IDEAS home Printed from https://ideas.repec.org/p/fip/fedpwp/18-5.html
   My bibliography  Save this paper

Screening on Loan Terms: Evidence from Maturity Choice in Consumer Credit

Author

Listed:
  • Andrew Hertzberg
  • Andres Liberman
  • Daniel Paravisini

Abstract

We exploit a natural experiment in the largest online consumer lending platform to provide the first evidence that loan terms, in particular maturity choice, can be used to screen borrowers based on their private information. We compare two groups of observationally equivalent borrowers who took identical unsecured 36-month loans; for only one of the groups, a 60-month loan was also available. When a long-maturity option is available, fewer borrowers take the short-term loan, and those who do default less. Additional findings suggest borrowers self-select on private information about their future ability to repay.

Suggested Citation

  • Andrew Hertzberg & Andres Liberman & Daniel Paravisini, 2018. "Screening on Loan Terms: Evidence from Maturity Choice in Consumer Credit," Working Papers 18-5, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:18-5
    DOI: https://doi.org/10.21799/frbp.wp.2018.05
    as

    Download full text from publisher

    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2018/wp18-05.pdf
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.21799/frbp.wp.2018.05?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    Screening; Adverse Selection; Loan Maturity; Consumer Credit;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:18-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Beth Paul (email available below). General contact details of provider: https://edirc.repec.org/data/frbphus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.