Auxmoney introduced a major change to the way interest rates are set. Instead of letting borrowers select the interest rate they are willing to pay, p2p lending service Auxmoney sets interest rates based on self-computed credit scores starting today. Auxmoney says it uses over 300 factors to grade borrowers either AAA, AA, A, B, C, D, E or X. The model now resembles the models Lending Club and Prosper use to set interest rates. In an earlier article I had compared different models p2p lending services use to set interest rates.

Near-term I expect borrower demand to rise due to this change since for most borrowers interest rates will be lower. However lower interest rates will lessen attractiveness for lenders and probably reduce funding percentage (in the weeks before this change approx. 30 to 40% of loan request got funded).

(via P2P-Kredite.com)