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Über dieses Buch

This book reviews problems with credit use and causes of indebtedness among young adults, while uncovering possibilities to encourage a healthier attitude towards loans in this segment of the population. Both consumption loans and mortgages are covered in order to adequately represent real-world credit use by young people about to enter adulthood. It focuses on three distinctive actors: the legislative authorities, the financial institution, most commonly a bank, and finally the individual borrower. More specifically, the book discusses the functioning of these three entities in the context of young adults borrowing behaviour, and would appeal to academics, researchers and students of financial institutions and banking.

Inhaltsverzeichnis

Frontmatter

Introduction to Young Adults’ Indebtedness

Frontmatter

Chapter 1. Why Study Young Adults’ Indebtedness?

Abstract
In many Western countries, household indebtedness is rising to levels constituting a financial risk for individuals and a threat to financial stability. The growing household debt applies to both consumer loans and housing loans. In Sweden, which is the country that we focus on in this book, household indebtedness has over many years grown to become among the highest in Europe. Young adults are for several reasons a particularly vulnerable group. An interdisciplinary research program was launched to study young adults’ borrowing from three perspectives: (i) the perspective of the young adult borrowers, (ii) the perspective of financial institutions that are lenders to young adult borrowers, and (iii) the legislative perspective of regulation lending and borrowing to young adults. Each perspective is presented and discussed.
Jeanette Carlsson Hauff, Tommy Gärling, Ted Lindblom

Chapter 2. Indebtedness, Over-Indebtedness and Wellbeing

Abstract
The indebtedness and possible over-indebtedness of households have attracted attention in academic research and in society at large. In this chapter, we summarize current research on indebtedness and over-indebtedness with especial emphasis on efforts and attempts to derive a more precise and applicable definition of the concept of over-indebtedness. With a more nuanced definition of the concept that can be operationalized in practice, one can more accurately estimate the societal costs of over-indebtedness. Particularly important, it makes it possible also to conduct more in-depth studies about the implications of indebtedness and over-indebtedness for the physical and psychological wellbeing of young adults. Relying on the distinction between active and passive over-indebtedness, we argue that the causality between indebtedness, over-indebtedness, and health is not necessarily unilateral.
Viktor Elliot, Ted Lindblom

Chapter 3. The Loan Market—The Swedish Example

Abstract
From a Swedish perspective, different types of credits and loans relevant to young adults are analysed, together with an assessment of levels of indebtedness. This enables an assessment of the level of urgency regarding the Swedish market and a discussion of whether the recent development of the Swedish loan market follows an international trend. The level of indebtedness of Swedish young adults is compared to the general population of borrowers. The efforts taken by Swedish authorities are discussed, something that may serve as a description of one way to tackle current societal challenges. The Swedish example, containing strong macro-prudential initiatives, could be seen as an example of a legislative way to tackle problems associated with a potential housing bubble and high debt ratios.
Jeanette Carlsson Hauff, Ted Lindblom, Jonas Nilsson

Psychological Factors Explaining Young Adults’ Indebtedness

Frontmatter

Chapter 4. Young Adults’ Attitudes Toward Borrowing

Abstract
Several scales for measuring attitude that have been developed are first described and evaluated. It is noted that the scales frequently fail to distinguish between opinions and attitudes and that the attitude object varies between studies. Studies of young adults’ attitudes toward borrowing are then reviewed. A majority have focused on student loans. It is found that attitudes are favorable although a change over time toward less favorable attitudes is discernible. A critical issue is to what extent favorable attitudes are related to borrowing. Some but not all studies confirm a positive relationship between favorable attitudes toward borrowing and debt amount. The causal direction of the relationship may however vary over time and in different groups.
Amelie Gamble, Tommy Gärling, Patrik Michaelsen

Chapter 5. Young Adults’ Consumption Desires, Feelings of Financial Scarcity and Borrowing

Abstract
Young adults use credit cards and store installments to borrow to consumption that improves their material life-style, for instance purchases of new models of smartphones, computers or other electronic gadgets, weekend travel or vacations in distant foreign countries. Over-borrowing is a potential problem. One determinant is present-biased temporal discounting which in young adults may result from desires to purchase attractive consumer products that are not affordable. Research is reviewed that both supports and does not support this claim. Other determinants are a positive attitude toward borrowing for purchases of consumer products or low financial involvement and knowledge. Empirical evidence is reported that attitude is most important. A negative attitude may have the role of a heuristic that suppresses decisions to borrow.
Amelie Gamble, Tommy Gärling, Patrik Michaelsen

Financial Information and Young Adults’ Borrowing Decisions

Frontmatter

Chapter 6. Impacts of Loan Communication on Young Adults’ Borrowing

Abstract
Against the backdrop of an increasing problem of over-indebtedness among young adults, the potential of communication as a means to promote a more responsible borrowing behavior is explored. We first analyze the ability of young borrowers to interpret given loan information. Our findings show that it seems difficult for young adults to accurately calculate what they can afford when only being exposed to an overall cost. We also find that the level of loan literacy had a distinct positive impact. Second, we focus on the impact of the format of the presented information on borrowing behavior and conclude that the use of narratives may have a limited impact on borrowing behavior.
Jonas Nilsson, Jeanette Carlsson Hauff

Chapter 7. Financial Literacy and Debt

Abstract
Given the empirical evidence of the effect of financial literacy on a number of debt-related financial behaviors, such as e.g., mortgage-related decisions and use of credit cards, the construct of financial literacy is defined (including both level of objective knowledge and individuals’ own perception of level of knowledge) and discussed, both in general and connected to borrowing decisions. Together with age, gender, education, and income, the impact of financial literacy on a number of variables (including choice of variable or fixed mortgage rates, use of credit cards and use of pawn shops) is assessed and discussed. The connection between literacy and indebtedness for the group of young adults is also specifically addressed.
Anders Carlander, Jeanette Carlsson Hauff

Legislator Tools and Possibilities for Healthy Lending

Frontmatter

Chapter 8. Toward Soundness in Provision of Credits and Loans to Young Adults

Abstract
Historically, over-indebtedness was a problem to be addressed at the nation-level across the European Union (EU). Today it has become a cross-European topic dealt with at an EU-level. In this chapter, we emphasize the policy measures that can be implemented to reduce excessive debt reliance and the potential implications of such policy measures. The policy measures discussed here include credit market regulation, consumer protection, early identification, and prevention of over-indebtedness. We conclude that coordination between these measures is pivotal in order to provide incentives for both young borrowers and creditors to make sound decisions.
Viktor Elliot, Ted Lindblom

Backmatter

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