What if borrowers stop paying their loans? Investors’ rates of return on a peer-to-peer lending platform

Autor:	Pei-Fen Chen, Hai-Yuan Tang, Shihmin Lo
Rok vydání:	2022
Předmět:	Rate of return Economics and Econometrics Actuarial science media_common.quotation_subject Critical factors Regression analysis Peer-to-peer computer.software_genre Investment (macroeconomics) Interest rate Credit rating Loan Business computer Finance media_common
Zdroj:	International Review of Economics & Finance. 77:359-377
ISSN:	1059-0560
DOI:	10.1016/j.iref.2021.10.011
Popis:	This research uses over 750,000 loan records from LendingClub issued from 2015 through 2018 to estimate the gross rates of return (ROR) for each loan by assuming the borrowers stop paying their loans once a default occurs. We find the probability of earning a positive return is 75.6% in terms of the total number of loans. By our calculation, the median of ROR ranges from 4.7% to 10.3% by lending to grade A through D borrowers, but ROR plummets to −6.6% to grade E-and-below borrowers. Regression analysis shows that borrowers' credit rating, loan interest rate, loan status, and paid-month are the most critical factors to influence investors’ ROR. Lastly, we offer a few investment implications and suggestions regarding participation in LendingClub.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::ab2812e23c3aaef75d6e43a1e9ed7ae7 https://doi.org/10.1016/j.iref.2021.10.011 Zobrazit plný text záznamu Full Text from ScienceDirect