Which Factors Drive the Prepayment of P2P Lending? Evidence from Prosper.Com

33 Pages Posted: 18 Oct 2017

See all articles by Shaofang Li

Shaofang Li

Southeast University - School of Economics and Management

Xiaolin Li

School of Management

Date Written: October 17, 2017

Abstract

This paper investigates which factors drive the prepayment of Peer-to-Peer (P2P) lending based on the data collected from Prosper.com. By using the lending data of 50,109 loans between July 2009 and August 2013, we find that higher interest rate and loan amount indicate lower probability that the borrower fully paid the loan before the maturity. For the borrower characteristics, debt to income, employment length, delinquent amount, and revolving payment are significantly and negatively affect the outcome of the loans. Macroeconomic variable GDP growth is positivity significant while lending rate is negatively and significantly related to the probability of prepayment of the loans. We also find that monthly income and Prosper Rating are the main reasons which drive the borrowers to fully paid the loan before the maturity.

Keywords: Peer-to-Peer Lending; Prepayment; Monthly Income; Prosper Rating

JEL Classification: C12; C14; G14; G15

Suggested Citation

Li, Shaofang and Li, Xiaolin, Which Factors Drive the Prepayment of P2P Lending? Evidence from Prosper.Com (October 17, 2017). Available at SSRN: https://ssrn.com/abstract=3054424 or http://dx.doi.org/10.2139/ssrn.3054424

Shaofang Li

Southeast University - School of Economics and Management ( email )

Sipailou 2#
Nanjing, Jiangsu Province 210096
China

Xiaolin Li (Contact Author)

School of Management ( email )

Nanjing, Jiangsu 210093
China

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