Marketplace Lending and Consumer Credit Outcomes: Evidence from Prosper

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 than those 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. *We would like to thank seminar participants at the Federal Reserve Board of Governors, and conference participants at the 2018 Consumer Finance Round Robin for insightful comments. All errors are our own. The analysis and conclusions set forth are those of the author and do not indicate concurrence by other members of the staff, by the Board of Governors or by the Federal Reserve Banks. Dore can be reached at 202-452-2887; tim.dore@frb.gov. Mach can be reached at 202-452-3906; traci.l.mach@frb.gov.

Crypto Lending and Stablecoin De-Pegging: Key Risks and Challenges

“…Despite the impressive growth, the biggest challenge of P2P lending including DeFi lending is the high risk for investors due to moral hazards and adverse selection. 5 For instance, the default rate at Prosper.com, a leading P2P lending platform in the United States, was reported to be 2.6% for A-grade loans and 11.5% for D-grade loans as of May 2017, in contrast to only 1.84% for consumer loans at commercial banks (Dore and Mach, 2020). Unlike crypto mining, stablecoin lending (crypto lending) is attractive to investors as it offers high interest rates.…”