Impacts of Loan Communication on Young Adults’ Borrowing

  • Jonas NilssonEmail author
  • Jeanette Carlsson Hauff


Against the backdrop of an increasing problem of over-indebtedness among young adults, the potential of communication as a means to promote a more responsible borrowing behavior is explored. We first analyze the ability of young borrowers to interpret given loan information. Our findings show that it seems difficult for young adults to accurately calculate what they can afford when only being exposed to an overall cost. We also find that the level of loan literacy had a distinct positive impact. Second, we focus on the impact of the format of the presented information on borrowing behavior and conclude that the use of narratives may have a limited impact on borrowing behavior.


Mortgage loans Loan decision Financial communication Transparency Narrative format 


  1. Agarwal, S., Chomsisengphet, S., Mahoney, N., & Stroebel, J. (2015). Regulating consumer financial products evidence from credit cards. The Quarterly Journal of Economics, 130(1), 111–164.Google Scholar
  2. Bertrand, M., Karlan, D., Mullainathan, S., Shafir, E., & Zinman, J. (2010). What’s advertising content worth? Evidence from a consumer credit marketing field experiment. Quarterly Journal of Economics, 125(1), 263–306.Google Scholar
  3. Bertrand, M., & Morse, A. (2011). Information disclosure, cognitive biases, and payday borrowing. Journal of Finance, 66(6), 1865–1893.Google Scholar
  4. Bertrand, M., Mullainathan, S., & Shafir, E. (2006). Behavioral economics and marketing in aid of decision making among the poor. Journal of Public Policy & Marketing, 25(1), 8–23.Google Scholar
  5. Braun Santos, D., Mendes‐Da‐Silva, W., Flores, E., & Norvilitis, J. M. (2016). Predictors of credit card use and perceived financial well‐being in female college students: A Brazil‐United States comparative study. International Journal of Consumer Studies, 40(2), 133–142.Google Scholar
  6. Carlsson Hauff, J., Carlander, A., Gamble, A., Gärling, T., & Holmen, M. (2014). Storytelling as a means to increase consumers’ processing of financial information. International Journal of Bank Marketing, 32(6), 494–514.
  7. Devlin, J. (2010). The stakeholder product brand and decision making in retail financial services. Service Industries Journal, 30(4), 567–582.Google Scholar
  8. Duclos, R. (2015). The psychology of investment behavior: (De)biasing financial decision-making one graph at a time. Journal of Consumer Psychology, 25(2), 317–325.Google Scholar
  9. Escalas, J. E. (2007). Self-referencing and persuasion: Narrative transportation versus analytical elaboration. Journal of Consumer Research, 33(4), 421–429.Google Scholar
  10. Fan, L., & Chatterjee, S. (2017). Borrowing decision of households: An examination of the information search process. Journal of Financial Counseling and Planning, 28(1), 95–106.Google Scholar
  11. Ferman, B. (2016). Reading the fine print: Information disclosure in the Brazilian credit card market. Management Science, 62(12), 3534–3548.Google Scholar
  12. Green, M. C., & Brock, T. C. (2000). The role of transportation in the persuasiveness of public narratives. Journal of Personality and Social Psychology, 79(5), 701–721. Google Scholar
  13. Hill, R. P., & Kozup, J. C. (2007). Consumer experiences with predatory lending practices. Journal of Consumer Affairs, 41(1), 29–46.Google Scholar
  14. Howcroft, B., Hamilton, R., & Hewer, P. (2007). Customer involvement and interaction in retail banking: An examination of risk and confidence in the purchase of financial products. Journal of Services Marketing, 21(7), 481–491.Google Scholar
  15. Jones, L. E., Loibl, C., & Tennyson, S. (2015). Effects of informational nudges on consumer debt repayment behaviors. Journal of Economic Psychology, 51(C), 16–33.Google Scholar
  16. Kahneman, D. (2002). Thinking fast and slow. New York: Farrar, Straus, & Giroux.Google Scholar
  17. Kozup, J., Howlett, E., & Pagano, M. (2008). The effects of summary information on consumer perceptions of mutual fund characteristics. Journal of Consumer Affairs, 42(1), 37–59.Google Scholar
  18. Lee, J., & Hogarth, J. M. (1999a). Returns to information search: Consumer credit card shopping decisions. Journal of Financial Counseling and Planning, 10(2), 23–35.Google Scholar
  19. Lee, J., & Hogarth, J. M. (1999b). Returns to information search: Consumer mortgage shopping decisions. Journal of Financial Counseling and Planning, 10(1), 49–67.Google Scholar
  20. Lee, J., & Hogarth, J. M. (2000a). Consumer information search for home mortgages: Who, what, how much, and what else? Financial Series Review, 9(3), 277–293.Google Scholar
  21. Lee, J., & Hogarth, J. M. (2000b). Relationships among information search activities when shopping for a credit card. Journal of Consumer Affairs, 34(2), 330–360.Google Scholar
  22. Livingstone, S. M., & Lunt, P. K. (1992). Predicting personal debt and debt repayment: Psychological, social and economic determinants. Journal of Economic Psychology, 13(1), 111.Google Scholar
  23. Loewenstein, G., Sunstein, C., & Golman, R. (2014). Disclosure: Psychology changes everything. Annual Review of Economics, 6, 391–419.Google Scholar
  24. National Board of Housing, Building and Planning. (2009). Boendekostnader och boendeutgifter–Sverige och Europa. PubMed. Accessed May 10, 2015.
  25. Navarro-Martinez, D., Salisbury, L. C., Lemon, K., Stewart, N., Matthews, W., & Harris, A. (2011). Minimum required payment and supplemental information disclosure effects on consumer debt repayment decisions. Journal of Marketing Research, 48, S60–S77.Google Scholar
  26. Perry, V. G., & Blumenthal, P. M. (2012). Understanding the fine print: The need for effective testing of mandatory mortgage loan disclosures. Journal of Public Policy and Marketing, 31(2), 305–312.Google Scholar
  27. Perry, V. G., & Lee, J. D. (2012). Shopping for a home vs. a loan: The role of cognitive resource depletion. International Journal of Consumer Studies, 36(5), 580–587.Google Scholar
  28. Petty, R. E., Brinõl, P., & Priester, J. R. (2009). Mass media attitude change: Implications of the Elaboration Likelihood Model of persuasion. In J. Bryant & M. B. Oliver (Eds.), Media effects: Advances in theory and research (3rd ed., pp. 125–164). New York: Routledge.Google Scholar
  29. Petty, R. E., & Cacioppo, J. T. (1986). The Elaboration Likelihood Model of persuasion. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 19, pp. 123–205), New York: Academic Press.Google Scholar
  30. Petty, R. E., Cacioppo, J. T., & Schumann, D. (1983). Central and peripheral routes to advertising effectiveness: The moderating role of involvement. Journal of Consumer Research, 10(2), 135–146.Google Scholar
  31. Ranyard, R., McHugh, S., & McNair, S. (2018). The psychology of borrowing and over-indebtedness. In R. Ranyard (Ed.), Economic psychology (pp. 222–238). New York: Wiley.Google Scholar
  32. Salisbury, L. C. (2014). Minimum payment warnings and information disclosure effects on consumer debt repayment decisions. Journal of Public Policy & Marketing, 33(1), 49–64.Google Scholar
  33. Seira, E., Elizondo, A., & Laguna-Müggenburg, E. (2017). Are information disclosures effective? Evidence from the credit card market. American Economic Journal: Economic Policy, 9(1), 277–307.Google Scholar
  34. Soman, D., & Cheema, A. (2002). The effect of credit on spending decisions: The role of the credit limit and credibility. Marketing Science, 21(1), 32–53.Google Scholar
  35. Sotiropoulos, V., & d’Astous, A. (2012). Social networks and credit card overspending among young adult consumers. Journal of Consumer Affairs, 46(3), 457–484.Google Scholar
  36. Sotiropoulos, V., & d’Astous, A. (2013). Attitudinal, self-efficacy, and social norms determinants of young consumers’ propensity to overspend on credit cards. Journal of Consumer Policy, 36(2), 179–196.Google Scholar
  37. Wentzel, D., Tomczak, T., & Herrmann, A. (2010). The moderating effect of manipulative intent and cognitive resources on the evaluation of narrative ads. Psychology & Marketing, 27(5), 510–530.Google Scholar
  38. Zinman, J. (2015). Household debt: Facts, puzzles, theories, and policies. Annual review of Economics, 7(1), 251–276.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.School of Business, Economics and LawUniversity of GothenburgGöteborgSweden

Personalised recommendations