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Study: Looks Matter at P2P Lending Site

[Mar 17, 2009.]


How big of a role does a person’s looks play in obtaining a personal loan? Researchers have attempted to answer that question by rating the trustworthiness of people in photos posted at peer-to-peer (P2P) lending site Prosper. The people who were rated the most trustworthy based on their appearance were more likely to get approved for personal loans through the site.

The study was conducted by professors from Rice University and the University of Washington. They had  volunteers look at 12,000 photos posted at Prosper and rank their trustworthiness on a scale of 1 to 5 and say whether of not they found the photos attractive. Among the factors considered were age, race, ethnicity, and estimated weight. The volunteers also were asked to rate the likelihood of the person in the photo repaying a $100 loan.

Volunteers were not given any financial information or other data about the people in the photos. The study shows that looks do matter when people are judging whether or not someone can be trusted.

For the most part, the people who were considered more attractive and trustworthy in the study do have higher credit ratings on Prosper. Also, people who were perceived as less trustworthy had to pay an interest rate of 182 basis points higher than borrowers who were seen as more trustworthy to get approved for loans.

What interesting about this study is that people’s looks really aren’t a predictor of whether or not they’ll repay a loan. One study cited in this research even concluded that people who were more attractive were less likely to repay loans.

But the truth is that one’s ability to repay a loan is more dependent upon their income and credit history than whether they look like someone on “America’s Next Top Model.” Also, there’s no guarantee that the photo posted with profile is actually the borrower. There have been many horror stories about fake photos posted at online dating sites and there’s nothing to stop this from happening at P2P lending sites.

Ultimately, anyone hoping to get a loan with the best interest rate and terms through Prosper or other P2P lending sights should have a decent credit rating. But given the results of this study, it probably can’t hurt to get some glammed up photos to post with a borrower profile.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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