High Price, High Importance: Examining Demand for High-Priced Credit
Hubbard, Sean Peter
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For 4,000 years those in position to influence policy have attempted to protect consumers from loans with terms they consider harmful. This continues today with attempts to address loans from payday lenders, pawnshops, etc. Despite this long history of restrictions and bans, demand for high-priced credit remains. The question of what drives demand for high-priced credit has gone largely unexplored and remains unanswered. In this research, I focus on the demand side of highpriced credit through interviews and a discrete choice experiment. The results of my research revealed that borrowers consider a range of non-monetary factors in the loan choices and order their preferences depending on the circumstances driving their need for credit. Ultimately, I find borrowers choose loans that best fit their needs given their situation.