Marketplace Lending and Consumer Credit Outcomes : Evidence from Prosper

Dore, Timothy E.; Mach, Traci L.

doi:10.17016/FEDS.2019.022

Working Paper

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 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.

Keywords: Marketplace lending; Online lending; Peer-to-peer lending; Prosper marketplace; Disintermediation;

JEL Classification: G23; G29; G20;

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