Loan performance

Loan performance

Default rates

A default rate is the probability that a loan will default and be written off as a bad debt and no further repayments are expected to be received. The rate is shown as an annual rate to enable comparison to the annual interest rate. 

The principal loss to investors as a result of a default will depend on when in the loans term it is written off. The later in the loan term the more principal has been repaid and the loss to an investor is lower. 

Please note that borrowers are required to make their loan repayments by direct debit, which take three working days to clear. As such, if, for example, a payment is made on Monday, then your funds will appear in your investor account on Wednesday night. The "Next Payment Date" will update to display the next payment due date before the funds have arrived in your account.

Forecast default rates by risk grade

Each loan in the marketplace has a forecast default rate based on its applicant's risk. It is important to understand that this is a forecast rate and the actual default rate may vary from the rate shown. Information about actual default rates will be published as they become available.

Defaults over time

The forecast default rates are shown as a consistent annual rate over the term of the loan. In reality, defaults are more likely to follow what is known in statistical terminology as a time-varying hazard rate. This chart shows a representative profile of the hazard curve of a personal loan portfolio. The curve shown is only for loans that do default and, therefore, adds up to 100%.

Invest performance default over time

We expect that the default hazard rate of loans originated on the Harmoney platform will be similar to the one shown in the graph. As defaults happen within the first 18 months it means 36-months and 60-month loans will have a similar default hazard rate.