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Experience, prediction and recollection of loan burden

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  • Hoelzl, Erik
  • Pollai, Maria
  • Kamleitner, Bernadette

Abstract

Loan use is a process over time, and the subjective loan burden may differ over stages. In this paper, experience of loan burden over time is contrasted with forecasts and recollections. Furthermore, it is suggested that loan burden relates to the mental association between the loan and the loan-financed goods. A survey of 117 homeowners at different stages of the loan process demonstrated that participants expected lower levels of loan burden in the future and reported higher levels in the past; in their view, loan burden decreases over the loan period. In contrast, participants at all stages reported similar current loan burden, suggesting no systematic change over time. Predictions and recollections were systematically different from experience: predictions were too positive, recollections too negative. Subjective loan burden can, in part, be predicted by home-to-loan associations, i.e. the degree to which thoughts of the home evoke thoughts of the loan. Homeowners seem to hold an intuitive theory about adaptation to the financial situation and this contributes to misforecasts.

Suggested Citation

  • Hoelzl, Erik & Pollai, Maria & Kamleitner, Bernadette, 2009. "Experience, prediction and recollection of loan burden," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 446-454, June.
    • Handle: RePEc:eee:joepsy:v:30:y:2009:i:3:p:446-454
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    6. Rafael R. S. Guimaraes, 2022. "Deep Learning Macroeconomics," Papers 2201.13380, arXiv.org.
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    8. Hoelzl, Erik & Kamleitner, Bernadette & Kirchler, Erich, 2011. "Loan repayment plans as sequences of instalments," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 621-631, August.
    9. Anna M. Helka & Tomasz Grzyb, 2021. "Social Norms Concerning Financial Liability for Various Indebtedness Experiences and Borrowing Plans: Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 22-35.
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