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Your looks can get you that loan now
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March 16, 2009

Your looks may play a significant role in getting your loans sanctioned, if US researchers are to be believed.

Jefferson Duarte at Rice University's Jones Graduate School of Management, and University of Washington's Stephan Siegel and Lance Young say that a person's appearance may play a key role in whether financial lenders deem him/her trustworthy.

In their study paper, titled 'Trust and Credit', the researchers say that borrowers on the peer-to-peer lending site, who are perceived as trustworthy, are more likely to have their loan requests granted.

The study also suggests that a seemingly untrustworthy person can have the same chance of getting a loan if he promises to pay an interest rate almost two percent higher than those deemed trustworthy.

"We found that people take into account someone's appearance when engaging in commercial transactions -- even in situations where a lot of information about the parties involved is available," said Duarte, visiting associate professor in management at Rice.

During the study, the researchers looked at 6,821 loan applications submitted to the popular online peer-to-peer lending site, where people seeking loans are matched up with people willing to lend money.

On the website, people willing to obtain loans submit information like their credit profile, job history, education level, income, etc. They may supply photographs and a statement about why they are seeking a loan or its intended use.

The lenders interested in offering the borrower a loan place a bid for their business. The loan application is filled if there are enough bids. Otherwise, the application expires.

The researchers said that of the 6,821 applications they used, 733 became loans.

The group later turned to's Mechanical Turk (MTurk), a site that brings together people who need a task done with people seeking work.

Twenty five MTurk 'workers' were supplied with only the photographs of the borrowers, and asked to rate the borrowers' trustworthiness on a scale of 1 to 5.

They were also asked to assess the probability that the person in the photograph would repay a $100 loan.

The researchers said that the responses enabled them to build a measure of trustworthiness based on the photographs. They found that the perceived trustworthiness of borrowers correlated with the ratings on their credit history filed at

According to them, the MTurk workers could distinguish people with high credit scores from people with low credit scores based solely on the photographs.

The team also found that people perceived as trustworthy default on their loans less often, even after accounting for credit scores.

"This implies that the pictures revealed something about borrower creditworthiness that is not accounted for in traditional credit scoring models," Duarte said.

The researchers also observed that lenders on used the information in the picture while deciding to make a loan, even when all required information about the borrower's credit history was available.

They said that people perceived as trustworthy get loans more often, even after accounting for traditional creditworthiness measures, such as credit scores.

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