Could Peer-to-Peer Loans Substitute for Payday Loans?

Accounting & Taxation, v. 4 (2) p. 77-94, 2012

18 Pages Posted: 13 Mar 2014

See all articles by Lynda Livingston

Lynda Livingston

University of Puget Sound - School of Business and Leadership

Date Written: 2012

Abstract

Many consumer advocates consider payday loans — short-term, uncollateralized loans with high interest rates — to be predatory. The demand for short-term funding has spurred the quest for a substitute, an effort encouraged and supported by regulators like the Federal Deposit Insurance Corporation. In this paper, we evaluate the potential for online peer-to-peer markets to provide this alternative. We conclude that while certain features of peer-to-peer loans would be well suited (such as their longer terms, larger amounts, and multiple payments), the longer time to fund and the required minimum credit scores for borrowers present meaningful hurdles.

Keywords: Fringe Lending, Payday Loans, Peer-to-Peer Loans

JEL Classification: G18, G21, G28

Suggested Citation

Livingston, Lynda, Could Peer-to-Peer Loans Substitute for Payday Loans? (2012). Accounting & Taxation, v. 4 (2) p. 77-94, 2012. Available at SSRN: https://ssrn.com/abstract=2144890

Lynda Livingston (Contact Author)

University of Puget Sound - School of Business and Leadership ( email )

1500 N Warner St.
Tacoma, WA 98416
United States

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