# More borrowers make early loan repayments in spring

Andrey Kamenov, Ph.D. Probability and Statistics

In a post some time ago, we studied seasonal patterns in loan default rates. At the same time, early loan repayments are relatively common, amounting to more than 15 percrent of all loans in the western states. And since early loan repayments are usually voluntary decisions (unlike defaulting on loans), it would be especially interesting to see if we can find any seasonal patterns here.

First, we look at the time series chart for an early loan repayment rate. The values here represent a percentage of all loans active by the start of the month that were repaid before two-thirds of the original loan term.

As you can see, the rate was noticeably smaller for Lending Club loans than for Prosper in 2011-2012. The former had a running average of around one percent, while the latter was closer to two percent. But since approximately the start of 2014, the two numbers have been roughly the same, with larger numbers being registered for Lending Club borrowers recently.

To see any seasonal patterns, we use the following standard routine - we detrend the data first and then calculate the average rate for each month of the year.

As you can see, the pattern is quite evident: the spring months are the most popular among borrowers who wish to repay their loans early, with rates being approximately 40 to 50 percent higher than in winter.

Andrey Kamenov, Ph.D. Probability and Statistics

Andrey Kamenov is a data scientist working for Advameg Inc. His background includes teaching statistics, stochastic processes and financial mathematics in Moscow State University and working for a hedge fund. His academic interests range from statistical data analysis to optimal stopping theory. Andrey also enjoys his hobbies of photography, reading and powerlifting.

Other posts by Andrey Kamenov:

## One thought on “More borrowers make early loan repayments in spring”

1. Bill Travers, RT(R) says:

Though I don’t have a Ph.D, and don’t mean to sound TOO terribly sarcastic, my initial reaction/common-sense? response to these not-surprising statistical results is…

Duh!! Ya think the Spring time-frame results just MIGHT have something to do with/be attributable to those who are owed/received a Federal Income Tax refund from the IRS, which- SURPRISE, SURPRISE!- coincides with the annual, Spring-time requirement for filing returns, with this ‘extra’ money then used for/increasing the pay-off of loans or bills? (And, even WITHOUT having to conduct a time-consuming, scientific survey/statistical analysis to prove it, I’d be willing to bet that the majority of those who ARE owed a refund file for/receive their refund WAAY before the April 15th (but STILL Spring-time, LOL!) deadline…