Borrowing Decisions of Households: An Examination of the Information Search Process

Abstract

This study uses the 2009 National Financial Capability Study dataset to examine the factors associated with information search behavior by consumers when applying for a loan. The results indicate that financial literacy, perceived financial knowledge, educational attainment, and engaging the service of a financial professional are positively associated with the likelihood of information search among consumers. The results also indicate that consumers from the traditionally under-served groups, who would benefit most from better information search, were the least likely to engage in such behavior. The results of this study are important to consumers, educators, and financial practitioners. A discussion of the implications addressing the association between financial literacy, information search behavior, and household financial capability within the population is also included in this study.

Keywords: Financial Literacy, Financial Capability, Risk Tolerance, Information Search, Consumer Behavior, Credit Cards, Financial Economics, Household Finance, Behavioral Economics, Financial Decision Making

JEL Classification: D14, D15, D90, D91, G10, I24