Posted by Lending Club :: June 8, 2007 @ 8:48 amAll income levels carry credit card debt. There were over 5 billion credit card mail solicitations sent to consumers during 2004. What does 5 billion look like for the consumer?
• 47 pieces of mail per household
• 56,000 trees wasted!
• 95,000 days (if each person takes 10 seconds to read each one)
• $1 billion in cost (if each piece costs about 20 cents)
All of that mail must be sent for a reason. We would assume there is some justification for all of that effort (and cost). One possible result of all of that junk mail could be that a significant portion of all income groups now carry credit card debt.
The majority of those in the middle class carry credit card debt, but we were surprised that more than 1/3 of the top income earners in America also carry credit card debt. Source: GAO Study
Our take on why there is so much credit card debt at all income levels is that we are all so busy with life’s challenges that we don’t find the time to do comparison shopping.
It is easier to believe the promotional offer for 0% interest than it is to research and set up a responsible loan. That is where Lending Club comes in, and we promise not to send you any promotional mailings.
Better rates. Together.
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3 Comments
I always send the back the business reply envelop empty or stuffed
with other trash. It cost them $0.63 for a first class letter
envelope. Others should fight back this way as well to raise the
cost of sending the annoying letters.
How do you folks at lendingclub set the interest rates on
lendingclub loans? I see a table of rates, but I have no idea what
theory you used to choose them. Lenders need to know this.
Fred, Good point; we will be making additional information
available in the next few weeks regarding specifically how rates
are being calculated. At a high level, we set a "base rate", which
is currently 7.12%. Then for each incremental loan grade (A1, A2,
A3..), we add the expected default percentage (based on data
provided to us by the credit bureaus and available at
https://secure.lendingclub.com/info/historical-defaults.action) and
a premium for additional risk / volatility. The whole formula will
be made public and posted on https://secure.lendingclub.com
shortly. The base rate is calculated as a discount to the best
available rate from banks for comparable loans (for borrowers) and
a significant premium to the average rate of return of Certificate
of Deposits. Hope this helps! More than happy to hear your feedback
on this; and again more data / formulas will be made available
soon. Best, Renaud
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