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Importance of Subjective Financial Knowledge and Perceived Credit Score in Payday Loan Use

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  • Jae Min Lee

    (Department of Family Consumer Science, Minnesota State University, Mankato, 102 Wiecking Center, Mankato, MN 56001, USA)

  • Narang Park

    (Department of Financial Planning, Housing, and Consumer Economics, University of Georgia, 205 Dawson Hall, 305 Sanford Drive, Athens, GA 30602, USA)

  • Wookjae Heo

    (Department of Consumer Sciences, South Dakota State University, SWG 149, Box 2275A, Brookings, SD 57007, USA)

Abstract

This study examined the factors associated with consumers’ decisions to use payday loans. Using a sample of 24,201 respondents from the 2015 National Financial Capability Study (NFCS), structural equation modeling was used to analyze the relationships among the variables. The results indicated that payday loan use was associated with a series of consumers’ socio-psychological factors, including financial knowledge, perceived credit score, credit-card payment problems, and having emergency funds. The findings suggested that, to improve borrowing decisions and industry practices, discussions about consumers’ payday loan use and its underlying repayment problems should encompass policy intervention and institutional attention, rather than focusing on behavioral modification at the individual level alone.

Suggested Citation

  • Jae Min Lee & Narang Park & Wookjae Heo, 2019. "Importance of Subjective Financial Knowledge and Perceived Credit Score in Payday Loan Use," IJFS, MDPI, vol. 7(3), pages 1-21, September.
    • Handle: RePEc:gam:jijfss:v:7:y:2019:i:3:p:53-:d:267962
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    5. Zakir Morshed & Mohshin Habib & Christine Jubb, 2020. "Does Regulation Influence Microfinance Institutions to Be More Client-Responsive?," IJFS, MDPI, vol. 8(4), pages 1-24, October.

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