Marketplace Lending in a Rising Rate Environment

Published on: 12/5/2018. Revised on: 12/5/2018.

In this issue of Marketplace Insights, we focus on potential impacts to marketplace loans in a rising interest rate environment.

The Impact of Rising Rates

As interest rates march steadily higher, investors are asking how marketplace loans might perform in a different rate environment. Because marketplace loans’ risk and return dynamics are different from those of more traditional fixed income assets, they can offer investors benefits in various environments. This is due to factors including:

  • Differentiation. Marketplace loans’ returns tend to be more affected by credit-specific factors and broader trends in consumer credit health, specifically, unemployment rates and recessions, than by prevailing interest rates.
  • Demand. Marketplace loans are an attractive alternative for borrowers in a variety of rate environments, given the generally higher rates on other consumer credit products.

Read the full Marketplace Insights piece here.

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