Utilizing an unique information set comprising near all U.K. cash advance applications, along with client credit files, we estimate the effect of cash advance use on customers in the margin of firm financing choices.
We discover that cash advance usage causes customers to try to get extra bank card and individual loan credit within half a year after loan acceptance that is payday. This leads to successful loan candidates taking right out more non-payday loans and total credit that is non-payday, especially for unsecured loans. But loans that are payday deterioration in customer creditworthiness. The possibilities of delinquency on non-payday financial obligation increases. After a little decrease that is one-month cash advance use persistently escalates the chance that the customer will go beyond the arranged overdraft limitation; the portion of non-payday loan balances in standard increases and customersвЂ™ credit bureau credit scores decrease.