Finance and Economics Discussion Series (FEDS)

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April 2019

Marketplace Lending and Consumer Credit Outcomes: Evidence from Prosper

Tim Dore and Traci Mach

Abstract:

In 2005, Prosper launched the first peer-to-peer lending website in the US, allowing for consumers to apply for and receive loans entirely online. To understand the effect of this new credit source, we match application-level data from Prosper to credit bureau data. Post application, borrowers' credit scores increase and their credit card utilization rates fall relative to non-borrowers in the short run. In the longer run, total debt levels for borrowers are higher that of non-borrowers. Differences in mortgage debt are particularly large and increasing over time. Despite increased debt levels relative to non-borrowers, delinquency rates for borrowers are significantly lower.

Accessible materials (.zip)

Keywords: Marketplace lending, Online lending, Peer-to-peer lending, Prosper Marketplace, disintermediation

DOI: https://doi.org/10.17016/FEDS.2019.022

PDF: Full Paper

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Last Update: January 09, 2020