Why do borrowers default on online loans? An inquiry of their psychology mechanism

Wang, Xiaolun; Xu, Yunjie; Lu, Tian; Zhang, Chenghong

doi:10.1108/intr-05-2019-0183

Cited by 12 publications

(26 citation statements)

References 83 publications

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“…The research discusses the many behavioral elements that may affect young adults’ willingness to default on a house loan in Indian metropolitan areas. The results are in line with Wang et al (2020), who found borrowers’ behavioral and psychological factors as plausible reasons for loan default intention in China. In terms of practical implications, this study contributes to a better agreement of behavioral variables, which may extend to the creation of preventive measures for young defaulters.…”

Section: Discussion and Managerial Implicationssupporting

confidence: 91%

“…The newest state’s growing unemployment rate has alleviated the industry’s woes and the economy is trapped in a vicious cycle (Bandyopadhyay and Saha, 2011). If borrowers fail to repay a loan, such as a credit card or a personal loan, they may suffer penalties such as late fees, collection processes and litigation (Al-Shami et al , 2019; Wang et al , 2020). A poor credit score might make it more challenging to borrow money, whether for a car loan, a mortgage or a credit card.…”

Section: Introductionmentioning

confidence: 99%

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Young adults’ default intention: influence of behavioral factors in determining housing and real estate loan repayment in India

Thomas

George

Godwin

et al. 2022

IJHMA

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Purpose The primary purpose of this paper is to determine the role of behavioral characteristics of young adults on housing and real estate loan default intentions. The behavioral factors considered in this study are financial literacy, materialism, emotions, indebtedness and risk perception. Design/methodology/approach The sample frame comprises of young clients who have taken house loans and work in India’s metropolitan cities. These cities provide a higher quality of life, more employment possibilities and cheaper living costs. A systematic questionnaire was used, which was divided into six components. A total of 352 valid responses were collected and analyzed through a structural equation model. Findings The findings suggest that financial literacy, materialism and risk perception have a considerable impact on loan default intention among young adults. The results also ascertained that emotion and indebtedness do not have a considerable impact on loan default intention among young adults. Research limitations/implications The scope of this study is limited to India’s metropolitan cities. Future studies can examine comparative examinations of young adults working in the public and private sectors and those working in different cities across India. Practical implications This paper contributes to a better understanding of behavioral variables which may lead to the creation of preventive measures for young defaulters. The findings of this study will help financial institutions to improve their credit-offering models. Originality/value To the best of the authors’ knowledge, this study is the first to determine the role of behavioral attributes of young adults on housing and real estate loan default intentions in India. This work will be executable to all the stakeholders of the housing and real estate industry altogether.

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Section: Discussion and Managerial Implicationssupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Young adults’ default intention: influence of behavioral factors in determining housing and real estate loan repayment in India

Thomas

George

Godwin

et al. 2022

IJHMA

View full text Add to dashboard Cite

show abstract

“…Lai, Li, and Hsieh, (2012) explain that individual self-efficacy depends on individual knowledge. A low level of knowledge regarding financial issues results in unsecured decisions about P2P loans and personal loans (Wang et al, 2020).…”

Section: Structural Model Resultsmentioning

confidence: 99%

“…This research is conducted to investigate the factors that influence Indonesians to avoid P2P lending. In contrast to previous studies that focused on the use of P2P lending in terms of lenders (Chen, Lai, and Lin, 2014); (Wang et al, 2014); (Chen, Lou and Van Slyke, 2015); (Xu et al, 2019); (Sangmin Lee, 2017), as well as the use of P2P lending from the borrowers' side (Rosavina et al, 2019); (Liu et al, 2018); (Wang et al, 2020); (Huang, Qian, and Xu, 2020), this study focuses on avoidance measures against the use of P2P lending from the borrowers' side using the technology threat avoidance theory (TTAT) as the basis for this research. Liang and Xue (2009) stated that the TTAT explains that a threat assessment determines individual avoidance behavior (perceived susceptibility, perceived severity, and perceived threat) and a coping appraisal (individual self-efficacy, perceived cost, and perceived effectiveness).…”

Section: Introductionmentioning

confidence: 99%

Determining Factors of Peer-to-Peer (P2P) Lending Avoidance: Empirical Evidence from Indonesia

Ali

Simboh²,

Rahmawati³

2023

GADJAH MADA INT. J. BUS.

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P2P lending offers loans to the public with easy processes and terms. However, the level of P2P lending disbursements is still lower than that of the banks. In addition, a comparison of the number of users of P2P lenders and the productive age population of Indonesia shows that there are still many people who do not use P2P lending. This paper examines the factors that make Indonesians avoid P2P lending. This study used an online survey approach for its data collection and structural equation modeling (SEM) to analyze the data from 499 responses. The study found that the perceived threat from P2P lending is influenced by its perceived severity, perceived susceptibility, and risk tolerance. This perceived threat and social influences cause people’s avoidance motivation. This study contributes to the fintech literature by providing empirical evidence on the avoidance of P2P lending from the borrowers’ perspectives using the TTAT model. Other implications are an input for regulators/governments to enforce the rules for user protection and input for the P2P lending service providers to provide educational programs regarding the use of P2P lending.

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“…(2022b) explored the role of social and psychologically related-soft information in credit analyses. Wang et al. (2020) proposed a psychological mechanism for borrowers' default behavior.…”

Section: Literature Reviewmentioning

confidence: 99%

How social activities affect corporate credit behavior? – the mediating role of network centrality

Chen

2023

IMDS

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PurposeSocial information is crucial to credit ratings and can improve the accuracy of the traditional credit assessment model. Drawing on the resource-based view (RBV) and social capital theory (SCT), this research explores the relationships between corporate social activities, network centrality and corporate credit behavior.Design/methodology/approachThe authors used social network analysis (SNA) and regression analysis to analyze the data collected from 14,544 enterprises on the Alibaba platform.FindingsThe results indicate that among the four types of social activities, the number of corporate questions and posts shows a positive relationship with credit behavior; while the number of corporate comments has negative relationship with credit behavior. Further, degree and betweenness centralities mediate the relationship between the number of corporate questions, posts and comments with credit behavior.Originality/valueThis study contributes to the literature on non-financial factors (soft information) by exploring the social behavioral factors related to corporate credit. In addition, this study offers a new theoretical lens and reasonable explanations for investigating the relationship between corporate social activities, network centrality and credit behavior from the perspective of the resource-based view, while most studies are predictive and methodological. Moreover, this study provides new insights for platforms to evaluate enterprise credit and for managers to improve credit behavior.

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Why do borrowers default on online loans? An inquiry of their psychology mechanism

Cited by 12 publications

References 83 publications

Young adults’ default intention: influence of behavioral factors in determining housing and real estate loan repayment in India

Young adults’ default intention: influence of behavioral factors in determining housing and real estate loan repayment in India

Determining Factors of Peer-to-Peer (P2P) Lending Avoidance: Empirical Evidence from Indonesia

How social activities affect corporate credit behavior? – the mediating role of network centrality

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