Just How Do Payday Advances Affect Borrowers? Proof through the U.K. Market

Just How Do Payday Advances Affect Borrowers? Proof through the U.K. Market

Pay day loans are controversial high-cost, short-term borrowing products, prohibited in a lot of U.S. states. But debates surrounding their advantageous assets to consumers carry on. We evaluate the consequences of pay day loans on customers simply by using a unique information set including 99% of loans authorized in the uk more than a two-year duration matched to credit files. Employing a regression discontinuity research design, our outcomes show that payday advances offer short-lived liquidity gains and encourage consumers to battle credit that is additional. Nonetheless, into the following months, pay day loans cause persistent increases in defaults and cause customers to go beyond their bank overdraft limitations.

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