When Can a Photo Increase Credit?: The Impact of Lender and Borrower Profiles on Online P2P Loans

Abstract

This paper examines the effects of lender and borrower personal characteristics (perceived attractiveness, age and gender) on online peer-to-peer lending decisions. The extant research in finance, marketing, and psychology provides substantial support for the "beauty premium" effect, where ceteris paribus, more (as opposed to less) attractive individuals are favored (e.g., Ravina 2012). Our results qualify these findings, suggesting that (1) when perceived age is a clear signal of competence (college-age signals low competence, while middle age signals significant competence), attractiveness has no effect on loan success; (2) when lender and borrower are of the same gender, attractiveness may actually hurt one’s chances to secure a loan (we observe "beauty is beastly" effect), and (3) loan success is sensitive to the relative age and attractiveness of lenders and borrowers.