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Disinter mediated finance peer to peer financing and pay day loans

Disinter mediated finance peer to peer financing and pay day loans

Probably the most prominent concern about the growing online peer to peer financing is the fact that borrowers will end up more anonymous and also this will aggravate the situation of adverse selection. Borrowers on these lending that is online have actually better details about their solvency than loan providers. With no intermediary of the bank, investors lack the process of complex danger evaluation that is typically supplied by the banking institutions.

In 2013 the writers Lin, Prabhala, and Viswanathan published a paper called “Judging borrowers by the business they keep: Friendship companies and information asymmetry in online peer-to-peer lending”. In this paper they analysed the peer lending site Prosper.com.