Sunday, October 30, 2011

Story Telling

A very interesting article about the effects of story telling on loan rates during the Prosper 1.0 time period out of the University of Delaware and Rice University.

They analyzed each description in terms of the identities it portrayed, including being trustworthy, successful, hardworking, moral, religious or having economic hardship.

They found that the more identities portrayed, the less likely a loan was to default:
The more identities the borrowers constructed, the more likely lenders were to fund the loan and reduce the interest rate but the less likely the borrowers were to repay the loan – 29 percent of borrowers with four identities defaulted, where 24 percent with two identities and 12 percent with no identities defaulted.

This seems in line with the data I've seen in my Needs Series. It really does seem like we might be able to pull out useable information for determining future defaults from a Loan's Title and Description.

Thanks to lovinglifestyle on the lendstats forum for publishing the link.

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