Personal Unsecured

-Personal Unsecured loans is the biggest asset class being Crowdfunded online with LendingClub being the biggest originator mediating $1bn of personal loans per month.

-Default of a borrower on a Personal Unsecured loan leads to persistent collection attempts and potential personal bankruptcy, wherein personal assets can be seized and personal bank accounts frozen.

-Note the diversification over 1344 loan slices (roughly corresponding to the same amount of borrowers) for an investment of €100k.

-Notice the very high interest rate 35% on average, which after losses and fees nets over 15% return.

 

                                                             Investments List

– Credit card debt is most similar asset to crowdfunded personal unsecured loans, and most evidence suggests the credit quality of crowdfunded personal unsecured loans is higher while offering a higher rate of return.

– Consistent with this data I enter a 4% positive return in my subjective stress test for my Personal Unsecured assets, and I feel this is a conservative assumption to make since these assets are much higher yielding (both gross and net) than the below aggregate US credit card debt, are more diversified over several geographically remote countries, and since in my opinion the credit underwriting process and quality is better than the Credit Card companies’ due to the latter’s old fashioned processes, people, and entrenched monopolistic attitudes.

                                              US Aggregate Credit Card Debt Interest Rates