Examining the Determinants of the Interest Rate of the Online Peer to Peer Loans in China

Abstract

Peer to Peer (P2P) lending is a new business model. People lend money to borrowers through internet where they judge the borrowers by information provided by the website. This paper aims to find how age, gender, and location influence the interest rate of a P2P loan in China. By exploiting the unique data of Paipaidai, which is one of the largest P2P website in China, we find that borrowers from more developed area (in terms of GDP) need to pay higher interest rate to get a loan. Male borrowers need to pay higher interest rate to finance the loan. Young people need to pay higher interest rate in order to get their loan.