What is the most common reason Connecticut residents borrow money from their peers? If one rare chunk of data is any indication, it’s for consolidation of their other debts.
According to recently released data, Connecticut residents took out, per capita, the second-highest number loans in the nation through LendingClub, a pioneer company in the “peer-to-peer” lending industry.
Between 2007 and 2015, Connecticut residents took out about 38 loans per 10,000 people. More than 10,000 of the loans were for the purposes of debt consolidation or paying off credit card debt. In contrast, during the same period, only 70 loans were for vacations and 50 to help fund weddings.
Connecticut’s rate of borrowing was a weak second to Nevada, where 44 loans per 10,000 people were issued.
LendingClub began in 2007 matching people looking to invest with people who needed to borrow money, with interest rates depending on risk factors such as the borrower’s credit history. The company was first heralded as a pioneer in the peer-to-peer field and as disruptor to the financial industry. The company’s achievements and reputation were tarnished earlier this month, however, when founding chief executive Renaud Laplanche announced he was resigning after it was disclosed he had violated the company’s business practices.
Data on the issued loans from LendingClub was recently made available on Kaggle.com, a site that hosts competitions for predictive modeling and analytics. A less-current version of the data is also available on Lending Club’s website. We are unsure if the data is complete. Only eight loans were labeled as defaulting.
This type of aggregate data for loans is rare since banks do not tend to make such information available, so Trend CT wanted to look at what information might be able to gleaned, however narrow, from the data.
The number of people in Connecticut using LendingClub loans has been increasing since 2007— with 13,500 loans issued as of 2015. The highest point was last year with more than 6,000 loans issued.
In an eight-year period, Connecticut residents used LendingClub to get 13,500 loans totaling about $200 million.
The average loan was about $15,000.
Interest rates ranged from 5.32 percent to 28.49 percent, depending on the grade assigned to the loan from A to G.
About 29 percent of the loans issued via Lending Club were given a B grade. About 18 percent were ranked A.
|Purpose||Total||Percent||Loan total||Average loan|
|Small business loan||132||0.98%||$1,978,400||$14,963.75|
Debt consolidation and assistance paying off credit cards, at 59 and 23 percent respectively, made up the vast majority of the loans.
Many customers wrote about having credit card debt spread between several cards at high interest rates, hoping to pay off the whole thing quicker if lumped together and at a lower rate.
“Just when it seems you’re getting ahead, life happens and it’s been a vicious cycle that I plan to break with this loan!” wrote one person in the loan application description.
Seven loans were requested to help pay for school tuition, while nearly 900 loans were filed for home improvements such as kitchen upgrades or roof repairs. More than $11 million in loans were issued between 2007 and 2015 to assist with home improvements— the most amount after credit card and debt consolidation.
More than 70 residents of Connecticut were issued loans to fund their vacation trips to Europe or Florida. Nearly 50 were issued to pay for weddings — the borrower’s own or a daughter’s — according to the description fields. The average loan was for $11,000.