Evaluating borrower's default risk in peer-to-peer lending: evidence from a lending platform in China. Issue 35 (27th July 2017)

• Record Type: Journal Article
• Authors: Lin, Xuchen; Li, Xiaolong; Zheng, Zhong
• Is Part Of: Applied economics. Volume 49:Issue 35(2017)
• Page Start: 3538
• Page End: 3545
• Publication Date: 2017-07-27
• Subjects: Default risk -- credit risk assessment -- peer-to-peer lending -- demographic characteristic; D12 -- G20; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2016.1262526
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: Recent years have witnessed the popularity of online peer-to-peer lending, which allows individuals to borrow from and lend to each other on an Internet-based platform. Using data from a large P2P platform in China, this article explores the factors that determine the default risk based on the demographic characteristics of borrowers. Moreover, we propose a credit risk evaluation model, which can quantify the default risk of each P2P loan. Empirical results reveal that gender, age, marital status, educational level, working years, company size, monthly payment, loan amount, debt to income ratio and delinquency history play a significant role in loan defaults. Finally, we analyse the relationship between default risk and these contributory variables, and the possible causes are also discussed in this study.