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Lenders’ blind trust and borrowers’ blind spots: A descriptive investigation of personal loans

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  • Dezső, Linda
  • Loewenstein, George

Abstract

We surveyed 971 individuals about their experiences with personal loans. Beyond the objective characteristics of the loans (e.g., whether interest was charged), and the purpose of the loan, we tested – and found support for – two main predictions: (1) at recall and evaluation of loans would be subject to a self-serving bias such that borrowers would, for example, recall having paid back a larger proportion of the loan, and (2) that loans, and particularly those not paid off by the agreed upon date, would have pernicious effects on the personal relationship between lender and borrower. Furthermore, we found that borrowers have a blind spot when it comes to recognizing the negative feelings and perceptions evoked in lenders by delinquent loan repayment.

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  • Dezső, Linda & Loewenstein, George, 2012. "Lenders’ blind trust and borrowers’ blind spots: A descriptive investigation of personal loans," Journal of Economic Psychology, Elsevier, vol. 33(5), pages 996-1011.
    • Handle: RePEc:eee:joepsy:v:33:y:2012:i:5:p:996-1011
    DOI: 10.1016/j.joep.2012.06.002
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    2. Adriana Uquillas, 2017. "Determinantes del riesgo comportamental en préstamos de consumo y microcrédito: Un estudio de caso en Centro América," Revista de Investigación en Ciencias Contables y Administrativas, Universidad Michoacana de San Nicolás de Hidalgo, Facultad de Contaduría y Ciencias Administrativas, vol. 3(1), pages 35-66, July.
    3. Eva Kløve & Halvor Mehlum, 2019. "Positive illusions and the temptation to borrow," Oxford Economic Papers, Oxford University Press, vol. 71(3), pages 623-644.
    4. Felipe Kast & Dina Pomeranz, 2013. "Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile," Harvard Business School Working Papers 14-001, Harvard Business School, revised Jun 2014.
    5. Laura Arnemann & Kai A Konrad & Niklas Potrafke, 2021. "Collective memories on the 2010 European debt crisis," European Union Politics, , vol. 22(4), pages 762-784, December.
    6. Mesly, Olivier & Chkir, Imed & Racicot, François-Éric, 2019. "Predatory cells and puzzling financial crises: Are toxic products good for the financial markets?," Economic Modelling, Elsevier, vol. 78(C), pages 11-31.
    7. repec:ces:ifowes:v:18:y:2018:i:4:p:01-24 is not listed on IDEAS
    8. Dezső, Linda & Alm, James & Kirchler, Erich, 2022. "Inequitable wages and tax evasion," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    9. Morvinski, Coby & Shani, Yaniv, 2022. "Misaligned mindsets between borrowers and lenders of small interpersonal loans," Organizational Behavior and Human Decision Processes, Elsevier, vol. 169(C).
    10. Dorine Boumans & Johanna Garnitz, 2018. "ifo World Economic Survey November 2018," ifo World Economic Survey, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 18(04), pages 01-24, November.
    11. Douglas Mwirigi & Mária Fekete-Farkas & Zoltán Lakner, 2024. "A Bibliometric Analysis of Borrowers’ Behavior," JRFM, MDPI, vol. 17(3), pages 1-20, March.

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    More about this item

    Keywords

    Personal loans; Self-serving bias; Blind spot;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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