In the age of spellcheckers, autocorrect, and grammar-correcting software one might imagine that there would be a dearth of spelling mistakes and typographical errors on websites and other online information. However, mistakes to slip through. Research in the International Journal of Electronic Finance has looked at how spelling mistakes can reflect badly on those working online and in particular people looking to obtain anonymous peer-to-peer loans.
Previous empirical research has demonstrated that poor spelling on P2P lending websites can act as a proxy for hard credit information. In other words, those borrowers with numerous spelling mistakes in their bid for a loan will often be perceived as representing a less certain prospect for those offering to lend money. The new research from Randall Hucks of Eastern Michigan University, USA, shows that misspellings as a proxy for credit quality is thus perceived as such irrespective of the quality of the material being offered by way of plea by the borrower on a P2P lending site.
Hucks examined various factors that might affect a putative borrower’s success on a P2P lending site. Poor spelling proficiency led to lower funding rates and prolonged the waiting period before a loan request was fulfilled. The research suggests that a good quality bid, which means perfect spelling, is essential to quick success for borrowers.
The research also showed that employment length and income would be positively correlated with higher funding rates, while debt-to-income ratios have a detrimental impact. Perhaps surprisingly, income verification by the P2P lending site led to lower funding rates, implying that lenders perceive verified borrowers as less creditworthy. The implications overall are that P2P lenders may not rely solely on conventional credit approaches to estimate credit risk when they evaluate a potential borrower.
The work thus reveals the role of clear communication in a potential borrower’s loan descriptions and highlights the interplay between borrower and loan attributes in determining whether or not they will be successful in obtaining the loan they require from the system.
Hucks, R.J. (2023) ‘On the effects of misspellings on lender demand in peer-to-peer lending’, Int. J. Electronic Finance, Vol. 12, No. 4, pp.374–402.