Lenders’ blind trust and borrowers’ blind spots: A descriptive investigation of personal loans

Linda Dezső and George Loewenstein

Journal of Economic Psychology, 2012, vol. 33, issue 5, 996-1011

Abstract: We surveyed 971 individuals about their experiences with personal loans. Beyond the objective characteristics of the loans (e.g., whether interest was charged), and the purpose of the loan, we tested – and found support for – two main predictions: (1) at recall and evaluation of loans would be subject to a self-serving bias such that borrowers would, for example, recall having paid back a larger proportion of the loan, and (2) that loans, and particularly those not paid off by the agreed upon date, would have pernicious effects on the personal relationship between lender and borrower. Furthermore, we found that borrowers have a blind spot when it comes to recognizing the negative feelings and perceptions evoked in lenders by delinquent loan repayment.

Keywords: Personal loans; Self-serving bias; Blind spot (search for similar items in EconPapers)
JEL-codes: D14 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:33:y:2012:i:5:p:996-1011

DOI: 10.1016/j.joep.2012.06.002

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