Importance of Subjective Financial Knowledge and Perceived Credit Score in Payday Loan Use

Jae Min Lee, Narang Park and Wookjae Heo
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Jae Min Lee: Department of Family Consumer Science, Minnesota State University, Mankato, 102 Wiecking Center, Mankato, MN 56001, USA
Narang Park: Department of Financial Planning, Housing, and Consumer Economics, University of Georgia, 205 Dawson Hall, 305 Sanford Drive, Athens, GA 30602, USA
Wookjae Heo: Department of Consumer Sciences, South Dakota State University, SWG 149, Box 2275A, Brookings, SD 57007, USA

IJFS, 2019, vol. 7, issue 3, 1-21

Abstract: This study examined the factors associated with consumers’ decisions to use payday loans. Using a sample of 24,201 respondents from the 2015 National Financial Capability Study (NFCS), structural equation modeling was used to analyze the relationships among the variables. The results indicated that payday loan use was associated with a series of consumers’ socio-psychological factors, including financial knowledge, perceived credit score, credit-card payment problems, and having emergency funds. The findings suggested that, to improve borrowing decisions and industry practices, discussions about consumers’ payday loan use and its underlying repayment problems should encompass policy intervention and institutional attention, rather than focusing on behavioral modification at the individual level alone.

Keywords: payday loan; financial knowledge; National Financial Capability Study; structural equation modeling (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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