Recently, we have released several posts that explore the origination of loans by unique data like home ownership, education, employment duration and more. This month, we’re going to do the same and compare how this has changed in comparison to the previous months.
Average income, loan amount and age
Due to human error, the data published for average net income in the February and March posts were incorrect, however this has been updated in the graph below. In April, the average net income decreased across the board, in Estonia this was -20% (-€295), in Spain -8% (-€133) and Finland -9% (-€262). The total number of loans increased in April (1,709) compared to the previous month (1,610) but were still lower than January (1,919).
In line with the reduction in the average net income, the average loan amount also decreased with the largest difference seen in Estonia at -10% (-€191). In Spain and Finland, the average loan amount decreased by 2% and 0.5% respectively.
Whilst the figures are relatively static in Estonia, the largest change seen in April was an increase in the average age of Spanish borrowers and a reduction in Finland. Overall, we commonly see the figures fall within the early to late 40’s range.
The average loan duration in April was lower in Estonia and Spain but remained static in Finland. For a more representative indicator, take a look below at the most common durations.
Loan and employment duration
Traditionally, Bondora has not focused on issuing short term loans and this is still clearly visible from the most recent data. Only 12 loans in total were issued under a duration of 12 months and were originated in Estonia other than 1 in Spain. The majority of loans issued had a duration of 36 months or above and only a total of 88 loans (5% of the total share) were issued with a smaller duration than this. More specifically, the most common loan duration across all countries was 36 months, followed by 60 months and 48 months. Offering the option to take a loan with a duration of up to 60 months allows borrowers to have affordable monthly payments that they can budget for, along with their other commitments.
Employment duration remains the same as previous months, with ‘More than 5 years’ being the most common followed by ‘Up to 5 years’ and ‘Up to 1 year’. This suggests that those who are confident in the stability of their employment (and ultimately their monthly income) are most likely to apply for a loan.
Education and home ownership
Similarly to previous months, the most common type of education declared by borrowers is of a High School standard, followed by University, Vocational School and Junior High School. Per country, the figures show a different story; In Estonia the most common is still High School, Vocational School in Finland and University in Spain. Whilst education curriculums and institutions also vary by country and district, it provides an interesting observation when compared with other data points.
The most common home ownership status in Estonia and Finland is ‘Owner’, in comparison the most common in Spain is ‘Living with parents’. In previous months, the status has been the same in Estonia and Finland, however it seems to fluctuate in Spain since the distribution is much more evenly spread other than ‘Council House’ and ‘Other’. Home ownership status can give us an insight in to the cultural differences between different geographies and how this can influence the wider economy. For example, in Finland only 6 borrowers were registered as ‘Living with parents’. In Estonia, just under half of all borrowers are owners of their home.
The data below shows how many customer’s income and expenses have been verified. Regardless of whether the borrower’s income has been verified, the background checks with population and credit referencing agencies are still conducted. Overall, the total number of customers classed as verified are higher than those classed as unverified.
Which data point is the most important?
The individual risk of issuing a loan to a borrower is calculated using all of the parameters above and many more. The self-reported data which is displayed to investors is typically not very predictive and has relatively little influence on the Bondora Rating of a particular loan. Therefore, this information should not be viewed as the only data used in determining the expected default rate of a loan.
Overall, this post can give you a great idea of the basic profile of our borrowers and how this changes with the origination of loans in the coming months. Leave us a comment below and let us know which data points you think are the most influential in credit scoring.