PEER TO PEER LOAN AND DEFAULT ANALYSIS

The emergence of peer-to-peer (P2P) online lending platforms drastically reduced the barriers to having access to funds. The major problem of peer-to-peer lending is predicting the ability of borrowers to pay back their loans without defaulting. This report examines financial factors influencing the possibility of default, the  borrower’s characteristics as a loan amount determinant, and also predicts future default rates.

iQvistas team conducted a data analysis process, from data collection, data cleaning, modelling and Dashboard design to enable Bondora team to track and monitor their debtors and also predict the possibilities of default.

The dashboard answer the following organisation questions

• What are the applicant’s demographic characteristics in each location?
• What is the monthly and quarterly trend of applied amounts and corresponding
  applicants?
• What is the approved amount’s annual growth rate?
• What is the trend and prediction of the default rate? Comparative analysis of default
  rates by location.
• What are the financial factors influencing the possibility of default?
• What are the specifics of each loan?
• What is the relationship between loan term and default?

VIEW REPORT

Key Findings

• There was a negative growth rate between 2019 and 2020 and a positive increase between 2013 and 2014.
• The majority of new applicants got their expected amount approved.
• The difference between the applied and approved amounts is about 6%.
• Applicants with Bondora ratings F, E, D, and C largely dominated the application.
• A significant portion of the total applied amount is spent on other purposes, such as home improvement and loan consolidation.
• The default rate of all the applicants across the whole region is 57.78%.
• The majority of defaulters are from Estonia and Finland.
• The organization may experience a constant default rate of 55.91% above average between 2022 and 2024.
• Unspecified loan purposes (“Other”) have the highest rate of default.
• The average loan interest rate across the region is 37%, and the average loan term is 47 months.
• Loan term and interest rate are two financial determinants that contribute to an increase in loan default.
• When interest rates rise by 5.42 percent on average, default rises by 1.41%.
• When loan terms and interest rates go down, it decreases the loan default, as well as when the Bondora rating is HR (high risk).
• The total number of applicants is 57,453, about 32,000 male, 19,000 female, 6,665 are neutral, and the average age is 40 years.

OUR RECOMMENDATIONS

• The company’s rate of approving loans for unspecified purposes should be reduced.
• The company needs to design and conduct more marketing campaigns in Spain.
• To reduce defaulters, the company needs to reduce its rate of approving new applicants’ requests or set a restriction on the maximum amount an applicant can request.
• The organization should focus more on applications that have low-term
• To reduce the default rate, the organization needs to review its interest rate and find a means to reduce it.
• Any application with a rating of HR should be considered so as to reduce the default rate.
• The organization must put measures in place so as to avoid a default rate increase in 2023 and 2024.