This document outlines the assumptions used in creating the projected default curve as well as the projected net return which is used on the Lending Loop website’s statistics page.

We anticipate the possibility that the assumptions and projections used in this document may be inaccurate and as such, we continue to monitor and update all assumptions based on the information that we collect as the platform continues to operate. The statistics page data and projections are updated at least once per calendar quarter.

# Default Curve

There are three factors required as an input to calculate the projected default curve. These factors include the portfolio mix (weighting of loans by Loan Grade and term), the expected default rate for each Loan Grade and the slope of the curve which indicates the time-based distribution of loan defaults.

The assumptions used below are used to generate the following projected default curve:

## 1) Portfolio Mix

The following table outlines the assumed portfolio mix that is used to calculate the projected default curve.

Portfolio Mix (Weightings) |

BAND |
0.5 Year |
1 Year |
1.5 Year |
2 Year |
3 Year |
4 Year |
5 Year |
Total |

A+ |
0.25% |
0.25% |
0.25% |
0.75% |
2.00% |
1.00% |
0.5% |
5.00% |

A |
0.25% |
0.25% |
0.25% |
0.75% |
2.00% |
1.00% |
0.5% |
5.00% |

B+ |
1.00% |
1.00% |
1.00% |
3.00% |
8.00% |
4.00% |
2.00% |
20.00% |

B |
1.00% |
1.00% |
1.00% |
3.00% |
8.00% |
4.00% |
2.00% |
20.00% |

C+ |
0.50% |
0.50% |
0.50% |
1.50% |
4.00% |
2.00% |
1.00% |
10.00% |

C |
0.50% |
0.50% |
0.50% |
1.50% |
4.00% |
2.00% |
1.00% |
10.00% |

D+ |
0.50% |
0.50% |
0.50% |
1.50% |
4.00% |
2.00% |
1.00% |
10.00% |

D |
0.50% |
0.50% |
0.50% |
1.50% |
4.00% |
2.00% |
1.00% |
10.00% |

E+ |
0.25% |
0.25% |
0.25% |
0.75% |
2.00% |
1.00% |
0.5% |
5.00% |

E |
0.25% |
0.25% |
0.25% |
0.75% |
2.00% |
1.00% |
0.5% |
5.00% |

**TOTAL** |
5.00% |
5.00% |
5.00% |
15.00% |
40.00% |
20.00% |
10.00% |
100.00% |

## 2) Expected Default Rate

The following table outlines the projected default rate by Loan Grade used to calculate the projected default curve.

Loan Grade |
Projected Bad Debt (%) |

A+ |
1.12% |

A |
2.53% |

B+ |
3.56% |

B |
5.07% |

C+ |
5.84% |

C |
6.65% |

D+ |
7.56% |

D |
8.43% |

E+ |
9.24% |

E |
10.03% |

**Weighted Average** |
**5.7%** |

## 3) Distribution of Defaults

The distribution of defaults is calculated using the exponential distribution function as explained by the following function:
$F(x;\; \lambda )\; =\; 1\; -\; e-\lambda x.$

For this function, the following values are used for lambda [λ] (where x is time from loan start). We generated these projections by looking at the λ seen on projected and actual default curves of comparable international p2p lending platforms.

Loan Grade |
Projected Lambda (λ) |

A+ |
0.05 |

A |
0.05 |

B+ |
0.0525 |

B |
0.0525 |

C+ |
0.0575 |

C |
0.0575 |

D+ |
0.0575 |

D |
0.0575 |

E+ |
0.06 |

E |
0.06 |

# Estimated Net Return

The estimated net return by cohort is calculated by multiplying the portfolio mix for a given cohort by the expected net return for each Loan Grade.

Using the assumptions shown below, the projected net return for the above 3 cohorts as of the date of this documents is:

Cohort |
Projected Net Return |

2015/2016 |
7.36% |

2017 |
7.74% |

2018 |
8.11% |

The net return for each Loan Grade is calculated using the following formula:

*NR = Average Interest Rate – (Bad Debt Rate x Loss Given Default) – Servicing Fee*

The following are the current projections for the Net Return for each Loan Grade:

Loan Grade |
Projected Net Return |

A+ |
4.38% |

A |
4.98% |

B+ |
5.92% |

B |
6.60% |

C+ |
7.79% |

C |
8.86% |

D+ |
10.00% |

D |
11.28% |

E+ |
12.67% |

E |
14.14% |

To establish the projected net return for each cohort, the return for each Loan Grade is multiplied by the portfolio weightings. The portfolio weightings used for each cohort are shown below:

Portfolio Mix |
2015/2016 |
2017 |
2018 (Projected) |

BAND |
Total |
Total |
Total |

A+ |
0.00% |
1.51% |
5.00% |

A |
12.05% |
9.62% |
5.00% |

B+ |
23.65% |
14.55% |
20.00% |

B |
14.67% |
22.69% |
20.00% |

C+ |
18.72% |
16.62% |
10.00% |

C |
20.41% |
15.11% |
10.00% |

D+ |
6.20% |
9.05% |
10.00% |

D |
2.77% |
6.78% |
5.00% |

E+ |
1.52% |
3.07% |
5.00% |

E |
0.00% |
1.00% |
5.00% |