Determinants of Borrowers’ Default in P2P Lending under Consideration of the Loan Risk Class

Michal Polena and Tobias Regner
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Michal Polena: Czechoslovak Commercial Bank, 150 57 Prague, Czech Republic

Games, 2018, vol. 9, issue 4, 1-17

Abstract: We study the determinants of borrowers’ default in P2P lending with a new data set consisting of 70,673 loan observations from the Lending Club. Previous research identified a number of default determining variables but did not distinguish between different loan risk levels. We define four loan risk classes and test the significance of the default determining variables within each loan risk class. Our findings suggest that the significance of most variables depends on the loan risk class. Only a few variables are consistently significant across all risk classes. The debt-to-income ratio, inquiries in the past six months and a loan intended for a small business are positively correlated with the default rate. Annual income and credit card as loan purpose are negatively correlated.

Keywords: crowdfunding; peer-to-peer lending; P2P; credit grade; FICO score; default risk (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Determinants of borrowers' default in P2P lending under consideration of the loan risk class (2016)
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