How to interpret the default index (default index) — technical guide.

📉🔍 How to Interpret the Default Rate in Crowdlending — Technical Guide

In the world of crowdlending, one of the most important indicators to assess the health of a portfolio or platform is the default rate. This metric reflects the proportion of loans that are not being repaid as agreed and is therefore key to measuring investment risk.

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📊 What is the default rate?

The default rate is calculated as:

Default Rate (%) = (Number of defaulted loans ÷ Total loans) × 100

Where:

• Defaulted loans: Loans overdue beyond a defined period (e.g., 30, 60, or 90 days).
• Total loans: All loans issued on the platform or portfolio during a specific period.

Example:

• If a platform has 1,000 active loans and 25 are overdue by more than 60 days:

25 ÷ 1000 × 100 = 2.5%

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🔧 How to interpret the default rate

• 📈 Historical comparison: Analyze trends over time. A steady increase may indicate credit risk issues.
• 🧾 Industry benchmark: P2P platforms typically show 1–5% default for moderately secured personal loans.
• ⚠️ Loan type: Real estate loans usually have lower default than unsecured personal loans.
• 💡 Guarantees and buy-back: Risk can be mitigated if buy-back guarantees or collateral exist.

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📌 Practical interpretation for investors

• Conservative: Prefer platforms with default rate < 2% and strong guarantees.
• Moderate: Accept 2–5% if diversification and protections are solid.
• Aggressive: May accept >5% if returns compensate the risk.

💡 Tip: Always combine default rate with volume, historical performance, diversification, and collateral type.

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🔍 Technical analysis example

Let’s analyze Twino:

• Total loans: 10,000
• Overdue >90 days: 300

Default rate = 300 ÷ 10,000 × 100 = 3%