 Determinants of Default in P2P LendingCarlos Serrano-Cinca (serrano@unizar.es), Begoña Gutiérrez-Nieto and Luz López-Palacios PLOS ONE, 2015, vol. 10, issue 10, 1-22 Abstract: This paper studies P2P lending and the factors explaining loan default. This is an important issue because in P2P lending individual investors bear the credit risk, instead of financial institutions, which are experts in dealing with this risk. P2P lenders suffer a severe problem of information asymmetry, because they are at a disadvantage facing the borrower. For this reason, P2P lending sites provide potential lenders with information about borrowers and their loan purpose. They also assign a grade to each loan. The empirical study is based on loans’ data collected from Lending Club (N = 24,449) from 2008 to 2014 that are first analyzed by using univariate means tests and survival analysis. Factors explaining default are loan purpose, annual income, current housing situation, credit history and indebtedness. Secondly, a logistic regression model is developed to predict defaults. The grade assigned by the P2P lending site is the most predictive factor of default, but the accuracy of the model is improved by adding other information, especially the borrower’s debt level. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0139427 DOI: 10.1371/journal.pone.0139427 Access Statistics for this article More articles in PLOS ONE from Public Library of Science |
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