What is portfolio at risk (PAR)? Formula, PAR30 vs PAR90 and examples

If you run a loan book, one number tells you more than any other about its health: portfolio at risk. Funders ask for it, regulators watch it, and lenders who track it catch problems while they are still small. This guide explains what PAR means, how to calculate it, how PAR30 differs from PAR90, and how to read the result.

The PAR formula

PAR(N) = Outstanding balance of loans with any installment more than N days past due ÷ Total outstanding portfolio

Two details matter:

1. The whole outstanding balance counts, not just the overdue installment. If a loan of 1,000 has 800 still outstanding and one installment of 100 is 45 days late, all 800 goes into PAR30 (and PAR45), not just the 100. The logic: the whole loan is at risk once any part is seriously late.
2. Measure from the oldest unpaid installment. Days past due are counted from the due date of the earliest installment that has not been paid in full. See days past due and loan aging.

A worked example

A lender has 500,000 in outstanding loans, broken down by days past due:

• PAR1 (any overdue): 70,000 ÷ 500,000 = 14.0%
• PAR30 (over 30 days): (20,000 + 8,000 + 7,000 + 5,000) = 40,000 ÷ 500,000 = 8.0%
• PAR60 (over 60 days): (8,000 + 7,000 + 5,000) = 20,000 ÷ 500,000 = 4.0%
• PAR90 (over 90 days): (7,000 + 5,000) = 12,000 ÷ 500,000 = 2.4%

Notice how the number falls as the threshold rises. That is expected. What you watch is how each version changes over time.

PAR30 vs PAR90: which should you use?

• PAR30 is an early-warning measure. It picks up problems while borrowers can still be helped. It is the most common measure in microfinance.
• PAR90 measures serious delinquency, loans likely to become losses. Many funders and regulators use it.
• PAR60 sits between them and is used by some institutions.

Track at least PAR30 and PAR90. If PAR30 is rising while PAR90 is flat, new problems are entering the pipeline. If PAR90 is rising, old problems are not being resolved.

What is a healthy PAR?

There is no universal answer, because it depends on the market, the product and the borrower. As a very rough guide often used in microfinance, PAR30 below about 5% is considered healthy, 5% to 10% needs attention and above 10% signals a real problem. PAR90 is usually held to a lower level. Short-term, high-risk products naturally run higher. Compare against your own history, your funders' covenants and any regulatory limits, rather than against a generic number.

PAR is not the same as write-offs

PAR measures loans that are overdue and still on the books. A write-off removes a loan from the books. A lender can show a low PAR by writing off its worst loans quickly, or by restructuring loans so they are no longer overdue. That is why PAR should be read together with the write-off ratio, the number of restructured loans and provisions.

PAR and provisioning

PAR and provisions go hand in hand: the higher your PAR, the more you should set aside. A common practice is to apply a provisioning percentage to each aging bucket, rising as loans get older. Provision coverage (provisions divided by PAR) shows how much of the at-risk portfolio is covered. Read more in loan loss provisioning and write-offs.

How to improve PAR

• Act on early arrears. Contact borrowers in the first days, not the first month.
• Improve underwriting. Lend to borrowers who can repay, on realistic terms.
• Monitor by officer and branch to find where problems concentrate.
• Track the first installment. Early missed payments predict later trouble.
• Be consistent with penalties, follow-up and escalation.
• Use restructuring carefully, and count restructured loans honestly.

See how to reduce loan defaults and the wider loan collections guide.

Common mistakes

• Counting only the overdue installment instead of the whole outstanding balance.
• Measuring from the wrong date. Use the oldest unpaid installment.
• Comparing PAR across institutions that define it differently.
• Ignoring restructured loans.
• Looking only at the level, not the trend.

PAR in LoanTabs

LoanTabs includes a portfolio-at-risk report among its 28 built-in reports, with thresholds set in your reporting policy, so you do not calculate it by hand. It sits alongside the aging report (current, 1-30, 31-60, 61-90, 91-180 and 181+ days), the delinquency worklist, collections performance and a configurable provisions matrix. Reports export to CSV and PDF. See the collections and arrears reports and reporting pages.

FAQ

What is PAR30?

Portfolio at risk over 30 days: the outstanding balance of loans with an installment more than 30 days overdue, divided by the total outstanding portfolio.

How do you calculate PAR?

Add the outstanding balances of all loans more than N days overdue, then divide by the total outstanding portfolio and express it as a percentage.

What is the difference between PAR and non-performing loans (NPL)?

NPL usually refers to loans that are 90 days or more overdue (or otherwise impaired), so it is close to PAR90. Definitions differ by regulator.

Is a high PAR always bad?

A rising PAR is a warning. A high but stable PAR may reflect a riskier product priced accordingly. Compare with provisions, funder covenants and your own history.

Does LoanTabs calculate PAR automatically?

Yes. The PAR report calculates it using thresholds you set in your reporting policy.