Collection Log Alert

The collection log alert is a service that monitors your notes (you must have your notes.csv file uploaded into the My Portfolio page for it to work) and when a new collection log entry is posted to any one of them, an e-mail message is sent to you to let you know of the activity. You can opt in or out of this service in the Preferences screen.

The e-mail frequency does not apply to this type of alert. Alerts are sent as soon as Interest Radar detects a change in the log.

The detection may not be on the same day a log entry is posted to the loan. This is the schedule for checking new messages:

Loan Status	Verification Frequency
In Funding	Not monitored
In Review	Not monitored
Issued	Not monitored
Current	Daily from the day a payment is expected until it is received
In Grade Period	Daily
Late (16-30 days)	Daily
Late (31-120 days)	Daily
Performing Payment Plan	Daily from the day a payment is expected until it is received
Default	Every 30 days
Charged Off	Every 30 days
Fully Paid	Not monitored

Buy Note

How to use Interest Radar’s FOLIOfn® interface to create an order to buy notes in the trading platform:

1. Log in to Interest Radar and open the Analysis screen
2. Check the FolioFn Listings box
3. Select the filters to apply to the notes from any of the filter groups
4. Run your selection
5. In the results table, you’ll notice the last column is titled Buy and has two links in the header: login folio and view order
6. Click the login folio link to open a new window with Lending Club’s trading platform search page. If you’re not logged in to Lending Club yet you will be asked to do so
7. To be able to add any note to your order, select all option (Never Late, Now Current, Now Late 16-30 and Now Late 31-120) and execute the search
8. Go back to the Analysis screen and do your shopping. Make sure to view the loan details both in Interest Radar and FOLIOfn® to gather all information about the payment status of the loan
9. When you’re certain you want to buy a note, click the Buy link from the Buy column. The previous window that was opened for Lending Club will show the message {“selectNoteResult”:0}. This is normal
10. Sometimes notes get sold in the platform but are still listed in Interest Radar until the next data refresh. To confirm that the note was still active and added to your order, click the view order link in the header of the Buy column
11. When you click the Buy link, Interest Radar records your selection and will show two different links for that note: Cancel and Clear
12. If you decided not to buy that note, you can click Cancel to remove the note from your order
13. If you closed your Lending Club session or it timed out and you need to add the note to the order again, you can click Clear and the Buy link will appear again
14. You also have the option to Discard the note, so that you know you already reviewed that note information and decided not to buy it
15. Keep shopping for notes until satisfied (back to step 7)
16. Click view order and close your order

It is very important to review all information in Lending Club to make sure the attributes showing in Interest Radar are correct. Due to timing issues (payments failing, status changes etc.), the information in the loan page may be incorrect. Interest Radar offers no investment advice and does not guarantee any of the information provided and the service is offered as a convenience to the users only. Purchasing a note is a transaction involving uncertainty and risk. From FOLIOfn®‘s page:

Notes are highly risky and only limited information is available about them. They are suitable only for investors whose investment objective is speculation. You could lose most or all of the money you invest in them. FOLIO Investing has no role in the original issuance of the notes and is not responsible for and does not approve, endorse, review, recommend or guarantee the notes or the accuracy, reliability, or completeness of any data or information about the notes.

Trading Platform Screener

Today we announce a big step for traders in the secondary market: the FOLIOfn® Screener.

Using the same interface you’re used to in the Analysis page, you can now search for notes offered in the trading platform.

To enable the feature and see the additional filters available for this type of search, select the option FolioFn Listings in the Show panel. The additional filters are:

• Discount/Markup %: How discounted or marked up is the note, calculated from the Principal plus Accrual and the ask price
• YTM: Yield To Maturity percent, i.e., how much the note will return if paid off, divided by asking price. Negative values mean the note is out-of-money, and paying the ask price will yield a loss even if the borrower pays as agreed until the loan is paid off
• FICO Trend: Whether the borrower’s score improved, stayed the same, or decreased
• Age: Note age, in months
• Last Payment: Days since last payment. Note that “processing” may also mean the first payment is not due yet (for Issued loans)
• Current Status: Loan status as reported by FolioFn. It may differ from the status in Interest Radar and Lending Club due to timing issues

The results will be tabulated and will contain the following columns:

• LoanID: The Loan ID with a link to Interest Radar’s loan summary
• NoteID: The Note ID with a link to FolioFn’s note summary
• Age: Loan age in months
• Remaining Payments: number of payments left to pay off the loan
• Grade: Loan’s Credit Grade
• Interest: Loan’s Interest Rate
• Length: Loan length (36 or 60 months)
• Status: Loan status as reported by FolioFn. It may differ from the status in Interest Radar and Lending Club due to timing issues
• Last Payment: Days since last payment. A value of “N/A” may mean the first payment wasn’t processed yet, or a payment is being processed now
• Principal: Remaining principal balance
• Accrued: Interest accrued since last payment
• Score: The IR01 and IR04 scores. For IR04, U means Unknown, H is High Risk, M is Medium Risk and L is Low Risk
• FICO Trend: How the borrower’s FICO is progressing. An arrow down means it’s decreasing, an arrow up means it is improving, and a dash means it is stable
• Ask Price: Amount you have to pay to buy the note
• Discount %: How discounted the note is. A negative value means the note is marked up, i.e., being sold for more than the Remaining Principal plus the Interest Accrued
• YTM %: Yield To Maturity percent if the note pays off

When you search, you can see before the results the date and time the list was updated from the trading platform. During the beta phase, the frequency of update is once a day.

The following features are not available yet but are being developed:

• Sorting the results
• Intra-day updates
• Save strategies with FolioFn filters set (if you save a strategy, the FolioFn filters won’t save)

If you have suggestions or bug reports, please send an e-mail to the address shown in Interest Radar’s home page in the Beta section.

Cheers!

In Funding Loans Now

This is how the In Funding Loans Now in the Strategy Shop page works:

• Every time Interest Radar refreshes the list of in funding loans from LendingClub, the strategies are run to find new matches
• Initially, the number of matches are shown in this column
• As you Invest or Discard the loans (see Show Current Listings), this number drops
• When you’ve decided on all the loans in that strategy, weather invested or discarded or found in your notes.csv file, the column will show zero
• Next time there is a new batch of fresh loans to invest from LendingClub, you’ll see the loans showing up here again

Show: Current Listings

After you’ve decided how you want your loans filtered, it’s time to go ahead and put your money to work. In the Analysis screen, you will do that by checking the Current Listings display option.

The list of loans will show you the following information (and you can click the header to sort the list):

• LoanID: The account number for the loan in LendingClub. You can click this number to see a popup with more detailed information on the loan
• Age: How long since loan was listed (or the word “new” if listed within the last 48 hours)
• Grade: LendingClub’s credit grade
• Interest Rate: Interest rate that will be charged
• Loan Purpose: The purpose input by the applicant
• State: The state of residence of the borrower
• Loan Length: Number of months in the loan term
• Title: The title of the listing, input by the borrower
• Total Amount: Total amount requested by the borrower
• % Funded: How much is already funded by investors, at the time the information was obtained from LendingClub. The list is updated every hour from LendingClub. Sometimes a listing may show as active here, but it’s already 100% funded in LendingClub, due to timing. In that case you won’t be able to invest in that note anymore, and LendingClub will show the message “0 notes added to your portfolio” when you click on the quick invest link (see below)
• Funding Hype: Interest Radar’s proprietary measure of the speed in which this listing is being funded. The faster the funding, more green arrows up you’ll see. If the funding is going too slow and the loan has a chance of not being 100% funded before expiring, then you’ll see red arrows pointing down. Blank mean average funding rate. This field may indicate to you that other lenders may be considering this a low-risk loan
• Average Invested: How much in average each investor funded the loan. Sometimes the funding hype may have a distortion: an investor may have put so much money in the loan that it appears like a tens or hundreds of investors are confident on the listing. You can detect this behavior looking at this column. Considering that most investors will put $25, and some wealth or corporate investors may have to put 10 to 50 times that to meet their investment goals, it’s safe to assume an average of up to $1000 considering the mix. If you see an average of more than that, it’s not really a hype of several lenders, but one lender that got really excited about the listing — and that’s not a very rational trend to follow
• Amount Requested Ratio: The ratio between the amount being requested and the revolving balance as per the credit report. The normal behavior for debt consolidation is to see a number around 1.0 in this field, as we assume the borrower needs the loan to pay off all the credit cards. A percentage too low (less than 0.2) or too high (over 1.5) is an indication that something unusual is going on with the loan (if it’s for debt consolidation purposes)
• Estimated Loss Rate (Words): Interest Radar will help you analyze the description entered by the borrower, rating the words or sentences that showed in the past that are related to a high loss rate. You can click on the number to see the analysis behind it. More on this subject later
• Score: The IR01 score assigned to that loan
• Estimated ROI: The interest rate minus the estimated loss rate of your filter selection, minus the average loss rate for that score range. The table is initially sorted by this column
• My Investment: This will help you keep track of your decisions in regard to this note:
  • Invest: If you have not taken any action yet, this will be a link to LendingClub’s investment button, so you can add the note to your shopping basket at LendingClub with just a click. You must be logged in to LendingClub before clicking. You can also control how much you want the one-click investment to be; the default is $25 but you can change that in the Quick invest amount below the Current Listings option
  • Added to Order: This means you have already clicked to add the loan to your order in LendingClub. Until you upload your notes.csv file in the My Portfolio page, the confirmation of the investment won’t appear in the column
  • Amount: When you see an amount, say $25, it means your notes.csv file already has this loan already invested
  • Discarded: If you decide this is not a good loan to invest in and click Discard, the link to invest will go away and the word Discarded will show up in this column. You may clear your discarded selection clicking “clear” in the column header

Only the first top 50 loans in the criteria are displayed. You must narrow your search or change the order of the list if you want to see more loans.

Show: Cash Flow

Another powerful tool in the Analysis page is the Cash Flow generator. Just like the Breakdown option, if you choose Cash Flow and run the analysis, Interest Radar will output a simulated cash flow based on the performance of the loans filtered by your selection.

As a cash flow is easier to understand when all the notes have the same term, you can only generate the list if you pick either 36 or 60 months.

The generated cash flow is based on a hypothetical investment of $1000. The output is a table with the actual numbers, a summary table with the results of the analysis, and a chart.

The columns in the table are:

1. Month: ranging from 1 to the 36 or 60, depending on the filter you provided
2. Beginning balance: the principal balance at the beginning of the month
3. Loss %: the percentage of the principal that is lost due to defaults or late payments, i.e., how much principal (of the previous column) is never going to pay again
4. Accumulated Loss: dollar amount of the principal loss, accumulated until this month
5. Interest: dollar amount received as interest payment
6. Amortization: dollar amount received as principal payment
7. Ending Balance: the principal balance at the end of the month, calculated as: G = B + B x C + F. That amount will be the beginning balance for the next month

In the results box you have the following indicators:

• IRR: The annualized IRR or the investment
• Principal loss: Total principal loss as a percentage of the initial investment
• Total received: Total payments in the course of the 3 or 5 years
• Yield: Total received divided by the initial investment amount

Finally, the chart will plot a line representing the accumulated loss each month. A dotted line means the loss cannot be determined with accuracy for that period. In the table you’ll see such months with a question mark in the Loss % column. You can decide whether to consider zero loss for the undetermined period, or use the average loss for the determined period, by checking the Assume constant average loss checkbox under the Cash Flow option.

Another option for the cash flow generation is Assume total loss for late loans. When this is checked, every late status is considered 100% loss instead of the predicted loss rate for that status (see the table used for predicting loss in the Loss Rate explanation). If you’re a very conservative investor with a high degree of aversion to defaults, you can use this option to preview a very pessimistic scenario.

Show: Filter Breakdown

The Filter Breakdown option in the Analysis screen is your best friend for understanding how an attribute behaves in a group of loans. Instead of running the filters several times and making notes to understand the effects that an attribute has on the Loss Rate, you can set up your filters, then check the desired attributes you want to test (just like you checked the other filters), select the Filter Breakdown option, and run the analysis.

The trigger to generate a breakdown table for an attribute is simple: at least 2 options in the attribute’s filter must be checked.

If you have a filter with no option checked, you’ll see no breakdown table for that attribute. If you have only one option select, no breakdown either.

The following columns are displayed in each breakdown table:

• Attribute value: the first column is the filter option segmenting the loans
• Loan #: Number of loans in the group
• Loan %: Percentage of loans in the group, out of the universe of accounts being analysed
• Interest: Average interest rate of the loans in the group
• Loss %: The loss rate of the loans in that group
• Loss #: Number of loans in the group that are currently in a late or defaulted status (i.e. that has a Loss Rate different than 0%)
• ROI: The Interest Rate minus the Loss Rate, i.e., the approximate average return you have over your investment, not considering the effects of the actual cash flow
• Quick Chart: A visual representation of the Loan % and Loss % columns. The black bars sizes are proportional to the number of loans, and the red bars are proportional to the average loss rate of the loans. The bars with different colors are not proportional to each other, they are only proportional to its own dimension

Sometimes the analysis require you to see the list of attributes in the natural order of the filters, for example, 0 delinquencies first, then 1 delinquency, then 2, and finally 3 or more. But sometimes you’ll want to sort the results by the loss rate, so you can quickly identify which options are reducing your ROI. You have that flexibility and much more:

• You can click on the column header to sort the tables by that field
• You can click again to change the order to descending
• You can also sort the columns using the Sort By dropdown box under Filter Breakdown
• If you click on the first column the order will be the natural sequence for the attribute values
• The bars in the Quick Chart will also change order to match the table

Finally, the Breakdown Current Status option will also output a breakdown table with the current status of the loans in the filter, so you can get some details regarding the calculated loss rate.

Quick Start Guide

Welcome to Interest Radar!

In this article I’ll try to give you some tips to get you acquainted to Interest Radar, and start using our tools to find the loans with the best chances of providing high yield returns.

First of all, Interest Radar is for people that already understand the basics of peer-to-peer lending. If you’re new to this world, here is some recommendations of where to start:

• Interest Radar focuses on loans provided by LendingClub. If you don’t have an account set up there yet, I suggest you read their Prospectus and decide whether this type of investment is for you
• Social Lending Network is a very complete site about P2P lending. They also maintain a forum for the community
• Interest Radar focuses on providing you with information for your investments. If you’re looking for data regarding the P2P lending industry and overall statistics, I recommend Nickel Steamroller charts or LendStats summaries
• Many sites also provider news related to P2P lending. You can start looking into P2P Lending News or the weekly digest provided by Social Lending Network

So, what is Interest Radar trying to accomplish?

At least once a month, if not almost daily, P2P lenders are faced with the tough decision of which loan listings to put money in. For conservative investors, expecting 5 to 8% in annualized returns, the decisions are easier: low-risk notes with grades A and B are safe bets with low exposition to defaults. But if you’re more aggressive, the challenges are more interesting. You have to pick the right high-interest loans, and you must expect a higher default rate, but find a balance where the losses due to default don’t decrease your returns too much. If you pick the wrong borrowers, your returns could be even less than the conservative A and B notes are yielding.

There is a lot of talk in the internet about credit worthiness and how to find the right loans to invest. Unfortunately, they’re mostly based in intuition and common sense. In Interest Radar we don’t rely in this type of advice to find the best loans. The background of the creators of this site is with the data analysis teams in the financial industry. The tools we provide are designed to:

1. Test an hypothesis through iteration
2. Find where the money is, i.e., where the loss is minimal
3. Find the current loans to put your money in
4. Effortlessly repeat step 3 every time you have cash to reinvest

And our principles are:

• Pragmatism and a practical approach. In the course of your investor life you’ll be picking hundreds, if not thousands of loans to invest. You have to spend your energy in what matters
• The numbers. Statistical analysis as opposed to “common sense”. Past behavior as an indication of future performance
• Integration. You must be able to track back your performance with the same instruments you picked your loans to begin with

If this sounds too abstract, let me walk you through a real world example of what all that means.

1. Let’s start with an anecdotal “common sense” belief and try our hypothesis. For this exercise, let’s try to prove that homeowners default less than those paying rent or a bank mortgage
2. We also want to be making at least 10% in returns, so we will rule out loans with grades A and B
3. With Interest Radar’s analysis tools, we will set up a filter: only notes C, D, E, F and G, and we will select all Home Ownership filters (Own, Mortgage, Rent)
4. (If you’re used to other tools in the internet that allow you to filter loans, you’re asking why can’t you go more granular and select, let’s say, C4 through G1. The answer is in our “pragmatism” principle: if you had all 35 credit grades to choose from, you’d be spending too much energy (picking, analyzing, filtering out, reading in the screen) and the reward for that wouldn’t be material)
5. You may additionally want to specify the loan term (36 or 60 months), based on your investment needs. For the purpose of this exercise, we’ll select only 36 months
6. We will select the Filter Breakdown option, so that we can see the distribution of loans and the summary of the two things we need to test our hypothesis: how many loans, and the average loss rate
7. When we run our analysis, Interest Radar will present us with the breakdown tables and some small charts for a quick visual representation of the distribution
8. By a quick look at the charts we can see an important trend: most of the loans in our analysis are C grade, then D and so on, and as the number of loans reduces, the loss rate increases. That’s something we expected, as we know C-grade notes should be better than G-grade notes
   
9. But the second chart, related to the filter we’re studying (home ownership), is where we get our main answer. For the universe of loans we’re analyzing, as the time of this post, loans for people that Own their homes default at a rate of 4.6%, while the loss rate for borrowers that rent or have a mortgage is 4.2% and 3.1% respectively

This is a good example of a situation where statistical analysis defeats intuitive knowledge. You must be asking yourself now, why people that don’t have to pay rent or a mortgage installment every month stop paying a loan more often than those who have such big burden in their financial lives? That’s the wrong question to ask, because that’s not what the numbers are saying. They are simply saying that when LendingClub report a borrower as “Owner” of their houses as opposed to “Rent” or “Mortgage” you can expect a higher risk of default. Why? Interest Radar can’t answer that. Maybe people lie when they enter that information, and a mortgage is easier to verify (it must be in their credit bureau report) than home ownership. Maybe relatives living as a favor report they own the house they live (as they’re not renting or paying mortgage, right?), and they’re not the best borrowers. Maybe there are people that couldn’t qualify for a mortgage and had to buy their places all cash, and they’re failing to pay back the loans. Maybe people living in a trailer default too much. The fact is that it’s beside the point for you as an investor of $25 for each loan. You have to focus your energy in what you can control, and right now, you’re going to start looking at those Rent and Mortgage loans with a little bit more respect.

I hope this example illustrated the key principles behind Interest Radar, and gets you started with the tools.

Are you interested so far? If so, I’m guessing you’ll enjoy the more advanced tools in Interest Radar, such as the Cash Flow generator, saving and retrieving Strategies, monitoring Strategy performance, the Loan Description word frequency analyzer, the alerts etc.

To read more about the features of the site, look for the context help icon  in the site. They are links to blog posts about the tools and lending tips. I’m looking forward to read your comments about the site and my suggestions!

My Portfolio – Portfolio Breakdown

The Portfolio Breakdown box will show your notes from your most recent uploaded notes.csv broken down by your LendingClub Portfolio tag, and by the Strategies you have saved in your profile.

After either the Portfolio name or the Strategy name, the columns in the tables are:

• Notes: The number of notes in the uploaded file
• Original Investment: Amount you funded
• Principal Remaining: Your fraction of the unpaid principal balance of all the loans
• Issued Principal: Your fraction of the unpaid principal balance of all loans issued at least one month before
• Payment To Date: Total amount received for the notes
• Avg Rate: Weighted average interest rate of all notes
• Loss Rate: Percent of principal considered lost, calculated based on the current status of the loans
• Monthly Payment: Expected monthly income of notes in issuing or current status
• Avg Term Remaining: Weighted average number of months for the maturity of the notes

Definition: Loss Rate

The Loss Rate is calculated in Interest Radar based on the current status of the loan and the expected default rate for that particular status. Performing loans have 0% Loss Rate for the purpose of this indicator, regardless of its grade.

When the Loss Rate is used in the context of a group of loans (that meet a certain criteria or that are part of a portfolio), the calculation is the weighted average Loss Rate for all loans in that group. For the specific case of the Loss Rate shown in the analysis page, the average is not weighted, as the recommendation is that you will not fund a loan as a proportion of its total principal, but, for the sake of diversification, a fixed amount (normally $25) for all loans.

The following expected default rates are used when calculating the Loss Rate:

• Fully Paid: 0%
• Current: 0%
• Performing Payment Plan: 35%
• In Grace Period: 16%
• Late (16-30 days): 23%
• Late (31-120 days): 47%
• Default: 100%
• Charged Off: 100%

The expected default rate is calculated on the remaining principal balance, not the entire loan amount. For example:

• The loan term is 36 months. Before the first payment ever, the debtor enters the grace period. The Loss Rate for that loan will be 100% principal x 16% expected default rate = 16%
• The loan term is 36 months. After paying 35 installments, the debtor enters the grace period. The Loss Rate for that loan will be 3.697% unpaid principal x 16% expected default rate = 0.59%