Work

What does not kill us makes us stronger: the story of repetitive consumer loan applications

Year: 2020

Type: article

Abstract: We investigate borrower and lender behaviours when the borrower has experienced a sequence of failed loan applications. Our analysis is based on half a million observations from an established peer-to-peer (P2P) loan platform in China from 2010 to 2018. We find that borrowers who have better credit scores and who accept to pay higher interest rates are likely to reapply for funds after experiencing an earlier failed attempt. However, women and applicants with more education are discouraged from re-applying compared to their male or less-educated counterparts, respectively. On the funding supply side, lenders strive to fund safe borrowers who have high credit ratings and high income, though not those who offer a high interest rate.

Source: European Journal of Finance

DOI: 10.1080/1351847x.2020.1793792

Authors: Mustafa Caglayan, Oleksandr Talavera, Lin Xiong, Jing Zhang

Institutions: Heriot-Watt University, University of Birmingham, Robert Gordon University, Tianjin University

Language: English

Topic: FinTech, Crowdfunding, Digital Finance

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funder: Economic and Social Research Council

Awards: G2652164002, Peer-to-peer lending market in China: pricing, risk management and regulation