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Learning How To Borrow in a Fintech World: Consumer Behavior When Search Costs Are (Near) Zero

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  • Alex Gunsberg
  • Camelia M. Kuhnen

Abstract

Online loan marketplaces are changing consumer lending. Here we investigate consumer behavior in these markets with near-zero search costs. Using administrative data on 730,000 applications, 750,000 offers, and 200,000 individuals, together with credit registry records, we document four facts. First, substantial within-applicant dispersion in offered terms makes search highly valuable. Second, marketplace nudges mitigate choice complexity. Third, applicants search significantly, applying repeatedly, asking for different terms, and rejecting offers, in ways consistent with their creditworthiness. Fourth, dynamic adverse selection constrains search, as lenders penalize repeat applicants. Our findings highlight trade-offs between informational gains from search, and reputational and cognitive costs.

Suggested Citation

  • Alex Gunsberg & Camelia M. Kuhnen, 2026. "Learning How To Borrow in a Fintech World: Consumer Behavior When Search Costs Are (Near) Zero," NBER Working Papers 35024, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35024
    Note: AP CF
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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