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JACIII Vol.25 No.5 pp. 530-538
doi: 10.20965/jaciii.2021.p0530
(2021)

Paper:

Evaluating Default Risk and Loan Performance in UK Peer-to-Peer Lending: Evidence from Funding Circle

Boyu Xu, Zhifang Su, and Jan Celler

School of Economics and Finance, Huaqiao University
No.269 Chenghua, North Road, Fengze District, Quanzhou, Fujian 362021, China

Corresponding author

Received:
June 12, 2020
Accepted:
March 17, 2021
Published:
September 20, 2021
Keywords:
P2P lending, default risk, logistic regression, marginal effect, Cox Proportional Hazard regression
Abstract

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.

Cite this article as:
Boyu Xu, Zhifang Su, and Jan Celler, “Evaluating Default Risk and Loan Performance in UK Peer-to-Peer Lending: Evidence from Funding Circle,” J. Adv. Comput. Intell. Intell. Inform., Vol.25, No.5, pp. 530-538, 2021.
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Last updated on Oct. 22, 2021