Roll Rate Analysis
Definition
A roll rate is the percentage of loan balances in one delinquency bucket at the start of a period that have moved to the next, worse bucket by the end of it: from current to 30 days past due, from 30 to 60, from 60 to 90, and from 90-plus to charge-off. Roll rate analysis is the practice of tracking those rates month by month, alongside the cure rate (balances that returned to current) and the stay rate (balances that remained in the bucket), to see credit deterioration while it is happening rather than when it is written off. The early rates are the sensitive ones: the share of current loans that go 30 days late in a month is typically 1 to 3 percent in a healthy consumer book and is the first number to rise when borrowers come under strain. The later rates are high and stable, since most loans that reach 90 days past due are eventually charged off, so multiplying the rates along the chain gives a forecast of losses from today's delinquencies four to six months before they appear in the charge-off line.
Why it matters
Charge-offs describe the past: a loan written off this month stopped paying five months ago. Roll rates describe the present, and in a consumer or small-business credit book they are the only figures that do. A marketplace lender, a BDC or an ABS trust can report a stable loss rate for two quarters after its borrowers have begun missing payments, because the losses are still rolling through the buckets. An investor who reads the roll-rate matrix sees the deterioration in the month it starts, can size the charge-offs it will produce, and can tell a lender whose losses are behind it from one whose losses are ahead. It is also the number that lenders themselves manage to, which is why a lender that does not publish it is worth asking why.
Common misconceptions
- •A stable total delinquency rate does not mean stable credit. If the current-to-30 roll rate rises while the 90-to-charge-off rate keeps clearing the late buckets, total delinquency can hold steady as the book gets worse.
- •Roll rates are not the same as delinquency rates. Delinquency is a level (how much is late); a roll rate is a flow (how much got later); levels lag flows by months.
- •High late-stage roll rates are not a warning. Nearly all 90-day-late loans charge off in every lender's book; the signal is in the early rates and in the cure rates.
- •Re-aging and modifications distort roll rates. A lender that resets modified loans to current lowers its forward roll rates without collecting any more money; ask how modified loans are treated in the matrix.
Technical details
Worked example: a monthly roll-rate matrix
Starting balances (month 1): current $470.0M; 1 to 29 days $12.5M; 30 to 59 $8.0M; 60 to 89 $5.0M; 90-plus $4.5M.
Ending positions (month 2): of the $470.0M current, $458.0M stayed current or paid off and $12.0M rolled to 1 to 29 days: current-to-30 roll rate 2.55%. Of the $12.5M in 1 to 29 days, $5.0M cured and $7.5M rolled: 60% roll, 40% cure. Of the $8.0M in 30 to 59, $2.0M cured and $6.0M rolled: 75% roll. Of the $5.0M in 60 to 89, $0.5M cured and $4.5M rolled: 90% roll. Of the $4.5M in 90-plus, $4.0M charged off and $0.5M was collected or modified: 89% roll to charge-off.
Chained loss rate: 2.55% times 60% times 75% times 90% times 89% = 0.92% of current balances per month, about 11% annualized before recoveries. A prime book would show 1.5% times 45% times 65% times 90% times 88% = 0.35% per month, about 4% annualized.
Forecast: the $12.0M that rolled to 1 to 29 days this month will produce about $4.3M of charge-offs in months 5 to 6 at these rates, before any of it appears in the charge-off line.
Reading the matrix
Current-to-30: the underwriting and macro signal; watch its trend over 12 months and by vintage, since new originations can be riskier than the seasoned book.
30-to-60 and cure from 30: the collections signal; a rising roll with a falling cure means the servicer is losing borrowers who used to catch up.
60-to-90 and 90-to-charge-off: structural; stable near 70 to 90 percent; a sudden fall usually means modifications or re-aging, not recovery.
By balance versus by count: a roll rate by count above the rate by balance means small loans are deteriorating faster; the reverse means large exposures are.
By vintage: roll rates for loans originated in the last 6 to 12 months versus older loans separate a worsening book from a growing one.
Where roll rates drive money
Allowance models: CECL and IFRS 9 expected-loss models for consumer portfolios are commonly built on roll-rate or transition-matrix methods; the allowance moves when the early rates move.
Securitization triggers: ABS trusts test delinquency and loss ratios, not roll rates, but rating agencies stress the roll rates in their cash-flow models and set credit enhancement from them.
Warehouse and borrowing-base lines: lenders to fintech originators monitor roll rates monthly and can cut advance rates or stop funding on deterioration.
Marketplace platforms: expected return tables for note investors are roll-rate forecasts under another name; the assumptions behind them are the first thing to check.
Roll rates in different asset classes
Credit cards: measured in cycles; current-to-1-cycle of 1 to 2 percent for prime, with 180-day charge-off.
Personal loans and BNPL: shorter terms and faster rolls; 120-day charge-off; current-to-30 rates of 2 to 4 percent in subprime.
Auto loans: repossession replaces the late buckets after 60 to 90 days; roll to repossession and recovery on sale replace roll to charge-off.
Small business and merchant cash advance: daily or weekly remittances make buckets shorter and rolls faster; a missed week is the early signal.
Mortgages: long buckets, low rolls, and foreclosure timelines measured in years; the 60-to-90 roll is the key rate.
Commercial and corporate loans: too few loans for statistical roll rates; watch lists and risk-grade migration serve the same purpose.
Diligence questions
Ask for the roll-rate matrix by balance and count for the last 24 months, and by vintage for the last 12.
Ask how modified, re-aged, deferred and hardship accounts are treated: reset to current, held in their bucket, or reported separately.
Ask for cure rates alongside roll rates; a matrix without cures hides half the picture.
Compare the chained loss rate with the lender's reported charge-off rate and allowance; a chained rate above both means the reserve is behind.
Ask what the current-to-30 rate was at origination of the vintages now seasoning; a lender that loosened underwriting shows it there first.
Frequently asked questions
- What is a roll rate?
- The fraction of loans that get worse in a month. If $10 million of loans were 30 to 59 days late at the start of the month and $4 million of that is now 60 to 89 days late, the 30-to-60 roll rate is 40 percent. Each bucket has its own rate, and the rate from current to 30 days late is the one that moves first when a portfolio starts to deteriorate.
- How do you calculate a roll rate?
- Roll rate = balance that moved from bucket A to bucket B during the period, divided by the balance in bucket A at the start of the period. By balance is standard; by account count is sometimes shown alongside. The period is usually one month, matching the 30-day buckets. A full analysis is a matrix showing, for each starting bucket, the share that rolled forward, cured, stayed, paid off or charged off.
- What is a normal roll rate?
- For prime consumer credit, roughly 1 to 3 percent from current to 30 days, 30 to 45 percent from 30 to 60, 55 to 70 percent from 60 to 90, and 85 to 95 percent from 90-plus to charge-off. Subprime books run higher at every stage, especially the first. The later rates are similar across lenders because few borrowers recover once three payments behind; the first rate is where underwriting quality and economic conditions show.
- What is a cure rate?
- The share of delinquent balances that return to current in the period, the opposite of a roll. Cure rates from the 30-day bucket are typically 40 to 60 percent for prime borrowers (a missed payment is often an oversight) and fall sharply from later buckets. A rising roll rate with a falling cure rate is deterioration; a rising roll rate with a stable cure rate can be a seasonal or operational blip.
- How are roll rates used to forecast charge-offs?
- By chaining them. Multiplying the roll rates from current through each bucket to charge-off gives the share of today's current balances expected to be written off; applying the rates to today's delinquent buckets gives the losses expected over the next few months. A book with $500 million current, a 2 percent current-to-30 rate and 40, 60 and 90 percent rates thereafter will lose about 0.43 percent of current balances per monthly cohort, or roughly 5 percent annualized, before recoveries.
- Where do investors find roll rates?
- In servicer reports for securitizations, in lender investor presentations and 10-Qs (banks and fintech lenders often show them by vintage or product), in marketplace lending platforms' performance dashboards, and in rating agency presale reports. Where a lender reports only delinquency and charge-off levels and not roll rates, the investor can approximate them from consecutive months' bucket tables.