Open AccessEvaluating Default Risk and Loan Performance in UK Peer-to-Peer Lending: Evidence from Funding Circle
Author(s) -
Boyu Xu,
Zhifang Su,
Jan Celler
Publication year - 2021
Publication title -
journal of advanced computational intelligence and intelligent informatics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.172
H-Index - 20
eISSN - 1343-0130
pISSN - 1883-8014
DOI - 10.20965/jaciii.2021.p0530
Subject(s) - loan , default , non performing loan , cross collateralization , participation loan , term loan , non conforming loan , bridge loan , business , probability of default , actuarial science , credit risk , context (archaeology) , interest rate , financial system , finance , paleontology , biology
The United Kingdom is the third-largest peer-to-peer (P2P) lending market in the world, which is surpassed only by the two dominant forces in P2P investing, China and the United States of America. As an innovative financial market in the UK, P2P lending brings not only many opportunities but also many risks, especially the loan default risk. In this context, this paper uses binary logistic regression and survival analysis to evaluate default risk and loan performance in UK P2P lending. The empirical results indicate that credit group, loan purpose for capital needs, sector type, loan amount, interest rate, loan term, and the age of the company all have a significant impact on the probability of loan default. Among them, the interest rate, loan term, and loan purpose for capital needs are the three most important determinants of the probability of loan defaults and survival time of loans.