How do payday loans affect borrowers?: evidence from the UK market
Payday loans are controversial high cost, short-term lending products, banned in many US states. But debates surrounding their benefits to consumers continue. We analyse the effects of payday loans on consumers using a unique dataset including 99% of loans approved in the UK over a two-year period m...
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| Format: | Article |
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Oxford University Press
2018
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| Online Access: | https://eprints.nottingham.ac.uk/52867/ |
| _version_ | 1848798827921801216 |
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| author | Gathergood, John Guttman-Kenney, Benedict Hunt, Stefan |
| author_facet | Gathergood, John Guttman-Kenney, Benedict Hunt, Stefan |
| author_sort | Gathergood, John |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | Payday loans are controversial high cost, short-term lending products, banned in many US states. But debates surrounding their benefits to consumers continue. We analyse the effects of payday loans on consumers using a unique dataset including 99% of loans approved in the UK over a two-year period matched to credit files. Using a Regression Discontinuity research design, our results show payday loans provide short-lived liquidity gains and encourage consumers to take on additional credit. However, in the following months, payday loans cause persistent increases in defaults and cause consumers to exceed their bank overdraft limits. |
| first_indexed | 2025-11-14T20:25:58Z |
| format | Article |
| id | nottingham-52867 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T20:25:58Z |
| publishDate | 2018 |
| publisher | Oxford University Press |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-528672020-05-04T19:43:55Z https://eprints.nottingham.ac.uk/52867/ How do payday loans affect borrowers?: evidence from the UK market Gathergood, John Guttman-Kenney, Benedict Hunt, Stefan Payday loans are controversial high cost, short-term lending products, banned in many US states. But debates surrounding their benefits to consumers continue. We analyse the effects of payday loans on consumers using a unique dataset including 99% of loans approved in the UK over a two-year period matched to credit files. Using a Regression Discontinuity research design, our results show payday loans provide short-lived liquidity gains and encourage consumers to take on additional credit. However, in the following months, payday loans cause persistent increases in defaults and cause consumers to exceed their bank overdraft limits. Oxford University Press 2018-08-13 Article PeerReviewed Gathergood, John, Guttman-Kenney, Benedict and Hunt, Stefan (2018) How do payday loans affect borrowers?: evidence from the UK market. Review of Financial Studies . ISSN 0893-9454 payday loan sub-prime credit consumer credit financial distress https://academic.oup.com/rfs/advance-article/doi/10.1093/rfs/hhy090/5071904 doi:10.1093/rfs/hhy090 doi:10.1093/rfs/hhy090 |
| spellingShingle | payday loan sub-prime credit consumer credit financial distress Gathergood, John Guttman-Kenney, Benedict Hunt, Stefan How do payday loans affect borrowers?: evidence from the UK market |
| title | How do payday loans affect borrowers?: evidence from the UK market |
| title_full | How do payday loans affect borrowers?: evidence from the UK market |
| title_fullStr | How do payday loans affect borrowers?: evidence from the UK market |
| title_full_unstemmed | How do payday loans affect borrowers?: evidence from the UK market |
| title_short | How do payday loans affect borrowers?: evidence from the UK market |
| title_sort | how do payday loans affect borrowers?: evidence from the uk market |
| topic | payday loan sub-prime credit consumer credit financial distress |
| url | https://eprints.nottingham.ac.uk/52867/ https://eprints.nottingham.ac.uk/52867/ https://eprints.nottingham.ac.uk/52867/ |