A new flatscreen or a beach holiday with friends even when the bank account is already empty? A new research article by CBS Professor Torben Hansen examines young people’s borrowing behaviour. His study presents a model that banks, authorities and politicians can use if they want to analyse and understand why young adults take on expensive loans. His goal is to raise awareness among young people about the pitfalls of the loan market.
“Although fewer young people are ending up in credit registers because they cannot repay their expensive loans, many still borrow from alternative providers at interest rates of up to 25 percent. This is unfortunate, as it can delay young individuals in establishing themselves and saving up,” says Torben Hansen.
“And from a macroeconomic perspective, expensive loans also have consequences, because young people cannot contribute to the economic dynamics of society when their money goes to paying interest. So, everyone has an interest in limiting expensive loans – perhaps apart from the providers of quick loans,” he adds.
Torben Hansen, who researches consumer behaviour, points out that the loan market has become increasingly complex with many different loan types – also in traditional banks. On top of this, it is easy to take out fast digital consumer loans such as quick loans, SMS loans and ‘buy now, pay later’ schemes offered by alternative providers.
