Macroeconomic Determinants of Loan Delinquencies: Evidence from the US Peer-to-Peer Lending Market

Abstract

The study documented in this paper utilises a probit regression analysis to empirically investigate the key macroeconomic factors that influence credit risk in the peer-to-peer (P2P) lending market. By aggregating the United States (US) state-level data with LendingClub’s loan book covering the period from 2008–2019, this study examines multiple factors related to default risks of loans issued by P2P lending platforms. Our results show that a higher interest rate and inflation increase the probability of default in the P2P lending market. We also find that the impact of interest rate on the probability of default is significantly higher for loans with lower ratings. The study’s outcomes, by paving the way to future market best practices, are applicable to P2P lending platforms and investors in their default estimation of loans.