Online Peer-to-Peer Lending – A Literature Review

The term online peer-to-peer lending (P2P) describes the loan origination process between private individuals on online platforms were financial institutions operate only as intermediates required by law. Initialized by groups in online social networks, first commercial online P2P lending platforms started in 2005. Thus online P2P lending is a relatively young research field. This paper gives a brief overview of the P2P lending market and reviews the research on the determinants of P2P lending. We distinguish between financial and demographic characteristics of the borrower, as well as social characteristics like friends and group affiliation. The reviewed literature gives insights on how the determinants affect the borrowers’ likelihood of successful funding, the final interest rate that has to be paid as well as the relationship of the borrowers’ characteristics and lending success.