Adverse selection, loan access and default behavior in the Chilean consumer debt market

Abstract

Highlights Chilean borrowers present heterogeneous adverse selection across lender types. No Debt Access decreases with income, age, education, but it increases with risk. Default is associated with income, unemployment, indebtedness and demographics. Paying past loans and health needs are associated with indebtedness and default. Financial literacy programs may be a powerful policy to improve the debt market.

Keywords

• Consumer credit
• Default risk
• Unemployment
• Financial literacy
• Adverse selection
• Credit constraints