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Lab Insight: Borrowers borrow money for a variety of reasons, including refinancing other debt and paying off credit cards as well as borrowing for other purposes. Lenders evaluate potential borrowers to decide if they want to extend the loan by evaluating the probability that the borrowers will repay the loan. Based on the characteristics of loans that were both rejected and accepted, we can better understand the loan decision process.
This lab gains insight about the factors that predict loan acceptance by analyzing applicants that were given a loan and applicants that were not given a loan.
Required:
Using regression analysis to classify the potential borrowers, choose among several potential variables that could explain what variables might be used by a Lending Club investor to decide whether to extend a loan.
Ask the Question: How can regression analysis be used to understand who receives a loan and who does not?
Master the Data: Lending Club is a U.S.-based peer-to-peer lending company, headquartered in San Francisco, California. Lending Club facilitates both borrowing and lending by providing a platform for unsecured personal loans between $1,000 and $35,000. The loan period is for either 3 or 5 years. There is information available that allows potential investors to search and browse the loan listings on the Lending Club website and select loans in which they would like to invest. The available information includes information supplied about the borrower, amount of the loan, loan grade (and related loan interest rate), and loan purpose. Investors invest in the loans and make money from interest. Lending Club makes money by charging borrowers an origination fee and investors a service fee. Since 2007, hundreds of thousands of borrowers have obtained more than $53 billion in loans via Lending Club.*
Lab Exhibit 8-2.1 provides an illustration of the loans issued by Lending Club since 2011.
Software needed
- Excel
- Screen capture tool (Windows: Snipping Tool; Mac: Cmd+Shift+4)
Data: Lab 8-2 Data.xlsx
Perform the Analysis: Refer to Lab 8-2 in the text for instructions and steps for each of the lab parts.
Upload the Word or PDF document containing your Lab screenshots using the button below.
Note: Please submit your file attachment response in one of the approved file formats; Word file (.doc or .docx), Excel file (.xls or .xlsx), or PDF. To submit photo or image files please paste them into Word or PDF. Consult with your instructor as needed on their preferred file attachment format.
Take a screenshot the regression output for all three independent variables, paste it into a Word document named “Lab 8-2 Excel SS.doc”, and label the screenshot Submission 1.