Effects of borrower-defined conditions in the online peer-to-peer lending market

Abstract

In online Peer-to-Peer lending market, the borrower-defined conditions of loan requests predetermine the successfulness to receive loans. We analyze the transaction data of PPDai, a leading Peer-to-Peer lending market provider in China. By using the multinomial logit model to investigate the importance of borrowers' decisions and their effects on funding results, we reveal that loan amount, acceptable maximum interest rate, and loan period decided by borrowers significantly influence the loan outcomes. For the unsuccessful listings, the requested loan amount has much more importance than other factors, while for the listings attracting more supply than the requested amount, the borrower's acceptable maximum interest rate are more dominant than other factors to the outcomes. Besides, consistent to prior literature's findings, PPDai borrower's personal information and social capital also play major role in the transactions. © 2012 Springer-Verlag Berlin Heidelberg.