Just How Do Pay Day Loans Affect Borrowers? Proof through the U.K. Market

Just How Do Pay Day Loans Affect Borrowers? Proof through the U.K. Market

Abstract

Payday advances are controversial high-cost, short-term financial products, prohibited in lots of U.S. states. But debates surrounding their advantages to consumers continue. We evaluate the results of pay day loans on customers through the use of a distinctive information set including 99% of loans authorized in the uk over a two-year period matched to credit files. Employing a regression discontinuity research design, our outcomes show that payday advances offer short-lived liquidity gains and encourage consumers to defend myself against extra credit. But, into the following months, pay day loans cause persistent increases in defaults and cause customers to surpass their bank overdraft limitations. Continue reading “Just How Do Pay Day Loans Affect Borrowers? Proof through the U.K. Market”