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

Caglayan, Mustafa; Talavera, Oleksandr; Xiong, Lin; Zhang, Jing

Authors

Mustafa Caglayan

Oleksandr Talavera

Jing Zhang



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.

Citation

CAGLAYAN, M., TALAVERA, O., XIONG, L. and ZHANG, J. 2020. What does not kill us makes us stronger: the story of repetitive consumer loan applications. The European journal of finance [online], Latest Articles. Available from: https://doi.org/10.1080/1351847X.2020.1793792

Journal Article Type Article
Acceptance Date Jul 2, 2020
Online Publication Date Jul 20, 2020
Deposit Date Jul 23, 2020
Publicly Available Date Jan 21, 2022
Journal The European journal of finance
Print ISSN 1351-847X
Electronic ISSN 1466-4364
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
DOI https://doi.org/10.1080/1351847X.2020.1793792
Keywords Peer-to-peer lending; Loans and borrowing; Financing; Borrowing practices; Loan applications; Fintech; China
Public URL https://rgu-repository.worktribe.com/output/951200