[akg_67]

If you only focus on return, you will draw erroneous conclusions. The upper limit to return is restricted by the interest rate. An A grade loan that carries interest rate of 5% will never give you return of 10% while a D grade loan carrying 18% interest rate has some chance of giving you 10% return, assuming you hold loans to maturity. If you only consider returns, your findings will always be biased toward high interest (supposedly high risk) loans. Similarly, the return comparison across vintage will generate erroneous conclusions.

You need to take into consideration Interest Rate and Default/Loss Rate while considering the validity of the relationship.

The Employment Length on its own is a poor indicator (statistically insignificant). You need to at least combine employment length with credit age (when the first credit line was opened) and Income to improve predictability.

There is no vintage of Lending Club 5-year term loans that have fully matured. The first 5-year term loan was issued in early 2010 (IIRC, May) so the first vintage is just coming up to full maturity.

  Interest Rate (Rate of Return)
  = Real risk-free interest rate 
  + Inflation premium 
  + Default risk premium 
  + Liquidity premium
  + Maturity premium

You need to determine whether you are being compensated on 5-year term loan for potential change in inflation, higher default risk, and longer maturity over 3-year term loan.