Credit Risk Meets Large Language Models: Building a Risk Indicator from Loan Descriptions in P2P Lending

Peer-to-peer (P2P) lending has emerged as a distinctive financing mechanism, linking borrowers with lenders through online platforms. However, P2P lending faces the challenge of information asymmetry, as lenders often lack sufficient data to assess the creditworthiness of borrowers. This paper proposes a novel approach to address this issue by leveraging the textual descriptions provided by borrowers during the loan application process. Our methodology involves processing these textual descriptions using a Large Language Model (LLM), a powerful tool capable of discerning …

building challenge credit credit risk cs.ai cs.cl cs.lg data financing information language language models large language large language models lending novel online platforms p2p paper peer peer-to-peer platforms q-fin.rm risk through