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INTEREST RATE CEILINGS AND THE ROLE OF SECURITY AND COLLECTION REMEDIES IN LOAN CONTRACTS
Author(s) -
Manage NEELA D.
Publication year - 1990
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1990.tb00819.x
Subject(s) - interest rate , collateral , loan , economics , fixed interest rate loan , creditor , debt , monetary economics , security interest , business , actuarial science , finance
Collateral or other security for personal loans and restrictions on creditor remedies for the collection of debts have varying effects on the price and quantity of credit which depend in turn on the level of interest rate ceilings. We report here on reduced‐form equations of a supply‐demand model estimated for five states with different interest rate restrictions. Interest rate ceilings limit how far lenders can raise loan rates to compensate for expected default losses but restrictions on collection remedies are generally associated with a higher interest rate.