This month we introduced a series of new blog posts, comparing a range of data from the Secondary Market, loan originations, collections and recoveries and more. Below, we continue this theme and take a look in to the origination of loans by home ownership, education, and age to name a few.
Is income the most important factor?
Firstly, we looked at the average monthly income (net) and age of borrowers across Spain, Estonia and Finland. Interestingly, the average age of borrowers is in a small range 38 (Spain) – 45 (Finland) and this could be compared with average statistics of significant life events for further analysis, such as buying a home or having children.
| Country | Average income | Average loan amount |
| ESTONIA | €1,058 | €1,749 |
|---|---|---|
| SPAIN | €1,659 | €797 |
| FINLAND | €2,440 | €2,202 |
| ACROSS COUNTRIES | €1,719 | €1,582 |
From the table above, we can see that the average loan amount is under 8% of the average annual net income across all three countries. Estonia has the lowest average income, however when compared with the rating statistics in our previous post it shows how income alone should not be the only factor in determining a borrower’s credit reliability.
Keeping this in mind, our figures show the most common type of home ownership across the three geographies is ‘owner’, including those with a mortgage and who are joint owners. With the exception of Spain where 34% of borrowers are classified as living with their parents, the next most common type of ownership is renting. This could be attributed to the banking climate in each locale and the difference in availability or access to mortgage finance.
How does employment, duration and education weigh up?
Across all countries, the most common employment duration was found to be more than 5 years, followed by ‘Up to 5 years’ and ‘Up to 1 year’. The most common loan duration was also shared, with 36 months being the most popular followed by 60 months. In comparison to pay day lenders, people who successfully take out a loan with Bondora understand they are committing to something long term and they will need to carefully assess their personal financial circumstances going forward.
Surprisingly, the levels of education declared by borrowers varies considerably across the three markets. Spain’s most common level was ‘Higher’, where as ‘Secondary’ was the most popular in Estonia and ‘Vocational’ in Finland.
What does this tell us?
So, it is evident that when looking at each factor on its own it does not give a true reflection of someone’s financial circumstances and what credit rating they should be awarded. The data points mentioned in this post are just a handful compared to the total number we use to assess the credit worthiness of a borrower. After 4 years of cross-border lending we are continuing to collect more unique data and aim to improve our credit model even further over the years to come.
If you would like to know more about the customers who we lend to, make sure to check out how Bondora helped Janar make his dream home.
