Business, Management and Accounting
8 years ago

Unlocking Better Living: Informal Collateral Reduces Loan Default Rates

SSRN Electronic Journal
Loans for Better Living: The Role of Informal Collateral
Gabriela Kuvíková

Paper Summary

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Consumers can get loans for specific or unspecified purposes, and having informal collateral reduces the chance of default. The reason for defaulting on a loan is more about the borrower's characteristics than the loan's purpose. Interest rates for specific purpose loans are consistently higher than for unspecified purpose loans, even though the default rates are not as different.