Loan Type and Debt Delinquency among Millennial and Non‐Millennial Households

Lee, Jae Min; Lee, Yoon G.; Kim, Sungsook

doi:10.1111/fcsr.12315

Cited by 14 publications

(11 citation statements)

References 19 publications

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“…Previous research has examined debts and life outcomes (e.g. Chen et al, 2021;Lee et al, 2019; as well as determinants of debt holdings (e.g. Yao, 2014, 2020).…”

Section: Good Debt Bad Debtmentioning

confidence: 99%

“…With data from the 2013 SCF, another study demonstrates a positive relationship between online banking adoption and debt delinquencies (Donou-Adonsou and Basnet, 2019). Using data from the 2016 SCF, researchers show significant associations between debt types and debt delinquency (Lee et al, 2019). After examining data from the 1992-2010 SCF, a study shows that certain types of family lifecycle categories, such as couples with children, are associated with debt delinquency (Xiao and Yao, 2014).…”

Section: Debt Pressure and Debt Delinquencymentioning

confidence: 99%

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Good debt, bad debt: family debt portfolios and financial burdens

Xiao

Yao

2022

IJBM

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PurposeIn recent decades, research on consumer debt and well-being is emerging. However, research on the potential effect of debt portfolios on family financial well-being is limited. The purpose of this study is to fill this research gap by examining the potential effect of debt portfolios on family financial well-being, measured by three indicators of progressive financial burdens. These indicators include debt pressure (debt payment to income ratio >40%), debt delinquency (60+ days late for debt payments) and insolvency (total liability > total asset). Debt portfolios refer to various combinations of mortgage, credit card, vehicle, education and other loans.Design/methodology/approachWith data from the 2019 Survey of Consumer Finances in the USA, multivariate logistic regressions are used to identify specific debt types, consumer backgrounds and financial capability factors that are significantly associated with debt burden indicators. The findings are used to create a table demonstrating warning debt portfolios that may lead to undesirable financial outcomes.FindingsHoldings of different types of debts are associated with different financial burdens. Specifically, holdings of three types of debts (mortgage, vehicle and other debts) tend to increase debt pressure; holdings of two types of debts (education and other debts) tend to increase debt delinquency; and holdings of four types of debts (mortgage, credit card, education and other debts) tend to increase insolvency. These results are used to construct warning debt portfolios that show greater chances of undesirable financial outcomes. Among them, the top warning portfolio for debt pressure is the combined holding of mortgage-vehicle-other debts; for debt delinquency is the holding of education-other debts; and for insolvency is the holding of mortgage-credit card-education-other debts.Research limitations/implicationsThis study is limited by using only cross-sectional survey data to examine associations between debt portfolios and financial burdens. To examine the causality of debt portfolios on financial burdens, appropriate panel data are necessary, which is a direction for future research. In addition, this study used data from only one developed country. In future research, data from more countries, including both developed and developing countries, should be analyzed to verify if similar relationships exist among families in other countries.Practical implicationsResults of this study have implications for practitioners in banking and other financial institutions. The study presents a comprehensive list of debt portfolios in the order from high risk to low risk in terms of financial burdens. Banking and other financial service professionals can use the information to help their clients make informed borrowing decisions, predict their debt burdens and offer early preventions based on their clients' debt portfolios. Marketing strategists can use the information for effective segmentation and promotion purposes.Originality/valueThis study utilizes a new concept, debt portfolios and examines its associations with family financial burdens. Financial burdens include three indicators that are seldom used together in previous research. These indicators conceptually indicate various severity levels of debt burdens. This study also presents a conceptual discussion on the association between debt portfolios and financial burdens and provides a better understanding of consumer debt behavior and its consequences. The warning debt portfolios constructed based on the findings have direct managerial implications for banking and other financial service professionals.

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“…Previous research has examined debts and life outcomes (e.g. Chen et al, 2021;Lee et al, 2019; as well as determinants of debt holdings (e.g. Yao, 2014, 2020).…”

Section: Good Debt Bad Debtmentioning

confidence: 99%

Section: Debt Pressure and Debt Delinquencymentioning

confidence: 99%

Good debt, bad debt: family debt portfolios and financial burdens

Xiao

Yao

2022

IJBM

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“…The paper concluded that student loans explained up http://www.ae.ef.unibl.org/ to 3% and 7% of the wealth gap between Black and White households across the wealth distribution channels. Lee, Lee & Kim (2019) employed the logistic regression on 2016 Survey of Consumer Finances (SCF) to ascertain whether holding different varieties of loans triggered debt delinquency among millennial and non-millennial households with the US. The findings show that the effects of auto loan and other installment loans on debt delinquency were negative and positive respectively for both groups.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Debt-Servicing Burden on Household Expenditure in Nigeria: A Case of Ekiti State Senatorial Districts

2021

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This study employs binary logistic regression technique to explore the impact of household debt-servicing burden on expenditure patterns in South-West geo-political region of Nigeria, using Ekiti State as a case study. Questionnaires were randomly distributed to 2500 households, and the results unveil that households with high income, large family-size and heads within the age group (40 and above) were more susceptible to debtburden. In addition, the paper highlighted that indebtedness compromises the quality of nutrition and health status of household members. Based on the above findings, we conclude that high indebtedness and debt burden trajectories cause deleterious effects on household consumption patterns and overall economic well-being. Thus, household heads should inculcate fiscal discipline which promotes saving culture and averts future shocks that could emanate from precautionary demands. Second, debt providers should regulate loans in cognizance to household repayment capacity and other stipulated policies which break the vicious cycle arising from over-indebtedness, install stability and spur economic development.

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“…An additional side effect of student loan debt is that student loan debt has been linked to delinquent payments in other forms of debt (Lee, Lee, & Kim, 2019) and lower credit scores (Goodman, Henriques, & Mezza, 2017), possibly making mortgage approval more difficult. Similarly, Lee, Kim, and Hong (2018) examined the student profile of student loan holders in the United States using 2010 and 2013 Survey of Consumer Finances data and discovered a negative relationship between homeownership and being delinquent on student loans.…”

Section: Review Of Literaturementioning

confidence: 99%

Millennials’ Future Homeownership and the Role of Student Loan Debt

Mountain

Cao

Kim

et al. 2020

Family & Consum Sci Res J

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The financial burden of student loans on individuals in the Millennial generation is a serious issue. We investigated the effect this financial burden has on not only current homeownership but also the expectations and timing for future homeownership. The data came from the 2016 UF/VT Millennial Housing and Student Debt Survey of 1,327 young adults aged 19 to 35. We used a logistic regression model to determine differences in current homeownership and a two‐stage Cragg model to examine the expectation and timing of future homeownership. We found that while student loans negatively affected Millennials’ current ownership rates, the Millennials still wanted to be homeowners. Moreover, the homeownership timeline for Millennials with student loan debt will be delayed by several years relative to their counterparts without student loan debt.

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Loan Type and Debt Delinquency among Millennial and Non‐Millennial Households

Cited by 14 publications

References 19 publications

Good debt, bad debt: family debt portfolios and financial burdens

Good debt, bad debt: family debt portfolios and financial burdens

The Impact of Debt-Servicing Burden on Household Expenditure in Nigeria: A Case of Ekiti State Senatorial Districts

Millennials’ Future Homeownership and the Role of Student Loan Debt

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