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Determinants of indebtedness among young adults: Impacts of lender guidelines, explicit information and financial (over)confidence

Journal article
Authors Jeanette Hauff Carlsson
Jonas Nilsson
Published in International Journal of Consumer Studies
Volume 44
Issue 2
Pages 89-98
ISSN 1470-6423
Publication year 2020
Published at Department of Business Administration
Pages 89-98
Language en
Keywords borrowing behaviour, financial literacy, indebtedness, young consumers, credit, debt, disclosure, Business & Economics
Subject categories Economics and Business


For most people, borrowing money is a necessary aspect of life in the 21st century. Wisely handled, loans give consumers access to consumption too expensive for most individuals to purchase with cash, such as homes and cars. However, history shows that taking on too much debt can be detrimental for the individual consumer as well as society as a whole. In this paper, we investigate determinants of over-indebtedness among young adults. We perform three studies in a setting focused on buying and borrowing money for a home. We show that, compared with an overall mortgage amount, explicit information about monthly payments reduces the tendency to take on too much debt (Study 1), that the amount borrowed depends on standards regarding the loan amount communicated through guidelines from the lender (Study 2), and that borrowers who are overconfident about their financial abilities tend to borrow more than less confident individuals (Study 3). These determinants and their policy implications are discussed.

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