Analyzing short-term loan company performance
This is a test assignment I’ve done a while ago. The company provides short-term consumer loan products through a mobile app. I was asked to analyze the data and show performance of the company in terms of volumes, delinquency, and profitability.
Loans dynamics and the most frequent lean term
The company made its first loan at the end of October 2017 and since then has been constantly increasing its numbers
Note, that there is only a half of June 2018 data (last data point is 2018-06-15), so seemingly the trend will keep climbing.
The most popular loan term is 30 days, following by 20, 15, and 10 days, respectively
Usually, it takes only one payment to repay the whole loan
Volumes and profitability
Now, let’s get to the nitty-gritty and see how well the company performs in terms of loan and payment volume
Two things to notice on this graph:
- Client selection is getting better: in November 2017, only around half of loan volume has been repaid, while in April 2018 payments volume has exceeded loan volume leaving a profit margin of 7% for Product 2.
- Product 1 is still unprofitable, even though the statement above.
Another way to look at profitability is to analyze Return On Equity (ROE) by cohort (swipe right to see Product2’s ROE)
It’s clear that the biggest jump happens during the first two months, and then ROE curve flattens.
“But what about May and June 2018?” — one may ask. As I mentioned before, the last data point in this dataset is 2018-06-15. Given that the most frequent loan term is 30 days, all those folks who borrowed money after 15th of May are yet to repay it.
As mentioned above, usually it takes only one payment to repay the whole loan. So it’s reasonable to report a loan as in delinquency if a borrower missed the first payment (long-term lenders, for instance, typically do not report a loan as in delinquency until the borrower has missed two consecutive payments).
To get a grasp of how many loans are yet to be repaid and how many are already delinquent (or default), take a look at the graph below
Here, unknown loans are those with the expected close date later than 2018-06-15, meaning we don’t know yet whether it will be repaid on time or delinquent.
Finally, let’s take a look at delinquency rate itself
As expected, premium Product 2 beats Product 1, although both have decent downwards trend.