Monthly Income

Another very important indicator of a debtor’s ability to pay his dues is his income. This may sound obvious, but the entire purpose of a credit score is to determine the ability of a person to pay debt (their creditworthiness), and still the credit score (FICO etc.) doesn’t consider the income of an individual or household. This is simply because the income is not an information that you can find in a credit report.

For you as a creditor, having the chance to analyze the income of the borrower is a very powerful feature. But you have to be careful, as most of the listings in LendingClub are not verified, so the stated monthly salary may be fictional.

Another way of looking at this attribute is what percentage of the income will go to pay the loan installment. Here is a reference matrix, showing how much the installments is based on the term (table 1 is 36 months and table 2 is 60 months) and the loan amount (rows) and interest rate (columns).

36 10% 15% 20% 25%
5000 $161 $173 $186 $199
10000 $323 $347 $372 $398
15000 $484 $520 $557 $596
20000 $645 $693 $743 $795
25000 $807 $867 $929 $994
30000 $968 $1,040 $1,115 $1,193
35000 $1,129 $1,213 $1,301 $1,392
60 10% 15% 20% 25%
5000 $106 $119 $132 $147
10000 $212 $238 $265 $294
15000 $319 $357 $397 $440
20000 $425 $476 $530 $587
25000 $531 $595 $662 $734
30000 $637 $714 $795 $881
35000 $744 $833 $927 $1,027

If the burden of the loan on the borrower’s finances is over 30% of their income, you should start to get worried whether or not they will be able to pay for their daily expenses while at the same time keep up with the debt payments. If that task becomes impossible, it’s mostly certain that the daily expenses will prevail.

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