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

Mustafa Caglayan (), Oleksandr Talavera, Lin Xiong and Jing Zhang
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Lin Xiong: Robert Gordon University
Jing Zhang: Tianjin University

Discussion Papers from Department of Economics, University of Birmingham

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 over 2010-2018. We find that borrowers with better credit scores and those who can offer higher rates are likely to reapply for funds after a failed attempt. Yet, females and applicants with better education are discouraged quickly. On the funding supply side, lenders strive to fund safe borrowers with high credit rating and high income, not those who offer high interest rate. 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 over 2010-2018. We find that borrowers with better credit scores and those who can offer higher rates are likely to reapply for funds after a failed attempt. Yet, females and applicants with better education are discouraged quickly. On the funding supply side, lenders strive to fund safe borrowers with high credit rating and high income, not those who offer high interest rate.

Keywords: Peer-to-peer (P2P) lending; Discouraged borrowers; Listing outcomes; Information problem; Fintech; China (search for similar items in EconPapers)
JEL-codes: G14 G32 M10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-tra
Date: 2019-02
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:19-01

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