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

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

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. 2022. What does not kill us makes us stronger: the story of repetitive consumer loan applications. European journal of finance [online], 28(1), pages 46-65. 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
• Publication Date: Feb 28, 2022
• Deposit Date: Jul 23, 2020
• Publicly Available Date: Jan 21, 2022
• Journal: European journal of finance
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Taylor & Francis (Routledge)
• Peer Reviewed: Peer Reviewed
• Volume: 28
• Issue: 1
• Pages: 46-65
• 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