pm

Very interesting Matt. This is somewhat surprising to me, I would have thought the 25-44 year old set would have the edge. I might have to do what J.M. suggests and dig a bit deeper into the data at LC and Prosper.

Feb 4, 2011
4:33 pm
#3 J.M. :

:-( unfortunately, it would seem that lending club doesn’t publish the employment information in the download data. Just checked.

Feb 4, 2011
4:47 pm

This is a bummer….and a bit strange. It is the download for active notes, but it doesn’t make it into main database. Prosper provides it in their performance section, so there might be some interesting data there.

Feb 4, 2011
9:24 pm
#5 Dan B. :

Given how LC started I’d imagine that the borrower demographics would be heavily skewed towards the 20′s to 40′s, would it not?

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